Pricing Lumber in a Down Market
A conversation about how to charge practical prices for lumber sawn from old, legacy trees. January 25, 2010
Question
Customers are beginning to call requesting lumber prices. It's no problem filling the orders, but I'm curious as to fair pricing with the overall market being down. I'll admit sentimental reasons come into play when I begin selling off forth generation timber. Being trusted to use the resource wisely, I expect to get the best prices. I am curious what you are asking for hemlock, poplar and red oak. I do expect to begin sacrificing somewhat since several of the oaks are beginning to die as result of age.
Forum Responses
(Sawing and Drying Forum)
From contributor R:
If you intend to sell your lumber as a business, then get rid of the fair and sentimental mentality. Propagate new trees from the best specimens and move on. Woodplanet.com and hmr.com are good resources for current prices.
From contributor G:
WOODWEB's Lumber Buying Guide gives lumber prices for a number of domestic species in three country divisions:
Lumber Buying Guide
From contributor J:
You should always charge as much as the market will bear, otherwise you are subsidizing your customer's lifestyle at your own expense. If the market price is not enough to provide you with a good living, then you shouldn't sell your product. There's no point in trading two nickels for a dime. The hard part is finding out how much the market will bear. Remember - it's always easier to lower your price than to raise it, eh?
From contributor A:
Is it green off the saw or kiln dried? If you try to run with the green wholesale price right now you will starve to death. Red oak is bringing $0.50 bdft for FAS here right now. The wholesale prices for FAS kiln dried are for large lot loads. So I would add about 20% to that for small loads. Then there are extra charges for all the same width boards and trimming and such.
Green off the saw log runs I am getting $600.00 mbdft for red oak up to 12" wide and to 12' long. Kiln dried same stuff is $1.25 for 1C and better. Sorted, S4S, and trimmed it is $2.25. Qsawn is more. I do not have the other kinds of trees.
From contributor S:
It sounds like you are retailing rough sawn lumber. Did I get that right? You have walk-in customers wanting prices?
I agree you need to charge a price that works for you or find a different product to cut. I try to keep my generic price less than retail. Yes, the retail parts have a lot more content to them. Folks want to save money and I find that they are often willing to get less processing as long as they can still use the material. They also see a nice log in their yard and want to turn it into something nice - another type of customer, and that affects price too.
In the past posts folks have recommended comparing hourly rates for construction equipment. For example, locally a dump truck goes for $125/hr. Lastly, when log prices are down, folks tend to say buy logs and keep yours for later (certainly you would want to salvage your logs too).
From contributor S:
Get the word "fair" out of your mind. Find out what other people are charging and go for it. Do you think Exxon or the taxman gives a hoot about being fair to you? You have to reach into your customer's pocket and extract as much money and still give them the perception of good value.
That's where the 4th generation of timber comes in. Sell that as value! Think of ways to work it - why your lumber is worth more. The wholesale market right now is terrible, so try not to get caught up in all that. When a customer asks what the price is, don't give him the price right away; ask what the lumber will be used for - does he need barn siding? Get him to pay more for all 10" wide boards. Good looking oak for door/window casing? If you provide all 6" or 5" stock, his waste factor will be lower. Wants wide plank flooring?
Give them what they want and make as much money in the process. None of us knows how much time we have left, so make some money while you can and then take some time off to go fishing or take the family out to dinner.
From contributor G:
You do have the world's most green product. Sell it with a markup for that feature. Green is in, at the moment at least, and sells for big premiums. Introduce the forest management/sustainable resource point. You have a forest that has been in your family's hands for four generations. You continue the tradition by careful cutting and replanting in a socially acceptable and sustainable manner in order to maintain the forest resource for future generations. (Throw in a couple of pictures of kids, or better yet, grandchildren.) There are even agencies out there who will certify you as green as green can be. That can be a part of your value added and you cut to order, etc. to conserve.
From the original questioner:
Thanks to all for the great responses. I guess my situation is a little different from some of you since I don't rely on the business for full time profit. I've actually worked in oil and gas for 35 years and expect to retire soon, and this milling business will be something of a hobby/retirement offset. Regardless, I plan to hold true to the resource left me and take only what I need. I think I will have accomplished this if I can pass this lesson to the son and grandsons. Good sawing and thanks!
