From CPP: Economy of pandemic whipsawing NC logging and sawmill industries

By Arturo Pineda, originally published by Carolina Public Press. Carolina Public Press is an independent, in-depth and investigative nonprofit news service for North Carolina.

Logging and sawmill operations across North Carolina are struggling to adjust to a destabilized lumber market caused by rapid swings in supply and demand during the COVID-19 pandemic.

Sawmills shut down in the early months of the pandemic, leading to a rise in lumber prices. Leaders at the sawmills expected a decrease in demand. Instead, home renovations and construction took off quickly, exhausting available supplies.

Despite drastic increases in lumber prices across the country, not everyone in the supply chain benefited.

Loggers, for instance, said they have seen very little if any financial gain. Instead, many of them are facing financial difficulties caused by a shortage of truck drivers, stagnant prices from sawmills and increased maintenance costs.

Loggers keep logging with no increase

“Lumber prices are way up,” said Jonzi Guill, Carolina Loggers Association communications director. “The bad thing is that it has not affected loggers in a positive way. You know the prices being up has not trickled down to the loggers.”

Some people think that because lumber prices have risen, loggers must have seen an increase in payout, but most loggers have seen no increase or even a decrease in revenues, Guill said. An increase in payout would have to come from the sawmills or timber buyers who purchase lumber, she said.

The relationship between loggers and sawmills can be a bit complicated at times because of the quota system used by sawmills, said Robert Bardon, a professor of forestry and environmental resources at N.C. State University.

There isn’t a real marketplace for loggers to sell their lumber to different sawmills or timber buyers, Bardon said. After the 2008 recession, many of the smaller, family-owned sawmills closed or were bought out by larger corporate sawmills. The remaining sawmills also began to specialize in products, reducing overlap in production.

Instead, loggers harvest lumber for a specific mill or timber buyer on a contract basis. Sometimes, sawmills place loggers under quota, meaning that a logger can only bring a certain number of tons to sell at the mill for a designated period.

The quota system helps ensure that no excess lumber is being harvested, Guill said. It also helps guarantee that loggers will be able to sell some lumber across the state.

However, the quotas are not set in stone and can change weekly or even daily depending on factors like weather, demand and supply.  According to Guill, loggers complain about how quickly the quota can be increased or decreased depending on pricing.

“We (sawmills) are only paying this logger so much per ton so we can up his quota and let him deliver more loads,” she said.

“While this logger over here … may be paying a few cents more, so (the sawmills) are going to lower his quota to not bring in as much. Unfortunately, that kind of thing happens a lot.”

Two years ago, Billy Corey, owner of Martin County-based Tim Con Forest Products, had about 50 sawmills to which he could sell his wood. Nowadays, he sells to three or four vendors within the area because he can’t afford to send the wood to sawmills farther away.

“I’m losing money because I can’t keep competing,” Corey said. “I can’t raise my production because of the quotas, and there’s not enough sawmills for me to sell to, so I’m at their mercy.”

In Robeson County, Kenny Cain, the owner of Lumber River Timber Co., wrestles with how to keep the business going. The pay he receives from the sawmills is the same amount he received 10 years ago, but compared to then, his costs have increased at least 35%.

“It is eating us up,” Cain said.

Working from a deficit

If Chipp Capps shut down his company, Warren County-based Arcola Logging, he would owe between $3 million and $4 million in replacement parts for his logging equipment, and he would have to lay off the company’s 20 employees. He said he has no choice but to continue working, with the hope that he’ll be able to pay off the debt later.

“You still got to be able to say, ‘No, I’m not going to do it for that rate, not going to do what you’re asking,’” he said. “It makes it much harder to stop and change directions as a small-business man.”

He’s not alone. In the past, the business would lose $2,000 a few weeks in a row, but one big haul could offset the debt, Corey said. But because of market saturation in logging, it is nearly impossible to catch up now.

Corey owns 11 trucks but only has nine drivers. He has been trying to find two more drivers so he can operate at full capacity, but he hasn’t received any applications.

