The continuing weak housing market and the permanent shutdown of some of northern Minnesota’s wood mills have sliced demand for timber stumpage to a degree not seen since at least the 1980s. And …
The continuing weak housing market and the permanent shutdown of some of northern Minnesota’s wood mills have sliced demand for timber stumpage to a degree not seen since at least the 1980s. And some industry observers fear that tightening credit for those loggers still operating could further diminish the area’s already depressed timber market.
Just four years ago, demand for timber stumpage, particularly aspen, had reached unprecedented levels in northern Minnesota. Stumpage prices were running $50-$60 per cord, and even higher in some cases, and virtually every cord offered by public land managers was quickly snapped up by eager timber buyers.
That’s no longer the case, according to officials with the Department of Natural Resources and the St. Louis County Land Department. “We’re definitely trending towards more unsold tracts,” said Doug Tilma, a regional forester in Grand Rapids.
In fiscal year 2009, in fact, a total of 167,000 cords worth of timber stumpage offered in northeastern Minnesota went unsold, or more than a third of the roughly 425,000 cords the DNR had planned to sell. Some of those cords were undoubtedly counted twice, however, since some stands were offered in more than one auction. Even so, said Tilma, “that’s much higher than in previous years.”
And some tracts, particularly those that have failed to sell in multiple auctions, are now selling for as little as $4 a cord.
Stands of good timber located close to paper mills are still drawing interest from loggers, said Tilma, and prices are holding fairly steady in the mid-$20 range per cord. On the other hand, in regions more distant from markets, such as the Ely and Tower-Soudan area, as well as northern Lake and Cook counties, interest in timber stumpage is increasingly sluggish, say DNR officials.
St. Louis County land officials are also seeing more sales go without bids. At the county’s most recent auction, held in August, ten of 35 sales went without bidders. In the past, most auctions saw only one or two go without a buyer, according to County Land Commissioner Bob Krepps. Some of those sales have since sold over-the-counter, according to Krepps, who said at this point he’s not particularly worried about the situation. “It’s not surprising under the circumstances,” he said.
While summer is typically a slow time in the woods, as most loggers focus their energies on other lines of work, this summer is one of the slowest in years, according to Scott Dane, executive director of the Associated Contract Loggers and Truckers.
And Dane is concerned that could be a sign of further deterioration in the industry, particularly as a result of tightening credit. “We’re seeing that banks are extremely reluctant to continue to operate in the timber industry. Even getting a letter of credit has become tougher. Without a financial partner, it’s impossible to operate a timber business,” he said.
Currently, said Dane, loggers on public lands must pay the full value of a timber sale before they can build access roads, and that forces most to borrow. He suggested an approach used in Wisconsin, where loggers can pay incrementally, as a way to reduce the need for borrowing by loggers.
“It’s critical that we change that requirement,” said Dane. Without it, he worries the industry may not survive. “We haven’t seen a large exodus of loggers over the past couple years. Guys have been able to hang on by tapping lines of credit and taking out second mortgages. But I’m worried by what I’m seeing from the banking industry. These guys need to stay at the table. They can’t turn their back on an entire industry, or that could be the death knell.”