Two years ago, Missouri warehouses overflowed with wood products. But seven months ago, a dramatic change led to higher demand for wood and lumber, and significant price increases. Low inventories and shortages are driving up prices for consumers and creating challenges for manufacturers and suppliers.
“I’ve never seen us go from nearly full inventory to nearly empty in such a short period of time,” said Bucky Pescaglia, president of Missouri-Pacific Lumber Company in Fayette, Mo. “With that comes escalating prices due to supply and demand in the market.”
Missouri has more American black walnut timber than any other location in the world. Missouri-Pacific Lumber Company specializes in producing high-quality walnut for furniture, flooring and other furnishings. Production in the entire sector was reduced as the pandemic took hold in the spring of 2020. However, Missouri’s classification of millworkers as essential helped Missouri-Pacific Lumber continue to operate during the COVID-19 shutdown.
“Being an essential business helped us keep running when a lot of the industry cut back for fear of overproducing for a shrinking market,” Pescaglia said. “In October, we started to see a real resurgence in purchasing of our products. It was all hands on deck and demand far exceeded supply in a short period of time. I’ve never seen anything like this.”
Most of the lumber produced for housing construction comes from mills in Alabama, Mississippi and Louisiana. Lumber prices doubled in the past year in some areas of the country, increasing the price of a new home by tens of thousands of dollars.
Missouri doesn’t produce wood for home construction, but its forest products contribute to an $11 billion industry. Demand is strong for everything from railroad ties to pallets to flooring to charcoal.
“The forest product industry in Missouri and across the United States are experiencing good markets, generally speaking,” said Brian Brookshire, executive director of the Missouri Forest Products Association.
However, Brookshire noted several factors leading to continued price increases in the short term. He said the pandemic influenced the market, but federal trade policies also contributed to a slowdown.
“A large amount of lumber is shipped from Missouri to other parts of the work, particularly China and Europe,” Brookshire said. “That trade almost stopped, creating a large supply. But that changed quickly.”
Low interest rates and federal stimulus money led to consumers to increase spending. However, production of U.S. forest products remains below pre-pandemic levels. Brookshire said manufacturers are hampered by workforce issues.
“Many companies are running at about 75-percent of capacity because they have 10- to 20-percent of FTE (full-time equivalent positions) vacant because they can’t fill the jobs,” Brookshire said. “Hiring people at $12 to $15 an hour has been next to impossible. Most companies I talked to don’t have one applicant – no applications on file at all.”
Besides managing workforce challenges, Pescaglia, of Missouri-Pacific Lumber Company, is encountering relationship challenges with longtime customers. With some customers, he will guarantee delivery but not a price due to market volatility. He said he can’t meet the needs of other customers.
“It’s amazing to get the volume of inquiries we get every day,” Pescaglia said. “It’s horrible to tell them I can’t make them an offer or I have to pick and choose who we’re going to sell to. We’re not satisfying anybody completely. We’re trying to satisfy our big customers and they’ve been receptive to getting something, although they might not know what it’s going to cost.”
View original Post