Those who are new to buying and those who are yet to buy for the first time are often surprised by price variations in American hardwoods. There are many forces that drive these prices changes and it is worth gaining a basic understanding of how the U.S. hardwood lumber industry works, in order to eliminate some of this confusion.
One of the most important things to understand about the U.S. hardwood industry, is that around three quarters of hardwood lumber production is destined for buyers within the Unites States. This means that domestic factors have significantly more influence on prices than factors from outside the U.S., such as the availability and price of hardwoods from alternative sources.
One such domestic factor is the fragmented nature of the industry itself. Even though it is very large in total production (some 23 million cubic meters in 2018), it is spread over a wide geographical area and is carried out by a vast network of small industrial units, most employing less than fifty people. Some 25,000 sawmills, concentration yards (which buy lumber from sawmills for processing), distribution yards (which store and sell lumber on a local or regional basis), brokerages, dimension and wood component manufacturers (which produce parts for finished goods) and a wide variety of finished goods manufacturers, are all involved in the hardwood lumber chain.
This decentralized production means no one producer is large enough to control market prices. Instead, mills are continuously adjusting prices up or down looking for additional sales and/or profit, with others following suit. When inventories of a particular item grow, prices generally drop. Likewise, real or perceived shortages cause prices to rise.
Another important and unusual characteristic of the U.S. hardwood industry is that 81 percent of America’s total hardwood forestland (290 million acres or 117 million hectares) is privately owned by individuals or by companies. With only 19 percent controlled by federal, state and other public ownership, it is not the U.S. government which has overall control of how the forest is managed. This means that state controls on how and when hardwoods are harvested and in what volumes, such as those found in many other hardwood supplying countries of the world, simply do not exist in the United States.