Timber!

Timber!

Overseas markets are boosting Louisiana's logging industry.



From La. 1 in Port Allen, in the shadows of the old Mississippi River Bridge, the 25,000-square-foot warehouse doesn't look like much. But inside the nondescript exterior of Ralph Stewart Logging is a bustling operation that ships 30,000 or so tons of Louisiana softwood timber per month to Asia, one of the fastest-growing timber markets in the world.



It is a lucrative operation—one of Stewart's shipments sets the buyer back about $7 million—and the four-year-old logging company is growing rapidly. Previously based in Amite, it has tripled in size since it was founded.



More significantly, though, Stewart's emerging success represents a growing trend in the state's timber industry, which generates $3.2 billion a year—a higher dollar volume than any other agricultural industry in Louisiana. As domestic demand for softwood pine lumber and other structural timber products has declined since the housing crash of 2008, Louisiana's foresters and loggers have turned to overseas markets, where they are finding buyers increasingly interested in what they are selling.



"When domestic markets were damaged by the housing bust, the export market began to become more attractive as an alternative," says Rich Vlosky, director of the Louisiana Forest Products development Center and professor of forest sector business development at the LSU AgCenter. "That's a trend we expect to continue over at least the next five years."



Owner Ralph Stewart is positioning his company to take advantage of the trend. A native of Holden, he is no stranger to the industry. Both sides of his family were in the timber business, going back three generations. He grew up working in the family trade as a logger, felling and hauling timber from any one of dozens of south Louisiana timber farms. He then sold the timber to brokers or directly to the big sawmills in the area.




Four years ago, he decided to branch out on his own. The timing was risky. The economy was in a recession, still reeling from the collapse of the housing market, and timber prices had dropped to about $20 per ton, down about 60% from just a couple of years earlier.



But Stewart had connections in the industry who introduced him to some international buyers. He began to bone up on the export business and eventually landed a lucrative contract with an Asian buyer whom he declines to identify.



"It's a very competitive business," says Stewart, in a slow, soft-spoken drawl. "We don't want people to know who we're dealing with."



Whoever it is, they buy a lot of softwood timber from Stewart: approximately 30,000 tons of logs per month, which is enough to fill the hull of the giant freighter the buyer sends to the Port of Greater Baton Rouge to pick up what Stewart says is a shipment worth up to $7 million. It's a big job and also something of a logistical challenge: It takes 1,076 truckloads, to be exact, to fill one of those shipments, and the logs have to be stored somewhere while the trucks make their runs back and forth to timber farms clustered around Tangipahoa, Livingston, Washington and St. Tammany parishes, which is where Stewart does much of his business.



PROXIMITY TO THE PORT

Initially, Stewart stored his logs at a site in New Orleans. But the two-hour drive from the Crescent City to timber country was long and costly. Last year, he decided to relocate to a facility on the river that was closer to the source of the timber. He lucked into a prime spot in Port Allen—the warehouse and 12-acre site that previously housed Louisiana Scrap—acquiring it in late December for $1.75 million. It's near the port and has plenty of open space on which to stack the logs, which will be supplied not only by Stewart's company but by other loggers in the area as well. The plan is to grow the export operation so that it not only supplies one international buyer but several.




"This facility is open to receive logs from any logger," says Ed Green, Stewart's uncle and business adviser. "We want between 70 and 100 truckloads coming in that gate a day—about three times what we have right now—because everybody overseas wants to buy our logs."



Louisiana's timber industry

50% of Louisiana land area is forested. That's 14 million acres.

59 of 64 parishes have forestland.

Timber is the state's No. 1 agricultural product, generating more than $3.2 billion through the sale of raw and value-added forest products.

Timber is the state's third-largest manufacturing sector.

Total value of the state's export timber is $60 million per year.

The largest markets for Louisiana timber are Mexico, Canada and China

The current timber stumpage price is $24 per ton, up 4% over one year ago.*
*Stumpage price includes the cost of felling, processing, and hauling timber from the ground to the buyer.

The last claim may be something of an exaggeration. But there is definitely demand for Louisiana's softwood pine, which is ideal for making the large, horizontal structural boards used in homebuilding. From a buyer's perspective, Louisiana timber is of high quality and attractively priced.



"Prices in the U.S. have declined dramatically over the past six or seven years," says Warren Peters, whose consulting firm, Peters Forest Resources, brokers deals between landowners and buyers. "That has made our prices much more attractive overseas."



Though timber prices have inched back up about 10% since the worst years of the recession, they're still considerably below what they were before, which has kept international demand high. What's more, Asian markets—particularly India and China—are growing fast, and U.S. suppliers are stable and reliable.



"They have a certain assurance when they deal with us," says Buck Vandersteen, executive director of the Louisiana Forestry Association. "We have good infrastructure, too. A lot of countries in the world cannot say that."



So far, Louisiana's timber export volume is only about $60 million per year. Relatively speaking, that's not very much, especially given the size of the timber industry, which besides being the largest agricultural industry in Louisiana is also the third-largest manufacturing sector.



But exports are growing—not only of logs but also of wood pellets. The pellets, which are also made from soft Louisiana pine, are an increasingly popular fuel stock in Europe for heating homes. Last year, Drax Biomass International began construction of a wood pellet storage-and-shipping facility at the Port of Greater Baton Rouge. The two large, white, domes—visible from the Mississippi River Bridge—will be used to store pellets manufactured at the corporation's new processing plant in Gloucester, Miss., and will be operational later this year.



"The pellet industry is a whole different side of this business," Vandersteen says. "Wood that makes the pellets comes from all over the state. And it is generally not used in other processes, so it's a better utilization of forest resources, and it's beneficial to the landowner."



Experts expect the industry's growth to continue. They also project a slight but slow recovery of raw timber prices, which is good news for loggers like Stewart and those who do business with him in Louisiana.



"This export market has created better opportunities for landowners, loggers, truckers, everybody," he says. "And it's statewide, 'cause if there's a parish in Louisiana, it has tree farmers on it."



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