HIGH LUMBER PRICES | Who is Getting Rich?

[Music] last week i did a video on how expensive it was for us to buy a treated 6x6 and how we ended up making our own 6x6s if you have not seen that video i'll leave a link above after reading the comments you know i learned a lot about the industry and there's a lot of really wise people out there with a lot of knowledge reading the comments it was a common theme that lumber was extremely expensive but there was a couple of comments that kind of struck me as odd i'm a logger and i'm still getting paid the same no that really didn't make sense to me you would think that everybody would make more if the product sold for more that's just not the case i read an article saying that logs were bringing the same amount now as they did 20 years ago so the question that came up in my mind is who is making the money [Music] you guys stick with me and i'll explain what i found as an amateur sawyer and lager i can tell you it takes a lot to get a log from the woods to the sawmill to a board it's tough work [Music] i know i didn't have a true respect for it until i started doing it myself so the lumber you've seen at a box store or your local lumber yard has been from the landowner to a logger to a sawyer who packed it up and shipped it on a semi truck to a store and then the store sells it now somewhere along that line somebody is making a killing now stick with me it's not who you think the one common theme i hear in the forums and the posts that i read is that the sawyers the loggers the truck drivers the factory workers that work in the sawmills they're not making any more money they do make some more overtime but it's nowhere near the kind of impact to account for the prices we see in today's market with the price of lumber and construction materials you would think that the people who own the logs and are selling the logs the landowners would be making money hand over fist that's not the case and this is why during the late 1970s and early 80s there was a farming devastation where the family farm just absolutely was falling apart due to low crop prices hundreds of thousands of family farms were foreclosed on and in the mid-80s after some protests a bill was passed first i want to thank secretary black and all the members those with us today and those who worked so hard on this but couldn't be here thank you all for the herculean effort you put forth on behalf of america's farmers this bill encouraged farmers to stop planting food crops there were several different variations of the of the programs put forth and one of them would subsidize the farmers to take the crop rotation out and plant trees much of the farmland of this time was originally in trees so this had not only benefit of raising the prices of the crop but it all had also had an environmental impact while good and meeting several of its goals the program went on entirely too long during this program over 20 million acres of land were planted in timber [Music] today there are millions of more acres of land planted in timber than there were in the 1980s intuitively you would think this would cause the price to go down but that's not the case raw timber prices are down and are at probably the lowest price that they have been in decades even though the price of lumber is at an all-time high landowners are not the ones that are winning big many conscientious landowners planted these trees using them for a retirement plan and now that it's time you know the trees are maturing and it's time to sell the trees off for retirement they're bringing basically less than they they sold for when they were planting them back in the 1980s so if the landowner is not getting rich who's getting rich the price of lumber goes up and down and this is due to many factors but the primary factor is the housing market and how many houses are being built so if there's a housing boom then obviously the price of lumber goes up but if there is a crash like there was in 2008 then the price of the lumber drops dramatically after the 2008 bust the banks quit lending money and then therefore people couldn't build new homes and then the price of lumber fell the price of lumber stayed stagnant up until about three years ago and then there was a moderate housing boom and construction you know took off at a moderate pace and the price of lumber rose gradually and in quarter in accordance with the boom but nothing to explain the prices that we are seeing now because the sawmills were able to keep up with the moderate grant gain over the last three years there was no rush to build new sawmills they were able to uh keep up with the wood needs the pup mills the sawmills they are all able to keep up with the demand that was needed and then along came covid and everybody went home and the box stores such as lowe's or you know the home improvement stores is a home depot they stayed open as essential and so everybody decided it was time to do all the home projects now this this doesn't seem like a lot all at once but when you take the entire population of the country and they all make a trip to the boxwood store all at the same time it basically wiped out our our supply chain of lumber so we we figured out that the people that are cutting the timber the people that are delivering the timber the people that own the land are not making more money in fact if you count for inflation they're making less now than they did in the 1980s when i see the prices at the box stores such as lowe's home depot or you know your menards or any of these vendors out there i my natural instinct would be to want to villainize the seller and the the reality of it is is that these box stores they buy a product for a price and then they raise it up a margin to pay for you know a percentage like 15 percent gain and they have to pay their employees their insurance their overhead their electricity all the things that goes into selling these they have to pay it out of that margin so yes they are a profitable company but it it's not it wouldn't behoove them to raise the price one you know one vendor to raise the price up higher than another because then you'll drive your you'll drive the customers to your competitor so the margin is pretty much stabilized for all of the lumber yards they are all making basically the same amount they're buying it all about the same amount so if it's not the big box stores that are making these huge profits who is making the money the large sawmills and the wood product manufacturers are making a killing there are literally thousands of small sawmill companies across the the united states and canada and these companies are not the ones we're talking about but there are five very large uh sawmill companies and wood product manufacturers that are in control of a huge portion of the lumber supply chain and this is where the problem and their profit lies the five big ones are georgia pacific interform west fraser sierra pacific industries and warehouses georgia pacific and sierra pacific are both privately held companies and we can't see the details of their profit but we can see the detail of the other three which are publicly traded and we can infer by the other three that georgia pacific and sierra pacific are doing well wherehauser has a 681 million dollar profit in their first quarter and that's a 220 percent increase over last year's same time west fraser's results are even more astounding they had an 81 sales increase over the already extremely high sales increase of last quarter in the first quarter of 2020 fraser west fraser made nine million dollars profit in in the first quarter of 2021 they made 665 million dollars profit i can keep going but i believe this answers the question of who is making the money it is the large sawmills and large wood producer wood product producers hey i really appreciate you taking the time to watch this with me and if you have any comments please leave it in the comment section below we look forward to answering any comments and anything that you know that you know better please leave a comment i wish you would also take this time to subscribe to our channel and you can watch us do sawmill and tractor work building our future god bless have a great day

