Outlook for Forestry & Forest Products 2003+

1. Outlook for Forestry & Forest Products 2003+ Terry Conners Univ. of Kentucky Dept. Of Forestry October, 2003

2. Snapshot: KY Forest Resources • 49.9% of Kentucky land area is classified as Forestland (2002) • 48.6% is Timberland • 1.3% is “Reserved”/Unproductive

3. KY Forest Area (1630-2002)

4. Snapshot: KY Forest Resources • ~ 12.4 Million acres in Timberland • New inventory was finished recently • Acreage went down a bit • Timber is worth $117+ Million to woodland owners (stumpage value) • In 2001, KY harvested over 1.1 billion board feet of timber!

5. KY Forest Resources Ownership • 90% is privately owned • 2% is owned by forest industry • 98% owned by over 300,000 individual woodland owners (NIPF) • N.B.: There are only ~ 88,000 farmers in Kentucky, owning ~ 13% of this!

6. KY Forest Resources Ownership • 10% is publicly held • 50% of publicly-held forest land is in National Forest • 20% is in Commonwealth holdings

7. KY Forest Resources Ownership • Percentages of “Who Owns What” (Private - Federal - State - Industry) have remained pretty constant since records started being kept in 1953.

8. KY Forest Area Productivity Growth in cubic feet per acre per year KY forests could be much more productive!

9. KY Forest Area Productivity

10. KY Forest Area Productivity

11. KY Forest Area Productivity

12. KY Forest Area Productivity

13. KY Forest Area Productivity

14. KY Master Loggerswww.masterlogger.org • KML graduates since 1992: 5,331 • Active Master Loggers: 3,655 • New Master Loggers in 2003: 307 • Master Logger CE programs conducted in 2003: 26 • CE Attendance in 2003: 1,296

15. Forest Products Industry • ~ 30,000 employees in primary and secondary forest products industries • 1 out of 9 manufacturing jobs • Annual payroll of $602 Million • Based on 2001 Dept. of Revenue data that include the paper and converting industries, the KY Div. of Agriculture counts a total of 38,000 employed in the forest industries.

16. Forest Products Industry • Value of Forest Products made in KY: $4.5 - 5.5 Billion

17. Forest Products Industry • KY is in the top 5 nationally in the production of hardwood lumber. • KY ranks 2nd in hardwood exports. • KY ranks 6th in total wood exports, even when compared against major softwood-producing states like Oregon and California!

18. Forest Products Industry • ~ 530 Primary Industries (ex., Sawmills) • ~ 540 Secondary Industries (ex., Pallet & large Cabinet makers) • Including Logging co.’s, ~ 2550 firms

19. Primary Manufacturing Companies in Kentucky ~ $1.6 Billion dollars value to Kentucky

20. Secondary Manufacturing Companies in Kentucky ~ $1.8 Billion dollars value to Kentucky

21. Over 1,000 Wood Industriesin Kentucky • Most of the companies are small and family-owned. • About 900 of the companies have fewer than 25 employees. • There are probably ~ 400-600 one- or two-man cabinet shops in Kentucky not included in this tally.

22. Forest Products Outlook • Stumpage Prices • Primary Industries • Secondary Industries • Non-Timber Forest Products

23. Stumpage Prices • Hardwood prices are up! • Prices compared to last year: • +7% for HW Sawtimber (~ $19.60/ton) • +37% for HW Pulpwood (~ $6.50/ton)

25. Stumpage Trends • Trends in sawtimber: Cherry and Walnut, Red Oak up; Yellow-poplar up a little; White oak stable; Hard Maple & Ash down (continuing last year’s trend) • Cabinet design market is heading back towards darker woods (3 - 4 year cycle) • Components starting to be made for KY companies from imported wood, e.g., Chinese maple for kitchen drawers!

26. Stumpage Trends • Hickory is gradually moving up due to Red Oak cost (lots of hickory in KY). • Hard to machine, but a potential substitute for oak flooring, also more interest for kitchen cabinets • Yellow-poplar still strong for moulding & millwork markets. Good outlook.

27. Stumpage Trends • Soft maple has moved up significantly over the past several years • Hard maple substitute, can also be stained to resemble cherry • Price-sensitive, Chinese maple is replacing domestic maple in some large producers’ mills.

28. Stumpage Trends • Not a lot of information about Softwoods in Kentucky • < 7% of the volume of standing timber in the state (not counting Eastern red cedar) • Southern pine beetle hit our pines hard. • Trends probably similar to more southerly states, SW pulpwood is going slightly higher.

