The March 12 commentary “A saturated market won’t help forest or landowners” purported to show the economics of the forest-products industry. It missed the mark on several accounts.
It argued that Minnesota has had low wood costs (stumpage prices). But prices for standing aspen timber have rocketed approximately 40 percent in the last four years (from $25 per cord to $35 per cord). Red pine prices have increased the same percentage in this time frame, while black spruce prices have gone up 50 percent.
We’ve seen this movie before. In the early to mid-2000s, wood prices reached similarly unsustainable levels in Minnesota.
The result was the permanent closure of one-third of the forest-products capacity in Minnesota. The products from these mills continued to be made, but they were made in other states or countries.
The reason wood prices again are rocketing is simple — supply and demand. No matter the size of demand, if supply is insufficient to meet demand, prices will rise rapidly.
People who own forestland do so for many reasons — wildlife, recreation, clean water and income, among many others.
Attempting to time timber markets is no wiser than attempting to time the stock market.
Just as the stock market will inevitably fall, at current wood prices and with other uneconomic costs in Minnesota, it is inevitable that another company will blink and shut down another mill or machine, with devastating impact on people and communities.
As for rebuilding the forest-products industrial base in Minnesota, great idea! But it’s not likely to happen with uneconomic raw material (wood) costs and uneconomic energy (electrical) costs. These two inputs account for approximately 50 percent of the cost of producing a ton of paper. And wood costs are an even larger factor for lumber, oriented strand board and other building products.
Wayne E. Brandt is executive vice president of Minnesota Forest Industries.