Professor Mark J. Perry's Blog for Economics and Finance
Watch the amazing video below, maybe this time-saving technology helps explain why the real price of lumber is the lowest in history (see chart above), at least back to 1891:
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
9 Comments:
Oh dear! A mechanized, forest raping nightmare for the tree hugger to wail on about...
That AFM company produces some incredible tree harvesting equipment...
Amazing stuff!
More great news for the demise of the rainforest! . . . a genuine problem. . . . Okay, now tell me that's another bogus, "junk science" issue too.
Some people are complaining about a large-scale decline of logging jobs in Oregon.
So what's the cause of said employment decline?
Is it technology or is it (political) policy?
Technologies like this act to reduce the cost of *new* housing and hence limit the increase in the price of the existing housing stock.
During the years of the housing bubble, I don't think I heard a single analyst, journalist, or economist point out this connection.
And it helps global warming by quickly and efficently cutting down trees which absorb co2 to grow and hold the carbon in thier cells which are then used in long term structures. Then a new tree can be grown starting the process all over again. So not only a carbon sink but creation of wealth, reduced construction costs, and increased work!
It is interesting to see a post on an industry that I am active in. I run a company that sells lumber (and other items) to builders. We work directly with mills in the US and Canada for our supply. I use the futures market to hedge risk on long term projects and to protect against a change in a multi-million dollar inventory. The price of lumber has crashed for a few reasons.
1) Demand for commodity lumber has crashed. New home single-family starts are off 65%+ and is not looking to get any better soon. This is a world wide event. Wood once destined for Japan (i.e. termed J-Wood around here) is available for much lower prices.
2) Commercial jobs are moving (slightly) to use more steel and other alternatives to commodity lumber.
3) The dropping of the quota system for Canadian lumber. It has helped Canadian mills get more wood to market at lower prices.
4) Technological advances. Not just machinery like that but others on the output. The mills are getting more out of the average log. Computers are modeling each log and calculating how exactly to cut it. It is pretty amazing to watch. Even a 3% gain in output has created efficiencies that were not there 10 years ago.
5) Even more technological advances: smaller logs can be used to create non-commodity lumber that pushes down the use of commodity demand.
Roof trusses limit the need to long length wide boards, floor trusses for solid sawn floor joists.
OSB is used instead of traditional plywood.
Laminated Veneer Lumber (lvl's) are used for strength in areas that commodity lumber could never be used before. Because of that, some home designs are much more affordable now than in the past.
6) It may not seem to be a big deal but solid sawn commodity lumber is used less and less for crating and packaging that is shipped overseas. There are heat treating requirements that restrict what is used. At one time, we sold in the mid 6 figures to crating companies. Half of that that has transitioned to non-commodity items.
From the size of those trees I'd say that wood being harvested is more likely to be pulped rather than made into structural lumber. Or, as Brian mentioned, veneered into structural pieces.
That's a beautiful machine right there - balletic and efficient.
I think my least favorite thing about the lumber industry is looking at satellite photos and those weird patches in the northwest and Canada that used to have trees.
Gee, and I work with an 8HP hobby sawmill to cut up downed trees on my own property for my own use.
I still figure it is cheaper, once you price a piece of clear cherry at the lumber yard. And you won;t even find it at the ususal building supply. And I've got some really gorgeous storm windows.
Hydra
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