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SOUTHERN STUMPIN’ By David Abbott • Managing Editor • Ph. 334-834-1170 • Fax: 334-834-4525 • E-mail: david@hattonbrown.com
Pumpin’ Pain he sky seems to be the limit...for fuel prices. And that's just the icing on the crap cake for loggers. Crad Jaynes, head of South Carolina Timber Producers Assn., is blunt: “In my 45 years it is the worst I have seen.” With nearly as long in the industry, South Carolina logger Bob Lussier and Alabama Loggers Council Director Joel Moon echo Crad’s assessment. “I’ve never seen anything quite like this,” Moon says. Lussier has seen five economic downturns, but never before such a rapid escalation of costs. “Inflation rate for logging here is anywhere from 38-42%," Crad continues. "Quite a few contract haulers have said to hell with it.” Carolina Loggers Assn. Executive Director Jonzi Guill says she has not talked to a logger recently who isn’t considering downsizing crews or selling equipment: “Our loggers are hurting bad.” One Mississippi logger anonymously summed it all up succinctly: “The margins were already tight but you factor in diesel prices along with inflation of every other thing we use, it’s a nightmare. I’m afraid the cost of fuel is gonna put a lot of loggers out of business. We have seen a little help from mills but when you’re getting a 3% bump and 40% inflation…even us ol’ dumb loggers can figure that math out!” Bill Jones, Assistant Director, Southern Loggers Co-op, says it will remain tight until there is more production in refineries. “I don’t see it getting any better until maybe the fall.” Moon thinks not even then. “The fall is gonna be worse, in my opinion.” His reasoning: fuel prices stay high, but demand for wood products declines (consider the Fed’s recent interest rate increase and the effect on housing starts). Right now maybe mills could pay more; then, maybe they can’t. “Lumber has rolled back a little already and paper usually follows about six months later. I think there is a crisis coming.”
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Supply, Demand “We are in a challenging situation, with inventories running low at all the terminals across the whole United States,” Jones warns. “We have less than 12 days of inventory in the whole system.” SLC President/CEO Todd Martin adds, “We have never witnessed the markets move in the way they have moved over the past year, especially since the beginning of this year. It makes it difficult for us to manage and even more difficult for our members to survive. From all indications we are hearing crude will reach $140 per barrel by fall.” Jones explains, “What has happened on the world market is that the European Union has finally agreed not to buy any more fuel from Russia. It is putting more pressure on what inventory we have.” He doesn’t expect Saudi Arabia, Venezuela or Iran to help. “If we don’t start producing we will 6
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continue to tighten our grip on our inventory and there will be a bidding war for whatever is in those tank farms across the country,” Jones continues. “We might even see some rationing by the middle of the summer. Loggers hate the high price but they really don’t like it when they run out.” Martin reports that SLC has already experienced supply difficulties, especially on the East Coast, and recently in Alabama too. Despite the high prices, the volume of fuel purchased has not diminished yet. Some SLC stations are posting record days. That’s an upside for members: big dividends. “The SLC saves our members dollars at the pump, and we also give back,” Martin says. “Each year 100% of the SLC’s net profit is paid back to our members in the form of patronage dividends.”
Going Or Gone “(We) can’t do what we are doing much longer,” another anonymous logger says. “I just got through running my P&L for the last five months and am losing $3,500 per week. Not only fuel but everything. Can’t and will not continue to lose money like this.” Toni McAllister of Louisiana Loggers Assn. believes exorbitant fuel prices were just the stick that broke the mule’s back; now, she says, loggers are dropping like flies. One timber dealer, she reports, recently lost four of his nine crews in a week. “Inflation will kill us slowly; fuel will kill us this month,” North Carolina logger Brent Roberson warns. Tim Rodrigues in Texas says he has parked or sold most of his equipment rather than continue producing at a loss. Same at Mark Pipkin Logging in Arkansas. “We can’t continue to lose money. We are no longer logging due to everything going up but our pay,” Rebecca Pipkin says. “We are losing a few now but in the next 60-90 days we are going to lose a lot,” Lussier fears. He admits he is among those taking a hard look at his options if things don’t change. “I’m not going to keep losing money. When I was younger I had to take money from my savings to keep my business afloat, but I am to the point now I am not going to do that anymore.” That’s no surprise to Richard Schwab at Florida’s M.A. Rigoni. “I think with Bobby (Goodson) going out, he and Lori have inspired a lot of people to strongly consider whether they want to re-up in this business climate.” Years of equity help a generational company like Louisiana’s McManus Timber survive a while, but there’s a limit, Josh McAllister says. “We are starting to not break even, so we have to find the stopping point when we quit using up all our equity, because that is not a sustainable business model.” Sometimes, loggers have to know when to say
no. Buck Vandersteen, Director of Louisiana Forestry Assn., suggests, “In order to survive we have to ask, do I take a tract that is 80 miles away or decline it for one that is worse timber but closer?” Moon agrees. “I am seeing in some instances loggers walking away from jobs that would not be profitable to them.”
Too Little, Too Late Lussier recently took a close look at his numbers using a cost calculator. He found that his fuel expense for the first half of the year is up 57% over the same period last year, while production is down 30% due to quotas. He tried to show the data to mills, hoping for better rates. To his dismay, some refused to even meet with him. “As an association we want to do all we can to help our loggers succeed, but…until we get some help back from the mills I honestly do not know how long our loggers can maintain,” Guill says. “It’s sad that they can all show record profits, but they can’t pass it down to their supply chain that is struggling,” Lussier states. It is hard for loggers to see CEOs of large companies they work for paying billions in dividends to investors, while their suppliers are contemplating going out of business. “That is a hard pill for loggers to swallow,” Josh acknowledges. Toni adds, “We know we are the bottom of their supply chain but they still can’t have that product without us.” Sources report that many mills (not all) are in fact paying fuel adjustments, but it is often too little, too late. And in some cases, the adjustment came with a cut in delivery price. “As long as trucks are going across the scales, they think everything must be lovely…but every load is losing $100 or more,” Crad says. “It is just so discouraging. I want them to make a profit, but they have been making record profits on the backs of the suppliers and forestland owners.” “If you are relying on a mill to give you what you need without asking for it, you’re not gonna get it,” Schwab believes. “They’re not volunteering anything. Loggers have to demand it. The days of trying to push people to do it for less are over.” Loggers can’t make up the difference with production anymore because of quotas. “Inventories are high at mills, so many loggers are not getting a full week of work,” Vandersteen acknowledges. “Loggers are frustrated with mills; mills are in an awkward position. They have made money, but a lot of it has been reinvested in plant improvements and new plants and that is critical. But a lot of people wonder, could they have done more to help the logging side of the industry?” Moon cautions against loggers and mills fighting each other because it will be counterproductive for all in the long run. “Loggers and mills are partners. SLT We’re all in this together.”
JULY 2022 l Southern Loggin’ Times
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