For others, the path into America’s timber crisis begins with the choice to construct a new house or at Home Depot, where the pandemic-driven home remodeling frenzy has contributed to make basic supplies expensive and scarce. For others, it all begins with memes. Lumber prices have skyrocketed in the last year, making it a highly sought-after commodity. The whole wide web has taken note.
“Not even one police escort,” one Twitter user joked with a picture of a lumber-laden truck speeding along the highway. “Wow, neighbors just casually displaying their riches in the corridor,” another captioned a photo of a pile of boards in a building.
The issue is genuine, even if the memes are a joke: In recent months, demand for timber has skyrocketed, and producers have struggled to keep up. Since the Great Recession, most of the sector has been on its heels, and output has slowed as a result. Even if someone anticipated things would perk up today, those sawmill closures and the like are difficult to undo.
As a result, prices have risen dramatically. For years, the cost of 1,000 board feet of timber has fluctuated between $200 and $400. It’s currently far in excess of $1,000. (A board foot is 12x12x1 inches, and the typical new single-family house requires about 16,000 board feet of timber.) A new home that would have cost $10,000 in wood to get off the ground a few years ago now costs $40,000 in wood – if you can get your hands on the timber at all.
Covid-19 was anticipated to cause an industry-wide downturn, not a boom, according to most in the industry. Many people were taken off guard.
“How fast we came roaring back not only shocked me, but also stunned the whole industry.” “The sheer size of demand was impossible to comprehend,” Stinson Dean, CEO of Deacon Lumber, a lumber trading business headquartered in Missouri, told me. “Housing and construction, repair and renovation, that’s where so much money was directed by American consumers that the sheer volume of demand was hard to conceive.”
He had to take a break in the midst of our conversation to make a sale. After putting me on wait, he added, “I’m so sorry, everyone needs lumber, and I have it.” He said that buying the truckload of lumber he just sold them straight from a manufacturer up in Canada would have been cheaper for his Texas customer, but that producer was sold out until May, and they needed the supplies right now. “You can’t acquire anything quick, and a lot of people misjudge their inventory requirements, so they have to rely on someone like me.”
The timber craze is one of a series of unusual and unexpected economic events in Covid-19. There was a big rush on toilet paper in 2020 before the large run on wood in 2021. People decided it was time to clean up their houses because of the same lockdown boredom and additional income that drove some to go into day trading. Those fleeing cities choose to purchase existing houses as well as construct new ones.
I talked with a dozen individuals in the lumber business in recent days about the economics of the current obsession and why timber is so costly and difficult to come by. Many others were surprised that anybody was interested at all. Panels, two-by-fours, and studs aren’t typically the focus of attention.
Chace Barber, a Canadian logger and truck driver who’s become a bit of a lumberjack TikTok celebrity in recent months, said of his unexpected online following, “I honestly don’t know what to make of it.” “I suppose I’ve been attempting to convey as much as I can about logging.” It wasn’t a certain conclusion that the TikTok audience would be interested in his area of work, but the memeification of lumber has definitely helped — not to mention the fact that Barber, 32, is very handsome. (Though he claims he doesn’t receive nearly as many DMs as you would assume.)
Barber isn’t the only one perplexed by the cultural attention as well as the whole scenario. Aside from a little bounce in 2018, the lumber business hasn’t exactly been booming recently. Chip Setzer, director of trading and development at Mickey, a commodities trading platform, stated, “Everyone is hot and heavy about this industry we’re in, and to us, it’s sort of hilarious, since this is a generational run.” “I’m willing to bet that no one living has ever seen what we’re going through right now.”
In the midst of the epidemic, do you despise your home? You’re not the only one who feels this way.
Before we get much farther into the lumber business crisis, it’s probably a good idea to go through how material flows normally: Someone fells a tree in the forest, loads it onto a truck, and transports it to a sawmill or panel mill where it is processed into a completed product such as a stick of lumber, a sheet of plywood, or OSB (oriented strand board). The product is then sold all over the globe.
