One of the things that we do on a regular basis is to monitor the news within the lumber industry. We do this for several reasons, but the main reason we monitor everything is so that we can consistently find great suppliers to make our shavings and grow our business.
While monitoring the latest lumber news, I came upon an article that made me smile and laugh. I call it business speak, and it happens all the time with big companies. As a consumer, it kind of makes me mad.
Here is the link to the article, and here is the quote I am referencing;
"This acquisition advances our growth strategy by expanding our geographic presence and product mix, and adds an exciting new set of capabilities to our company," said U.S. Lumber President and CEO Jeff McLendon in a news release. "We're particularly pleased that combining these complementary businesses will enhance the value proposition we collectively offer our trading partners."
Stuff like this drives me crazy. Who are we impressing with all that jargon and mumbo jumbo? Why not just tell it like it is. So for your comedic pleasure, we have translated the quote into plain english.
"We bought this company so we can grow our business in new parts of the country that we don't service now. We will also be able to sell products to the customer that we don't currently. Because we will now be a larger company, we should be able to offer our vendors better terms and bigger deals."
Have a great weekend all!
Wood shavings are one of the most popular types of stall bedding used in the barn, but horse owners need to be aware of the varieties used to make their shavings as a few tree species are toxic to your animals.
The first variety of wood that people know not to use already is black walnut. Black walnut trees are native to the eastern US, but they can exist outside their native homes as well. Horses that stand in black walnut shavings are susceptible to laminitis within 24-48 hours. The good news is that black walnut shavings are a dark chocolate brown color and stands out in contrast to lighter colored tree varieties.
Several other tree species are also best avoided. Below is a quick list of the most commonly found in the United States.
Another good rule of thumb to use is to remember not to use any shavings from a tree that would be hazardous to your horses's health when ingested orally.
To ensure that your bedding is safe, always purchase from a reputable supplier that has ecxperience with horses and livestock in general. Do not ever buy shavings that can not be sourced back to a specific tree species. Avoid bedding from tree trimmers or carpentry shops. They can not ensure the tree varieites that were trimmed down, and they can not be sure that the lumber used wasn't treated.
If you ever have specific questions about toxic materials in your bedding, you should check with your local veterinarian or consult the American Society for the Prevention of Cruelty to Animals (ASPCA) 24-Hour Animal Poison Control Center hotline at 888-426-4435. There website is also available at www.aspca.org/Pet-care/poison-control.
Congratulations to our new retail partner, Southern States in Winchester, for making their local newspaper. Full article here.
Frederick County Fair board member Matt Moulden, of Clear Brook, guided a truck driver Monday who delivered more than 50 cubic yards of mulch donated by Southern States in Winchester to the Frederick County Fairgrounds. The mulch will be used for animal bedding during the fair, which runs July 30-Aug. 4.
Full article available here.
This idea was discussed in more depth with members of my private investing community, Hecht Commodity Report.
Lumber is an essential ingredient when it comes to construction. Lumber is one of many industrial commodities that reflect economic conditions, and the price of wood can be highly volatile. While many speculators trade other raw materials in liquid futures markets, lumber is another story.
While lumber is not a popular trading market in the world of futures, the price is a significant barometer for the strength of industrial commodities. Over recent years, the price action in the wood market has been signaling that economic growth is rising and the demand for raw materials and the building blocks of construction is booming.
Lumber has tripled since September 2015
While I never trade the lumber futures market, I watch the price action like a hawk for clues about how the overall economic conditions are impacting the demand for a key industrial commodity. The ascent of the price of lumber over the past two years and eight months has been nothing short of astounding.
We've talked about the shortage of lumber for months here on the PRB Blog, but now everyone else is starting to catch on to the severity of the shortage.
Full article below and available here, courtesy of CNBC.
In the woods of central Maine, trees are gaining value by the minute, and lumber producers aren’t waiting a second. They are scrambling to expand production, build new facilities and hire more workers.
Lumber prices soared over sixty percent since early 2017, thanks to a perfect storm that hit Canadian supply. First tree-eating beetles, then forest fires, transportation issues involving a shortage of trucking and rail cars, and finally, last fall, U.S. duties imposed on Canadian lumber that amount to a 20 percent tax on the commodity.
It all adds up to opportunity in the eyes of Jason Brochu, co-president of Pleasant River Lumber, which operates two mills in Maine, employing 300 workers.
“I think with the duties that are in place, that’s given us a level of confidence that we didn’t have before, and with a level playing field, looking ahead, the confidence we’re at, we’re able to expand and produce more lumber,” said Brochu.
The plan, he said, is to invest $20 million in the company over the next two years, increase production by 50 percent and add up to 40 new jobs. A large dirt pit is already forming near the current mill in Dover-Foxcroft, as workers blast open new ground for additional equipment and machinery.
“You’re seeing it throughout the country where mills are expanding, or building new mills, and our industry is starting to grow to meet the increase in the demand,” said Brochu.
Demand for lumber is rising as the housing market continues on its slow recovery. Housing starts were up over 18 percent in May year-over-year, according to the U.S. Census.
Canadian lumber currently supplies about a third of all U.S. demand, and while U.S. producers are planning to expand, there are plenty of roadblocks on the way to new mills.
“We're going to need more land that you can harvest lumber on,” said Robert Dietz, chief economist for the National Association of Home Builders. “We're going to need more mills in terms of increasing the production capacity, and that requires materials, it requires regulatory approvals, permits, and hiring, and let's keep in mind the labor shortage has been affecting the housing market from a builder perspective. It's also going to limit the uptake of sawmill producers and transportation to increase that domestic supply.“
Brochu admits it is hard to find enough workers in today’s competitive market, and wages are therefore going up. It also takes steel and aluminum and machine parts to build new lumber production facilities, and the U.S. just levied heavy tariffs on Chinese imports of these products. Brochu said on that front, he is not concerned.
“It's not a factor in our decision-making. We're not looking ahead saying, Oh Jeez, stuff might be more expensive so we'd better hold back,” said Brochu. “We feel confident that we'll be able to put in the equipment we need at the price we need to put it in and expand and grow and we're gonna do well.”
But so far this year employment in the lumber industry has been flat, and production has not increased by very much. The cost of lumber has come off its record high in March but is still elevated substantially. That increases homebuilder costs, and builders are thus passing those costs on to buyers.
“In 2017 we were expecting the tariffs to increase home prices by about $1,300, $1,400, It's gone way beyond that, and currently the impact is about $7,500,” said Dietz.
Lumber supply is not keeping up with demand, so prices are unlikely to lose much ground in the short term. Producers still have a long runway ahead, which may be why they’re not concerned about the cost of expansion.
“We know there are going to be highs, we know there are going to be lows,” added Brochu. “What we try to react to is confidence. Things that are longer term give us confidence to spend money to improve the mill or expand the mill.”
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