Economics of Sawing for the Tie and Pallet Market

      Ties and pallets typically get sawn as byproducts when producing higher-grade lumber. But in a down market, it's tough to sell any part of the log at a profit. September 6, 2010

Question
I have a mill and was set up to cut ties back in the summer. When I took a break the buyer changed the specs and price without notice to me. He bought my last bundle but said that he had been put on a quota and the mill I delivered mine to made more than he needed. He would not buy any more from me.

I then tried to find a pallet mill that would buy cants. There are several around me but none seem to want to buy anything. Only one of them would talk price to me. They said they were paying $.17 /board foot for 4x6-8'. I can sell the logs to another mill for $.22/board foot and it does not make much sense to me.

Iím dong some custom work and donít want to let that go but I would like to get a buyer for some stuff to keep the bills paid when things are slow. I realize the economy is down but surely Iím not supposed to take a nickel less for my lumber than what I could get for my logs.

Forum Responses
(Sawing and Drying Forum)
From contributor D:
Pallet cants are to be a byproduct of sawing and not the target. The price of pallet cants is $200 mbdft here and tires are $470 mbdft and FAS oak is $680 mbdft. My cost to manufacture is $430 mbdft so where should I be shooting. Last grade load averaged $410 mbdft so I made more off the ties than the lumber. Thus I am not sawing any hardwoods right now unless it is an order and I can sell every board I cut for at least $500 mbdft. This is the reason so many mills are going under. I get four to five auction fliers every week from all over the country. This is a business of millions where pennies kill you.



From the original questioner:
I have a custom market for some lumber and I am doing my own logging off my farm so I get some that wonít make ties or boards to sell, but some would make a cant. Are you still able to sell your ties? Has the price dropped? When I was cutting them they wanted 8' 8'' -7x9 and were paying $24 when they quit buying from me they changed the size to 9' 6'' and paid $23 but the buyer didnít want my bundle every other week.


From contributor Y:
Weíre all in the same leaking boat. Our oak flooring prices are not high enough to pay to cut it but we do when we have something to make out of the middle of it that pays better and donít have a local order to fill.

But, like you, our tie specs keep changing. For most of the year they wanted only 9í3Ē 7x9. Then it was 8í-8" and then it was we had to mix the load exactly half and half. Prices for ties have dropped .50 here and there all year Ė like youíve noted. But our buyer is real good about getting to us as soon as he knows of a change and will buy what weíve already made. He had about 80 mills supplying ties this time last year when they put him on a quota. He cut off a lot of mills that were making a lot of culls and poorly sawn ties and I know of some mills that have gone under.

Weíve keep afloat this year so far by sawing long beams, cants for log home builders, heavy matt material, heavy blocking, and a few ties. Now a couple of these markets have ďgone to sleepĒ for the winter and I donít know if any will awaken next spring. We didnít get much of a chance to fatten up this summer so we may be pretty skinny by spring.

Weíve tried to keep the prices weíve been paying for logs up the best we can because the logger has to eat too. But if we paid for logs based on making a decent profit on the product, heíd leave these logs in the woods rather than go to the expense to bring them to us. Weíve not even tried to make resaw cants. Anytime weíve asked about prices, itíd be better to cut them up into firewood. Firewood has become a pretty good sideline ďcash and carryĒ market. Sometimes that pays for a hambone to put in the beans.



From the original questioner:
Thatís exactly what Iíve found. Iím a one man mill but I really donít have a market to saw for unless someone stops buy with an order. The firewood deal has kept me a float lately, but Iím all out now. Iím probably going to cut some round wood out of some tops if no orders come. I am set up to cut slabs into firewood in a building and I load them in a grain truck with my front end loader. Delivered and dumped $120 and itís about three or four rick. I know that the lumber world is at a standstill but I want to be ready to go if a market opens up to me. The way it has worked before when I get a market to saw for, then people start bringing me a lot of logs to saw for them and I may need to be making hay or something else. Good thing those times come or else the dry spells would be really dry. It helps keep the lights at the mill exercised too.


From contributor S:
After 12 year in the business, I shut down my mill right after Christmas, 2008. One of the reasons was the decline in the tie market. The tie buyer cut me off because my production was too low. He had a quota and had to draw the line somewhere. The market for the side boards from the ties also dried up. Earlier, my grade markets all disappeared
.
Before that, one of my largest customers relocated operations to China. Orders can be found, but they are for very specialized items. So my equipment has been idle, and I'm thankful I was able to land a job that actually pays the bills. At this point, I don't see any signs that the lumber business is going to be profitable anytime soon. A pallet mill did call me a few weeks ago looking for lumber, but the pallet lumber alone doesn't have the profit to sustain my operation.


From contributor H:
To me, if youíre cutting for the tie or pallet markets it's a slow painful death.