Timber and lumber are two distinct terms for the same thing: Lumber is a produced finished product, similar to what you’d purchase at the hardware store to repair your fence. Timber is the raw fiber from the forest, the tree; lumber is a manufactured finished good, similar to what you’d buy at the hardware store to fix your fence. The chain resembles the oil sector in several ways. The log represents raw oil, the refinery represents a sawmill, and gas represents the lumber — the product that everyone is talking about right now.
To some degree, the timber craze is a simple supply and demand story: people desire more wood than there is available.
While there are some areas where wood is scarce, there are others where it is abundant. The problem for individuals wanting to construct a deck isn’t a lack of trees to chop down; rather, it’s a lack of processed wood that can be used — lumber.
When the epidemic struck in the spring of 2020, many in the timber sector predicted that business would suffer. Millions of people were unemployed, companies were closing throughout the nation, and the country was in recession. As a result, manufacturers responded in like.
Dustin Jalbert, senior economist and lumber sector expert at Fastmarkets RISI, stated, “They actually pulled down, expecting demand would decrease, and the truth is that demand never dropped.”
Instead, everything accelerated. People who were stranded at home due to Covid-19 shutdowns throughout the nation thought it was a good opportunity to repair and renovate their houses – they constructed fences, added decks, created offices, and refinished basements. The DIY craze helped retailers like Home Depot and Lowe’s achieve record sales.
Those who weren’t busy renovating their houses went out in search of new ones. Where they couldn’t locate pre-existing houses, they began to construct their own. Whatever construction sluggishness there may have been soon dissipated. “Because we are a capitalist country, if people want to purchase a home to move out of the city and into the suburbs, someone will construct it for them. “They’ll find a way,” Michael Wisnefski, CEO of MaterialsXchange, an online marketplace for timber and plywood, said.
Residential housing starts, a statistic that measures when new building projects begin, have been steadily increasing, reaching levels not seen since before the Great Recession. The hot housing market has contributed to heat up the lumber market, which has resulted in increased new home costs.
According to Robert Dietz, chief economist of the National Association of House Builders, “it adds approximately $36,000 to the price of a typical newly constructed home and about $13,000 to the price of a typical apartment.”
The supply side was virtually sceptical about the lumber boom.
Following the Great Recession and the housing bubble, the lumber sector has struggled to recover, and it has been hampered by a slew of economic, regulatory, and environmental problems. Many sawmills in the United States and Canada have shut down or reduced their operations; 2019 was a particularly terrible year for lumber.
“You can’t have 12 recessionary years in a row and expect an industry to act the same way,” said Paul Jannke, partner of Forest Economic Advisors.
Many wholesalers sold off inventory and scaled down operations in the spring of 2020, anticipating even worse sales. It took a long for the business to think that the epidemic would persist as it became apparent that it may not be such a catastrophe after all. “They didn’t start production immediately away, and by the time they realized this was genuine and would persist, they were having trouble quarantining their workers, so they couldn’t scale up production,” Jannke said.
Finding timber employees was difficult before Covid-19; finding labor during the pandemic has been much more difficult. Sawmills have had difficulty staffing up and increasing shifts, not just due to Covid-related limitations and safety precautions, but also because many individuals do not want to work in those kinds of occupations. Some individuals I talked with indicated that increased unemployment insurance, which adds $300 per week to state benefits until September 6, might be a role — but, of course, sawmills are earning so much money right now that they might be able to afford to pay employees more and court them back.
Steve Swanson, who owns and operates a sawmill and two plywood mills in Oregon, is one of many who has worked hard to meet the present demand. “We’re doing very, very well at these prices,” he added. “We’ve been through a lot in the past decade, and now we’re being rewarded for our perseverance in staying in business.”
Even so, things might be a lot better. He’s sold one sawmill and totally shut down two others since 2007, employing around 700 people today, but he thinks he’d have employed 500 more if those businesses hadn’t been abandoned. Many people, he says, don’t realize how difficult it is to get a sawmill up and operating. “They want our business to react to these prices by producing additional lumber, but a new sawmill costs $100 million today, takes two years to construct, and there’s no assurance you’ll have the raw materials to operate it.” Furthermore, no one knows how long this present uptick will continue.
From the trucks and railcars transporting supplies from point A to point B, to the employees who operate lumber yards and sawmills, to, of course, the logs themselves, the timber supply chain is very tight. A tree does not grow overnight, nor can it be transported to a sawmill to be turned into timber. And it takes years to grow a tree back once it has been taken down.