Channel: Tony's Tractor Adventure Homestead

Views: 1,136,256

Rating: 4.8666434 out of 5

Keywords: high lumber prices, who is getting rich, high wood cost, osb prices, lumber prices, plywood prices, tony's tractor adventure, corporate greed, Plywood, wood prices 2021, plywood cost, lumber, lumber prices 2021, wood, when will lumber prices come down, why is wood so expensive, economics, markets, lumberjack, lumber mill, sawmill, mill, obs cost, expensive, uneducated economists, conspiracy, housing market 2021, Supply and demand, lowes lumber prices, Home depot lumber prices

Id: Gz0DUmv8Pzo

Length: 10min 37sec (637 seconds)

Published: Sun May 09 2021

Reddit Comments

[u/Shadyelectrician]

Question, who’s getting rich! Easy answer, not me! 🤣

[u/PhotoPetey]

Somebody is getting rich!

[u/newtyour]

Well, I still strongly dislike “the Devils Hardware Store” (aka: Mynards)! That crook has been taking peoples hard earned money for years with his rebate game. Also they had piles of inventory and spiked the price before the lumber yards did. The hardware stores are not our friends they are all against us. The driving force is money. Look what the banks did to us in 2008! Record bonuses for CEO’s CFO’s & to all high level management!

[u/Recovering_Junkie]

So where can we invest to profit when these prices inevitably fall? How can we facilitate a GameStop for tradesmen?

[u/creative_net_usr]

This guy literally described the problem with union busting in America. Demand went up, that's capitalism. However, the workers (loggers and farmers) got zero while 5 corporations made billions. That's called wealth transfer and will haunt us until America fails.

[u/cumbionloco]

It should be a roll of 14/2 it's considered and luxurious item lol

[u/5boros]

They're not going to expand operations for a temporary spike in demand, and new players aren't going to invest to build competing lumber processing, because they won't be set up in time to meet this temporary spike in demand.

Does it suck, yea, but not as bad as countries that demonize anyone making profit and try to legislate away scarcity. Basically, the alternative would be lower prices, but if they weren't raised due to increased demand, there'd be no lumber on the shelves and it's that simple. This is how free markets work, occasionally it's inconvenient but it's way better than the alternatives, like not having a choice between buying high priced lumber, or not. If there's no lumber you don't even have that choice.

[u/Industrial-Sparky]

Many of the mills in Canada shut down or took curtailments during covid. Add to that the fires out in the pacific northwest last fall that shut down many of the mills there as well as increased materials demand from so many wanting remodels plus new construction and you have sky-high lumber prices. Basic supply and demand.