November-December 2016

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Page 24 of 43 PalletCentral • November-December 2016 25 parallel a similar trend to the stumpage prices. The difference in stumpage and delivered prices represent the labor and other costs associated with harvesting, loading, and hauling the trees. These costs are typically shouldered by loggers. Sawtimber Utilization Traditionally, paper and pulp producers owned both mills and land, thus maintaining a supply of primarily softwood resource. This vertically-integrated business structure changed to a market- based approach over the past 15 years. Mills now compete for the resource directly. Technological advances have enabled mills' ability to extract more profitable lumber from lower quality logs. Changes that affect hardwood more than softwood include a shift in end-use preferences for hardwood products and fluctuating exports to the Chinese market iii . Compared to northern hardwoods, southern hardwood timber can be considered relatively low quality because of the high proportion of cull trees and the low proportional volume of high- grade sawtimber trees. Pallet material can be produced from low- quality and cull timber, while cross ties can be processed from mid- and low-grade sawtimber. Pallets and cross ties have remained in relatively high demand over the past decade iv . Every year, it is estimated that 500 million new pallets are manufactured and these become part of a pool of roughly 2 billion pallets in circulation within the United States. About 90% of the manufactured pallets are made out of solid wood, with mixed eastern oaks species being the dominant hardwood (22.4%) and southern yellow pine being the dominant softwood (7.1%) v . TimberMart-South has recently developed a species-specific report to track such price trends. Of the hardwood species tracked, walnut, white oak, and red oak sawtimber stumpage have on average been the highest valued products over the past three years vi . The sawmill industry has experienced severe financial pressures due to the 2007-2009 recession and demand weakness. Although softwood sawtimber prices have yet to recover, hardwood sawtimber prices are stronger than pre-recession levels. In addition, evidence points to hardwood mills increasing or Pallet lumber demand has been experiencing growth because of increasing shipments of goods, corresponding to the overall improving economy, i which has contributed to the current resilience of hardwood markets.

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