The “timber baskets,” or how much wood is available to chop, in the Pacific Northwest and British Columbia, where many of the logs originate from, are quite limited, according to Jalbert. About 30% of the timber used in the United States comes from Canada, much of it from British Columbia, which has been afflicted by a multi-decade beetle infestation that has hampered supplies. Wildfires pose a danger to logging in those regions, while environmentalists and loggers are at odds in the Pacific Northwest, where federal lands are closed to logging.
On the other hand, the issue in the US South, another region rich in wood, is the polar opposite. Jalbert said, “They have a surplus of timber.” Production will be slower than it might be until the area has adequate sawmill capacity to convert that wood into lumber.
“We’ve discovered that we have a large inventory of trees that are ready to be harvested.” There’s this increasing demand on the lumber side of things with the same production capacity… but the production
side has all the logs they need to make lumber,” said Dan Hockenberger, owner of Virginia Forest Resources, a forestry business.
Even if production were to increase, softwood timber from the Pacific Northwest and British Columbia isn’t always interchangeable with that produced in the South, according to Dean, the lumber dealer. “The timber produced from a Southern yellow pine tree does not have the same applications as lumber made from a Canadian spruce tree,” he said. However, many builders are finding out how to adapt and utilize more of what’s available out of need.
Because of this mismatch between raw materials and processing capacity, the benefits of the timber boom aren’t being evenly distributed across the supply chain, and many individuals who cultivate trees are being left out. Many areas’ timber prices have remained stable, even after accounting for taxes and inflation. “With the South, we’re swimming in wood,” said Brooks Mendell, CEO of forest supply analysis firm Forisk Consulting. “The sawmills can simply purchase anything they want since there’s so much out there.” We’ve got a problem.”
Barber, on the other hand, isn’t seeing much of a raise in his salary in Canada. “The price of lumber has skyrocketed, and the mill is earning a lot more money,” he said, “but they’re not paying us any more.” “It’s kind of amusing how it works.”
The timber mania is in full swing, with no apparent end in sight.
The increase in demand and scarcity of supply in the lumber market is generating all kinds of market instability and distortions. The timber futures market continues to set new highs, exceeding $1,400 per 1,000 board feet, and things may get much crazier. The cash market, which refers to the tangible goods, is growing. Some sawmills are selling boards that haven’t even been cut yet. Those in quest of lumber are paying a premium price for it, if they can get it at all.
“I have clients in other countries who say, ‘I’ll send you $1 million right now, can you just provide me some product?’ And yeah, I’m not going to be able to,” Setzer, the commodities trader, added. He recounted having to contact dozens of trucks simply to have anything moved, and he advised members of his staff to inflate their figures on bids to buyers since “you’re going to wind up taking a loss on something if you quote it inexpensively.”
Lumber futures contracts as far out as November are still trading over $1,000, indicating that the situation is unlikely to improve anytime soon. While the music is playing, producers will continue to dance — and, if they can, dance faster.
Swanson said, “We just react to the increased costs.” “Why would I sell lumber for $800 per 1,000 board feet when others are willing to pay $1,500?” says the seller. It’s a commodity like gasoline, gas, maize, and orange juice in that when there isn’t enough of it to go around, the price rises.”
The timber craze is expected to calm down at some time in the future. Prices will eventually level out, and sawmills will catch up. Nobody knows when, however. The spring and summer construction seasons are upon us, and if demand didn’t slow down during the winter, it certainly won’t now. If there is a slowdown in the approaching winter, coupled with high mill output, the chain may be able to re-establish balance. In general, things will take time to settle down and the supply chain will need to be reorganized.
“This kind of balance takes time in forestry.” “Trees take a long time to mature, and building a new mill takes years,” Mendell said.
While some have referred to rising lumber prices as a sign of rising inflation and an indication that the economy is overheating, there isn’t much the Federal Reserve, for example, can do about it. Increasing the federal interest rate, for example, may prevent individuals from constructing houses, but it may also deter timber companies from expanding their milling capacity.
“If we have supply-side limitations, greater supply is the greatest approach to combat supply-side constraints,” Dietz said. “We need additional sawmills, which necessitates finance.”