To the original questioner: how much wood are you cutting per week or month? Iím asking only because when we are cutting hardwoods we cut the whole log into lumber, and have opened a lot of small k.d. markets at a good price. This works good for us for only sawing smaller quantities. Finding niche markets is the key to survival now and into the future.



From the original questioner:
To contributor H: do you have a kiln. Is it homemade? I have a homemade kiln but it seems slow. I dry a load in about five weeks - 3k feet. These kd markets sound good. Are they a local market? Is this a for sale as it goes? I have had some luck selling my air dried lumber to a school woodshop, but in small quantities. The side lumber I have off of some custom orders donít seem to stay at the mill. If it is there someone comes by needing some of it. I had been saving some 2x8's up for a deck on the house but every time I get ready to start it seems to shrink to less than I need for the deck.


From contributor F:
Things are not much different up here in the frozen tundra of Ontario.The softwood markets are soft (sorry for the pun). The upside is I am getting log cuts for free but no sales to support a crew. The business channel on T.V. keeps talking about the emerging markets in China and India, which all sounds great but can they afford to pay what we need to survive. I met with a businessman from India some years back and we compared payrolls. I was paying five electricians in my electrical business what he was paying for 200 employees in his factory.

In the U.S. you have great local markets in which 70% of what is manufactured is used, in Canada we do not have that and have to export and in the past it was to U.S. markets. We now have to look overseas due to shipping the orders have to be large and are complicated for a beginner such as myself. Perhaps this would be a subject for a seminar? Or am I trying to reinvent the wheel?



From the original questioner:
I am pretty sure that anything we do has been tried before, but we have to hope the results will be better. I am getting a lot of calls to pick up logs. They give them to me, but I always ask if I can saw some lumber out for them. I canít make much money if nothing leaves the mill. Iím still getting some blown down stuff from the f-5 twister that went two miles south of us a couple years back. It makes some good lumber still but the buying mills around me wonít buy it anymore. Still something has to leave the mill for me to make a living, even firewood helps. Iím not trying something new just wanting input about whatís working for you all in this slump.


From contributor Y:
I'm here in Charleston WV and I don't see many log trucks moving. I called a few mills to see what prices were delivered to the mill. Poplar was $290 which I thought was a good price, and they made it clear they didn't want cherry. I can't remember what they would give for the other types of logs, It looks like it will take a few years for the hardwood market to turn around. I'd say if you want to get into this business this would e a good time to get in. You might be able to buy the equipment for pennies on the dollar.


From contributor F:
I agree in that now is the time to get into the lumber business. I remember my father talking of the great depression in 1929 and how many people who had a few dollars purchased business and property for pennies on the dollar, but most did not have even the pennies.

In Canada I don't think we have been through the worst of it yet. My point now is perhaps new markets in the EU or Asia may be the answer but perhaps it could be a joint effort with someone with experience leading the way, this would minimize the risk and we could fill orders which none of us small mills could do on our own.



From contributor A:
I get calls every day from all over the country looking for wood products. A guy in Texas wanted 3/4x6x6' cedar boards and a guy on the left cost wanted 8/4 FAS red oak. Then comes the call from Canada wanting 4/4 white oak 1C and better kiln dried all in truck loads. It would seem like good news if I could sell it for $150 mbdft less then it cost me to produce it. Since a lot of mills are going under and it is hard to get money to start a mill much less keep it going soon the inventories will be used up and the price will come up.

I let my hands go last Friday and I do not know if I will have any work to call them back then or not. I have just enough work on the yard to get me through January if I cut just 1 mbdft a day and get the people to come pick it up. Do not know what I will do in Feb to make it to March when the spring building picks up.



From the original questioner:
There are a few medium sized pallet mills near me that seem to be running too, but it seems tough to get a foot in the door on selling them something. Most have their own saw and only buy logs. The real telltale signs about their health is that their cutting ties and selling them for more than their grade lumber is worth. I have no doubt that I will find a market that will buy some from me in the near future. I will probably try all of them again after the first of the year just to see how their pulse is beating.


From the original questioner:
The logs I sell lumber from come off my farm that is paid for. The big end of my business is sawing other peopleís logs. I still get an average of $300 a week. I donít hire any help, except my sons. My glass has shrunk some but it is way over half full. I donít know the answer or how long till it starts to heal up and move forward. The truth is people are still going to need wood. Still they will want their own logs sawn. Carpenters still will need building material.

Since we are looking back and to the future maybe we should do what the working force of the past did. They almost never stopped working toward their goals and dreams no matter what the economy.Our ancestors made a plan to work and then worked their plan. We must do the same to survive these perilous times. Niche markets and specialty stuff may become our bread and butter instead of just icing on the cake.

Letís set our minds to finding the market to survive on and build it. Specialty items have been good to me and I plan to continue to provide those when folks want them. For you timber framers you are providing a specialty market.



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