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Two Trees Forestry
167 Main St.
P.O. Box 356
Winthrop, ME 04364
V: (207) 377-7196
F: (207) 377-7198 harold@twotreesforestry.com

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Thursday, November 12 2015

Fall 2015: How do we adapt?

Big changes in wood markets are affecting forestry decisions right here at home.

I recently sought permission to sell five truckloads of pine pulp from a client’s woodlot in Belgrade. Since September, I’d been hearing reports of stricter quotas at Verso’s mill in Jay and had called a Verso wood buyer because we are wrestling with the advisability of starting a harvest on a certified Tree Farm stocked with mostly pine trees. If we couldn’t sell the tree tops as pulpwood, it wouldn’t make good economic sense to log the trees at all, even though we could sell the best logs to a pine saw mill for a good price. Our contractor was allotted no pulpwood tickets for November. That’s potentially no market for five loads – 50 cords or 100 ton. And to think just last August was the mill's most productive month for softwood pulp. Quite a change!

Not all contractors are in the same boat. A much larger contractor has been able to sell 1,500 tons of pulp since moving onto a pine-dominated woodlot in September. Many other contractors are selling enough to keep going, but we’ve been scurrying to relocate logging contractors onto hardwood-dominated woodlots as rapidly as we can. Hardwood pulp and firewood are moving well and at good prices.

The strict new quotas at Verso are not the only startling news. Since Verso’s mid-August announcement that it was shutting down a pulp drying machine and a paper making machine, two other mills made the news. Lincoln Paper and Tissue filed for bankruptcy protection, and on the very next day, Expera Specialty Solutions announced it would shutter its Old Town mill by year’s end. The opening bid for Lincoln has been set at its scrap value. If that’s the end of the line for Lincoln, that will mean the last four pulp mills on the Penobscot River will have closed since January 2014 – East Millinocket, Lincoln, Old Town, and Bucksport. For 250 years, the Penobscot River has been eastern Maine's great economic engine, initially delivering logs to the mills, then catalyzing paper and pulp production and removing effluent to the sea. No longer a working river, that's pretty unthinkable.

I expect the demand for softwood will remain in an uncertain place well into winter. The price drop seems a likely long-term consequence of recent events. Given that Verso was buying so much softwood this summer, even at a much-reduced buying pattern, it will take some time to process its inventory and begin buying wood at a rate commensurate with its current pulp production. But the noted delivered-price drop has passed through to current pulpwood prices, as was evident during an early October stumpage auction. For a 100-acre timber sale we saw a top price offered for hemlock pulpwood of only $5/ton, a drop of more than half from what we’d seen this summer. However, we also saw the highest offer, in a few years, for hardwood pulpwood/firewood.

But back to Belgrade, where the consequences likely extend far beyond our ability to sell pine pulpwood. If we don’t start that project next week the landowners will, at least temporarily, forego the income that they were counting on for 2015 and we will immediately move the contractor to an aspen groundwood and hardwood pulpwood dominated woodlot in Pittston. Potentially more interesting, Hammond Lumber in Belgrade won’t be able to process the much larger volume of pine sawtimber that we expected to cut there. Such a decision will ripple in unknown directions. For example, Hammond, Hancock, Irving, and Robbins sawmills all rely on reliable pulpwood markets to sell their waste sawdust and edgings. Where will they get the required volume of pine sawlogs, and at what price, once local logging contractor’s shift to woodlots dominated by oak, maple, and birch? Will they raise their buying prices to procure what they need? Will hardwood/firewood prices settle back if a supply glut develops?

While it is hardly an upbeat time to be selling timber, 2015 has been a year when we generated more stumpage income for landowners and oversaw the harvest of more logs and pulpwood than ever before. With that history and with significant numbers of sales planned for this winter, we are cautious, but moving forward. It seems likely that by the end of March we should have a clearer picture of what will be saleable and at what price, as we begin setting up sales for next summer. Or so we hope – stay tuned!