Within the industry, the maintenance of trucks and truck drivers are a money drain, said Capps, who is also chairman of the Carolina Loggers Association. He estimates loggers are losing between 10% and 15% of gross sales on the cost of trucks alone.

Some logging companies increased salaries and added benefits to attract qualified truck drivers with salaries now ranging between $50,000 and $60,000.

However, these salaries pale in comparison to the $80,000 and up salaries offered to truckers by larger corporations. In February, Walmart pitched a $4,000 sign-on bonus for truck drivers, in addition to a second-year salary of $87,500.

Capps has retained his drivers with a $60,000 salary and a work schedule that allows them to come home every night —a huge draw for those with families. But Capps knows truck drivers have the option of leaving for better-paying jobs at any moment.

“As drivers become more scarce, they’re going to race us out,” Capps said. “Then it’s going to suck dry people like me because it’s going to be such a disparity. I can’t compete.”

Truckers weigh in

Brad Ball’s phone rang off the hook in recent weeks as companies across the country tried to find qualified truck drivers to move freight. As the president of Roadmaster Drivers School, a Dunn-based training program for commercial driver’s license truckers, he should have been able to provide help, but he couldn’t.

The shortage of qualified truck drivers is high nationwide, and industries including lumber and gas are struggling to recruit and retain drivers.

According to a report from the American Trucking Association, 63,000 truck-driving jobs were vacant in 2019. If changes aren’t made quickly, the report estimates vacancies will climb to more than 160,000 jobs.

The shortage of drivers was well known within the industry before the pandemic, Ball said. The establishment of the Commercial Driver’s License Drug and Alcohol Clearinghouse database in January 2020, a couple of months before the first major wave of COVID-19, compounded the problem.

Because no central database existed for drug testing, truck drivers could fail a drug test at one company, wait a few months and find a job at another company, Ball said. Now companies are required to consult the database created by the Federal Motor Carrier Safety Administration prior to hiring. Employers must also report failed drug tests.

As of May 2021, more than 76,000 drivers have become ineligible to drive because of their refusal to get a drug test or positive drug tests.

In the early stages of the pandemic, older experienced truck drivers retired in high numbers, leaving a hole in the workforce. Relative to other professions, the average age of American truck drivers skews older at 48. The possibility of early retirement is feasible for many.

“As long as you obtain your CDL and keep it, there’s always a job out there for you,” said Julie Cook, general manager of Future Truckers of America, an Asheboro-based truck driver training program. “There’s always going to be another trucking company.”

In her eyes, the shortage of workers is the perfect time for people to enter and take over those empty spots.

Enrollment at the school increased to 30% more than the school’s usual class size in years before COVID-19. The most recent graduating class of 500 students came from a diverse range of backgrounds from retired law enforcement officers to 21-year-olds anxious to meet the age requirement to become truckers.

At Roadmaster Drivers School of North Carolina, Ball found a similar pattern. The program attracted a number of former hospitality and tourism workers laid off during the pandemic, he said.

To accommodate the demand for more lumber truck drivers in the state, Roadmaster expanded its current facilities to increase its graduating class size to more than 500 students.

Sawmill challenges

Smaller sawmills are faring no better than their larger counterparts on issues of driver and worker shortage.

Like others in the industry, John Fletcher, owner of Canton Sawmill in Haywood County, closed his sawmill in the early stages of the pandemic.  The mill’s staff of 15 employees specialized in manufactured high-quality Appalachian hardwood lumber.

While the mill was closed, employees accepted higher-paying jobs at larger companies. After losing most of the management team, Fletcher decided to keep the mill closed for the immediate future and cut his losses.

Even if he wanted to reopen, he would not be able to find skilled enough employees to work with the high-end boutique lumber, Fletcher said.

In addition to the sawmill, Fletcher runs an eight-person logging company and a four-person wood-chipping mill. Because he is unable to process his own timber, he sends it to Evergreen Timber Works in Knoxville, Tenn., he said.

The mill then sells it back to him, and he uses it in his wood-chipping mill. Despite his best efforts, his wood-chipping mill is operating only at 60%.

He will likely be unable to increase production in the near future, he said.