Data for this survey was obtained by a mail survey of all known saw and veneer mills in Indiana. The survey was conducted by the Indiana Agricultural Statistics service. The prices reported are for logs delivered to the log yards of the reporting mills and concentration yards. This report is intended to be used as an indication of price trends, not for the appraisal of logs or standing timber (stumpage). Data is collected once a year and log prices are constantly changing. Standard appraisal techniques by those familiar with local market conditions should be used to obtain estimates of current market values for particular stands of timber or lots of logs. Because of the small number of mills reporting logging costs, "stumpage prices" estimated by deducting the average logging and hauling costs, Table 3, from delivered log prices must be interpreted with caution.

The survey was mailed to 212 mills. There was an initial mailing and one reminder postcard sent to non-respondents. Mills not responding were contacted by enumerators of the Indiana Agriculture Statistics Service. Purdue’s Department of Forestry and Natural Resources pays for this assistance using funds from its John S. Wright Endowment, not from public funds.

Seventy-three mills reported some useable data, compared to 88 last year and 102 in 2007. Six sawmills and 1 veneer mill responded that they went out of business. Twenty-eight declined to provide data, 11 were returned for bad addresses, and 4 reported that they didn’t buy logs. Thus 123 mills were accounted for making the overall response rate 58 percent, slightly above last year’s 54 percent.

The number of mills contributing price data for each product is shown in the fourth column in Tables 1 to 4. Fifty-one mills reported their 2008 total board-foot production, compared to 56 in 2007. Twelve mills reported producing 500 thousand board feet (MBF) or less. Total production for the reporting mills was 157 million compared to 175 million in 2007, and 205 million in 2006. Again for 2008 the largest mill responding reported 20 million board feet of output.

The price statistics by species and grade don’t include data from small custom mills because most do not buy logs, or they pay a set price for all species and grades of pallet logs. They are, however, the primary source of data on the cost of custom sawing. Thus, the custom sawing costs reported in Table 3 do not reflect the operating cost of large mills.

As this is written lumber inventories are low enough to justify increased output based on current order levels. Price upticks in certain species will occur while supply catches up, but will then level off unless demand increases above current levels. Log yards are at or near empty since log inventories had to be reduced. Efforts to bring supplies in are facing resistance from landowners who are waiting until stumpage prices increase, and availability of logging services. An advantage of the logging business, especially in the corn belt where firms are small, is that operators can come and go with the market. But, the number leaving the business this go-round because of the severity and length of the recession will severely delay the response of the logging industry. The likely response will be a proportionately larger increase in delivered log prices than in stumpage.

The number of mills reporting prices was up slightly compared to 2008. Sawlog prices, Table 1, were down across all species. Reflecting lumber price trends, the premium species were down the most, in the 15% to 30%, compared to less than 10 percent for the non-premium species. The lowest grade in almost all species increased the least, reflecting different markets for low grade lumber, and tie and cants. The largest declines were for black cherry, white oak, and black walnut. Red oak has been declining since 2002 when it peaked at $856 per MBF for prime logs. This year’s $496 is a 42 percent drop. In comparison, prime black walnut is down 15 percent from its peak in 2005.

The average for the seven mills reporting pine sawlogs was down 11.7 percent, $210 compared to $238 in 2008. The niche market for red cedar logs continues, down 9.7 percent, from $450 to $400 per MBF.

Veneer log prices were down more than sawlogs. Small prime walnut was down about 15 percent, larger prime logs were down over 30 percent. Select black walnut was down 25 to 60 percent. White oak was down 20 percent or more. Black cherry was down 20 to 60 percent.

We find little reason to expect a rapid recovery in the hardwood industry. Stumpage buyers will be much more active going forward, but many mills will not be able to fund the large standing inventories they’ve typically kept. Lead times from purchase to harvest will be in the 2 to 3 months, compared to over a year when capital availability and cash flow were better.

Stumpage buyers will be offering slightly higher prices to make and close deals, but potential sellers are unlikely to know this. Most timber owners make decisions based on their overall perception of market conditions, not specific market conditions.

A key will be when consulting foresters perceive that prices have recovered sufficiently to justify putting clients timber up for sale. There is a backlog of clients waiting for a sell recommendation from their consultant. This sector will become active only after buyers have worked through the easily reached direct sale opportunities available to them. There will be many fundamental changes in the hardwood industry in Indiana over the next decade. After recovering from this recession production will go back on the longer run downward trend. This will impact premium species and veneer logs more than the industrial wood sector. The former is tied closely to housing and furniture, while the later is tied to total industrial output. Export markets will make up a greater share of the market for premium species in upper grades. The hottest topic of conversation in the wood products and forestry communities is the impact of the renewable energy sector on wood. We need to start collecting additional information to track the impacts of this sector. Based on the data available, there are few signs that energy demand is impacting wood prices. A possible indication that the energy market is impacting by-product prices is that sawdust and bark prices are coming together. We must point out that because of the low number of responses for bark and sawdust prices any implications drawn from them must be taken lightly. In addition, there is inconsistency in how these prices are reported. Based on discussions with colleagues in the FNR department here is our assessment of the impact of renewable energy demand on wood products and forests in Indiana. Demand for sawdust will increase, driven by the fuel pellet industry that is serving domestic markets and exporting to EU countries. Bark will be substituted to a greater extent for sawdust in boilers at wood products firms and paper mills. Hogged chips from debarked logs will also go to pellet mills. Hogged chips from slabs with bark on will go to boilers. The demand for bark for fuel will bump up against the hardwood mulch market, capping the volume going for fuel.

The delivered log prices collected in the Indiana Forest Products Price Survey are used to calculate the delivered log value of typical stands of timber. This provides trend-line information that can be used to monitor long-term price trends for timber. The species distribution and log quality weights used to calculate the weighted averages at http://www.ces.purdue.edu/extmedia/FNR/FNR-177-W.pdf.