Sawmills Must Adapt to Stay Relevant
May 1, 2013
by Andy Kerr for the Daily Courier
The closing of Cave Junction's Rough and Ready sawmill was due more to a flawed business model than an inadequate federal timber supply. Management failed to adapt to changing business environments, and 85 workers are out of work.
Oregon sawmill closures are nothing new. Since 1995, one half of Oregon's large sawmills have closed and one half of the jobs have gone as well. However, the remaining sawmills in 2013 can produce one-quarter more lumber than twice that number of mills could in 1995. R&R lost out to other sawmills that modernized and got larger.
Efficient sawmills in Shanghai and Tokyo outcompete inefficient Oregon sawmills for Oregon logs. More Pacific Northwest logs are exported to East Asia than come off federal public land.
R&R's large-log sawmill required logs from large trees from old public forests. The 1980s glory days that R&R longs for again was a time when two square miles of Oregon's ancient federal forests were being clear-cut each week.
With the adoption of the Northwest Forest Plan two decades ago, the timber industry lost its social license to log older forests on federal forests. Yet R&R's owners didn't adapt. Stubbornness, hope and denial do not make a viable business plan.
A viable business plan does not require rolling back 20 years of federal conservation standards that provide clean water, wildlife habitat, scenic beauty and recreational opportunities for this and future generations.
R&R's owners could have chosen to grow large trees for large logs on their own vast timberlands, but they didn't. Perhaps they found it more profitable to sell their logs to sawmills other than their own in this country or elsewhere.
In their press release announcing the closure of their large-log sawmill, R&R's owners note:
• The $6 million they invested in a biomass electric cogeneration facility at their sawmill. They neglected to thank taxpayers as it was mostly paid for with federal and state tax credits.
• Their investment in the "region's first small log mill." They didn't say they barely ever ran it while they continued to focus on old-growth logs for their large-log mill.
• That "(t)he company was poised to begin a new $2 million sawmill project in 2014." Was it for modernizing their small log sawmill so they would actually run it or was it to make their large log sawmill a more profitable consumer of large old trees?
• "R&R annually consumes 25 million board feet" (MMBF) of logs. As of March 31, R&R had 18.6 MMBF of Medford Bureau of Land Management timber under contract, but unlogged—none of which is encumbered by conservationist challenges. R&R also bought logs from sources.
• "It's like sitting in a grocery store not being able to eat while the produce rots around you." It's more like a hunger strike, because R&R has nine months' worth of just Medford BLM logs under contract that it could eat — but choose not to. It's cheap food, too, because R&R was the sole bidder for the timber sales. The two most recent Medford BLM timber sale offerings received no bids.
R&R also failed on the demand side of their business model. U.S. housing starts are currently 0.9 million annually, up from the housing-bust low of 0.5 million, but down from the housing-boom high of 2.1 million. To reach that peak again requires another housing bubble — something policymakers have vowed to not let happen again.
R&R's closure is part of an industry-wide rationalization of domestic sawmilling capacity to more closely match domestic lumber demand. Seven other obsolete Oregon sawmills also rely on logging old growth on federal forests. While most other sawmills were retooling to focus on small logs, these dinosaurs retooled — but to more efficiently process large (old) logs. It's not unlike modernizing a whaling station to more profitably process whales. The fatal flaw in such a business plan is that the feedstock is whales — or in R&R's case, old-growth forests.
R&R's blaming of Senate Energy and Natural Resources Committee Ron Wyden for R&R's own poor business decisions is misplaced. Unfortunately for R&R and the other seven dinosaur sawmills — like almost all Oregonians — Wyden wants to save the last of the older forests. Fortunately, for the 55 large primary wood-processing facilities in Oregon that modernized to smaller logs, Wyden — like most conservation organizations — wants to increase federal logging levels.
Most conservationists support increasing the amount of commercially profitable restoration thinning in moist forest plantations and degraded dry forests. In fact, federal logging levels could increase 44 percent in the Northwest Forest Plan area for well over the next two decades — with the blessing of most conservationists.
Most conservationists supported Lakeview's Collins Pine when it built a new small-log sawmill. We supported John Day's Malheur Lumber when it built a pellet facility utilizing small wood and support them now to also do what Collins did.
For capitalism to have winners, there must be losers. R&R was a winner for two generations of owners, but this generation wouldn't adapt to changed circumstances. Unfortunately, 85 workers are paying the price.
The modern business environment is rough, and R&R wasn't ready.
Andy Kerr (www.andykerr.net) consults for several public lands conservation organizations in the West and lives in Ashland and Washington, D.C.
Kerr, Andy, May 1, 2013. Sawmills Must Adapt to Stay Relevant. Daily Courier, Grants Pass, Oregon. (http://www.thedailycourier.com/articles/2013/05/01/opinion/news02.txt; paywall).