Duties on Canadian timber, which are presently at 9%, may have pushed up costs in the past, but that isn’t the case right now. Given how much prices have risen, that 9 percent is little.
Dean said he doesn’t anticipate lumber prices to return to pre-Covid-19 levels very soon, but he believes the situation will stabilize. “People are only paying these exorbitant costs because they have no choice; soon, those who must buy lumber will purchase enough, and we’ll be able to breathe again, and prices will drop.” “The issue for me is, where will we reset?” he said.
To be sure, one lingering issue is why, given the high costs and scarcity of lumber, there hasn’t been a slowdown yet. You may assume that since building out your deck is so difficult and costly right now, you should put it off until next year. But that hasn’t been the case thus far.
The issue has also spawned conspiracy theories that claim there is no scarcity at all – you don’t have to go far on the internet to discover ideas that claim there is plenty of timber out there and that lumberyards, mill owners, and other forest power players are just concealing it. When I questioned the experts about the conspiracy ideas, they laughed them off.
“They aren’t concealing the boards; they don’t have anything.” “At these prices, they’re going to sell every board they can,” Mendell added.
Despite what the truthers may think, what seems to be a large amount of timber to the average person is not really a large amount of lumber. A typical single-family home requires thousands of board feet of timber to build. “A lot of the lumber you see has already been sold or committed, so it isn’t for sale on the open market.”
Barber said, “That conspiracy is insane.” “You can see the lumber cycling simply by watching the trucks come in and out.”
Hockenberger, the owner of the timber business, first mistook me for a lumber truther reaching out to him to discuss conspiracies. “Nowadays, you don’t really know what someone’s purpose is with that information when they want to speak to you about it,” he added.
Lumber isn’t a replacement for GameStop… or is it?
In recent months, the financial sector has given rise to a slew of memes, including GameStop, the Fed’s “Money Printer Go Brrr,” and Dogecoin, to name a few. You may now add lumber to the list.
As part of my reporting for this article, I found that lumber Twitter is a thing, with stars like Dean (@LumberTrading) and Jalbert (@2x4caster) among the stars. Some of the conversation is serious, but a lot of it is lighthearted. Take a photo of some wood and add a one-liner about how much money it’s worth, and you’ve got yourself a meme.
Workers at Home Depot, who are seeing the timber frenzy firsthand, are also laughing at the joke. On Reddit’s r/HomeDepot page, one user joked, “Customers pressuring me about why I don’t have lumber, as if I’m supposed to walk out back and chop a tree down for them.”
Given the lumber fever, one Wisconsin consulting forester, who requested anonymity to protect the identities of his clients, says he’s noticed increased interest among individuals wanting to get into producing wood… And, before diving in, he’d suggest thinking about it realistically. “They think it’s interesting or that it’s the new bitcoin, but they have to understand that it’s large enough and complicated enough that they’ll have to commit to it.” People who do commit to it, I believe they realize fairly soon that this isn’t going to be a get-rich-quick kind thing,” he added.
For the time being, the majority of those engaged are having a good time.
Barber began using TikTok less than a year ago after several colleagues encouraged him to do so. “I’ve seen that truckers perform very well on TikTok, and my only hypothesis is that we have a lot of time throughout the day to sit and think about things,” he said. He currently has a following of about 300,000 people.
His most popular videos are simply him giving odd facts about his truck and logging, and he’s still a bit perplexed that he’s found an audience. “Here’s a fun tidbit about logging trucks: the logs aren’t really secured to the vehicle. “I suppose gravity and Jesus are the only things keeping these items to the vehicle,” he remarked in a recent video taken as he strolled around his truck. It was seen almost 700,000 times.
When we chatted, he mentioned another video he shot of himself driving his truck in the center of a snowy road, tying it back to the timber boom that first made him famous. “Guys, this is why timber is so costly,” he said. “You have to pay me to drive down a cliff’s edge.”
When it comes to their own personal ambitions, even even industry insiders are upset by the price of lumber. “I’ve been waiting for costs to decrease on a garage I’ve wanted to construct for over a year,” Hockenberger said. “I should simply purchase a sawmill,” says the narrator.