29. SW Stumpage Prices • Softwood prices are about the same or slightly higher than this time last year. • Prices compared to last year: • -0.2% for SW Sawtimber (~ $36.40/ton) • -2% for Pine Chip-n-Saw (~ $22.30/ton) • +14% for SW Pulpwood (~ $6.60/ton)

31. Stumpage Trends • Kentucky harvests ~ 15-25 Million board feet (or more) of Eastern red cedar each year – use has increased by ~10% over last year. • Production goes into shavings, boards and 3.5” x 3.5” posts that compete with treated southern pine for mailbox posts. (50% or more of production!)

32. Most Common Species in Kentucky Sawmills • Red oak is most common (594 MM b.f.) • White oak (424 MM b.f.) • Tulipwood (Tulip poplar) (339 MM b.f.) • Other hardwoods such as maple, black walnut, hickory and cherry (339 MM b.f.)

33. Hardwood Sawmills • 300 Sawmills in KY Div. of Forestry database • Losing small & mid-size mills (10 to15,000 bf/day) because of difficulty in getting the high-grade logs that sustained lower volume, slower producers Factors: • Consolidation of mills • Optimization of mills through technology • More resaws to convert cants more efficiently

34. Hardwood Sawmills • ~ 1200 Portable sawmills in Kentucky (est.) • Ave. mill longevity is 5 to 6 years • 30-40% of mills sold leave the state • ~ 80% of owners get out, 20% buy a bigger mill • Impossible to make a living sawing only 1,000 board feet/day! (ex., non-hydraulic mill)

35. Hardwood Sawmills • Portable sawmills are good for specific markets or high value-added opportunities such as: • Railroad ties • Yellow-poplar siding • Restoration siding for old buildings • Specialty, local-use woods, crafts markets

36. Hardwood Sawmills • Likely opportunity for sawyers in Quarter-sawn lumber market, but most feel it’s “too much trouble” A B Quartersawn (A) and Plainsawn (B) boards cut from a log

37. Other Primary HW Products • Boards & Staves: • Consistent, good outlook - Export market is growing by about 10%/annum • Distillery business getting bigger - worldwide, alcohol consumption is increasing

38. Other Primary HW Products • Boards & Staves: • More countries becoming customers, ex., Cuba is purchasing some for aging rum. • CA wineries are using some Kentucky barrels too.

39. Other Primary HW Products • Poles • Pine peeler poles (SE KY) continue to have a good market, but the volume is decreasing. • Kentucky lost a lot of pine to beetles and may never fully recover this market.

40. Other Primary HW Products • RR Crossties • Hot Market! • Big demand. • Prices up last two years. • Consolidators may be needed to attract small producers.

41. Other Primary HW Products • Pallet Cants • 4.4 Billion board feet of HW lumber was used in pallets in 1999 • 38% of total U.S. HW lumber production • 48% of all KY HW lumber goes into pallets! • Very competitive market! HW Species used in U.S. pallets, 1999. Bejune 2001.

42. Other Primary HW Products • Pallet Cants • Demand is up, but the market price has stayed about the same! • KY pallet lumber is extremely cheap. • ~90 pallet producers • ~ 10% cheaper than neighboring states! • Ex., $245/MBF in KY vs. $250/MBF in TN, $275/MBF in W. VA (2002 figures)

43. Sterilizing Wood Pallets • Pallets now need to be heat-treated to eliminate pests whenever there is a possibility they might be sent to another country. • Only have a few heat-treaters in Kentucky, will probably need more in coming years.

44. Sterilizing Wood Pallets • A complete listing of companies capable of sterilizing solid wood packaging material is being compiled and will be included in the Division of Forestry’s database.

45. Other Primary HW Products • Also see the web page at www.ukwoodcenter.net, under the pull down menu “Events & News, Sterilizing Wood for Pallets”.

46. Dry Kilns • Good value-added opportunity • ~ 65 Dry kiln companies in Kentucky • Companies have continued to add dry kiln capacity, will likely continue to add more capacity.

47. Secondary Hardwood Products • Millwork (Residential & Commercial) • Flooring • Cabinets • Furniture • Pallets

48. Millwork • Increasing production in last 5 years • More/larger moulders have been added • Cheaper machinery available • Yellow poplar supply is exceptional, best wood choice • Outlook: V. good, remodeling strong

49. Flooring • Growing market, will continue to grow • Preferred over carpeting • Species used (in order of demand): • Red oak • White oak • Hickory • Hard maple

50. Cabinets • Remodeling market, won’t slow down • Very competitive, lots of small firms and a few big ones (20+ employees) • Most do well with custom cabinets • Cheaper lines coming from overseas using U.S. (and recently, foreign) wood