Primary processing profit parameters
Some goal guidelines for profitability in kiln-drying operations. July 26, 2000
Q.
You mentioned a profit goal of $30/day/thousand board feet (MBF). Please inform me if the following scenario is correct: A 25,000 BF kiln, loaded with #1 common red oak, at $1/BF. $30/day/MBF for a 30-day drying cycle would be $30 x 25MBF x 30 days = $22,500. I should theoretically receive $25,000 + $22,500 for the KD lumber? Sounds like a lot to me. Maybe my logic is wrong?
A.
A dry kiln should have as a management goal to make a profit of about $30 per day per MBF. With many species that is possible, since the difference between green and kiln-dried lumber prices exceeds $300 per MBF.
So, with a seven-day drying cycle, you should make a profit of 7 x $30 = $210 per MBF. Then you will have drying expenses of about $75 per MBF. So the price difference between green and kiln-dried must be about $285 to make $30 per day, per MBF.
Now, if you were drying 6/4 red oak and it was going to take 60 days in the kiln, that would require over $1,800 per MBF difference between green and KD. Of course, this would not happen, so the point is that drying 6/4 red oak, green from the saw, in a kiln is not a profitable idea, compared to other options -- drying other thicknesses and species, or quality air-drying first.
In your example, you should receive $22,500 (or $900 per MBF) in addition to your actual drying costs plus the green price of the lumber OR ELSE you could have made more money drying a different species/thickness for the past 30 days.
Hopefully, you can quickly see why people like quality predrying (shed drying, warehouse predryers, etc.) as an inexpensive way to lower the MC before putting lumber in the kiln -- without adding to degrade or inventory costs.
When you look at air-drying, which will cut your kiln costs, the extra degrade (or degrade risk) and inventory expense in air drying is too large to offset the expense. Regular, sloppy air-drying of oak is not a good idea.
Gene Wengert, forum moderator
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KnowledgeBase: Business: Estimating/Accounting/Profitability
KnowledgeBase: Primary Processing: Kiln Operation
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