The Pot Calling the Kettle Black

When the housing industry collapsed in 2006 the ACLT reviewed the wood portfolios of the mills, particularly the mills that closed. The common denominator was that Weyerhaeuser and Ainsworth had the highest cost wood portfolios respectively. Compared to the average cost of the logger wood portfolios, Ainsworth averaged $25/cord higher.

With the housing industry collapse, timber permits were overvalued and many permit holders had to forfeit or have adjustments made to their timber permits. Permit values were 1/3 to 1/2 of the original value. Now, eight years later timber auctions are seeing a spike in bid values approaching those experienced prior to the 2006 collapse. Leading this run up in timber auction prices have been Minnesota mills.

An examination of recent auctions reveals the following examples:

Koochiching County:

  • Boise bid up Aspen to $107.00 per cord on one tract.

Itasca County:

  • Intermediate Auction average bid up 40.44%
  • Regular Auction average bid pp 93.60%
  • SAPPI highest bidder averaging between $50 and $60 per cord

U.S. Forest Service:

  • Repeater Sale Bids:
    • Rutar Logging: $49,189.60
    • DeLack Logging: $63,379.67
    • Boise: 201,459.90

MNDNR:

  • Statewide Sealed Bid Auction
  • Mills were the successful high bidders on many permits averaging approximately $60 per cord. The average combined mill bid up was 247%. SAPPI was the highest average overall bidder at 285% bid up securing nine tracts. Blandin secured 4 tracts at an average bid up of 236% and Boise secured 4 tracts at an average bid up of 222%. Mills purchased 1/3 of the offered tracts. The average non-mill bid up was 91%. But after removing Carlson Timber Products, the average drops to 70% (less than a third of mill bid up). Carlson Timber Products bid up averaged $187% on 7 tracts.

Saint Louis County:

  • Mills proved to be the unquestionable high bidder on many of the sales. The average mill bid up was 140% compared to the average logger bid up of 53%.

The highest bids were Boise on one tract to $68.00 per cord for Aspen followed by SAPPI at $58.00 per cord for Aspen.

Clearly some of the mills are driving the run up in stumpage prices, while at the same time claiming that if they paid loggers more they would just waste it on bidding up stumpage. The facts do not support this excuse. Even if it did on some occasions, mills are able to monitor bid results and specific permits and address loggers/incidents if that appears to occur. Other times they say that they cannot afford to pay any more for wood, but then turn around and pay $20-$30 per cord more for wood at auction.

The recent bid results are not sustainable and will prove detrimental to the entire timber industry in the long run. Unfortunately, with public land managers reaping millions in additional revenue they have no short-term motivation to offer more wood to lower the price of stumpage. The combination of these two trends, high stumpage prices and low timber volume offered, along with continued below cost prices paid to loggers, will result in very negative impacts to the Minnesota timber industry.

Before accusing loggers of spending any additional money received from the mills for delivered wood on stumpage, some mills need to look at who’s leading the run up in stumpage prices.

Paying more for stumpage will not solve the mill wood shortage problem. Paying loggers the additional money being wasted by mills on buying stumpage will strengthen the wood pipeline and capacity and enable loggers to support mill needs.