Thanksgiving

Thanksgiving knows no borders. It will be celebrated by our U.S. friends tomorrow, but, like lumber markets, the spirit of Thanksgiving is not defined by one jurisdiction, time or space. It brings focus to more than football and turkey. It speaks of blessings shared in a people-centered business that is results oriented.

At Thanksgiving some 30 years ago, one small lumber wholesaler sought to answer the question: “What’s Thanksgiving got to do with lumber wholesaling in recession?” (See original: Thanksgiving Oct 1982).

For this blog post, I asked my dad to update his answer to that question in the context of “economic recovery”:

Interestingly, the fundamental considerations surrounding relevance of Thanksgiving in times of economic recession or economic recovery seem timely in both instances – perhaps moreso in midst of industry’s generally cautious talk of “recovery”. The original article expanded on appreciation of the “people aspect of our business”.  It declared that even back then, bigness in our businesses could be threatening the individual’s confidence. It suggested that “if anything, economies of scale are being undermined by failure to adapt quickly enough to changes in market realities.” The digital age has introduced the “Power of Now” in our business in ways that could only have been imagined 30 years ago. While acknowledging that sound management principles cannot be disregarded,  the original editorial offered that “while systems changes inherently breed frustration and pessimism in some large organizations, they can become creative opportunity for the experienced, small wholesaler.”

We were grateful for our experience where the size and corporate philosophy gave us a built-in bias toward the human element in wholesaling. That’s a strength; it’s vital. It allows smaller wholesalers to follow through with personal attention. It doesn’t eliminate problems but it does facilitate – even ensure – strategies aimed at prompt resolution. It incorporates a built-in respect and sensitivity for customer concerns. The conclusion long ago declaring: “The people aspect of wholesaling provides purpose for our work and gives us reason for optimism” – holds true for today.
– Ernie Harder, Nov 2013

2014 will mark my fourth year here at Dakeryn Industries. I can attest that the most important assets here are the people relationships we enjoy with our suppliers and customers.  For these we are thankful. Happy Thanksgiving!

Secret Recipies

Historically the competitive nature of lumber marketing has probably contributed to a reluctance in sharing day-to-day trading information among competitors. At the same time, most would acknowledge there are few secrets left in lumber distribution aimed at guarding “proprietary processes”.  That is, creating value around variables such as solidifying existing relationships, reaffirming integrity, enhancing performance. This information age is changing all that. So says Jay Baer, marketing consultant, self-described “hype-free social media and content strategist” and author of the New York Times bestseller Youtility. He cites the five reasons why you need to give away the recipe for your secret sauce:

  1. Your competition already has the formula
  2. Admit it, your sauce is just Thousand Island Dressing
  3. Your prospective customers want self-serve information
  4. Free content filters out the crappy clients
  5. Your customers are being trained to expect the recipe.

In this age of instantaneous information, Baer has a point when he says “There are only so many ways to skin a cat, and everyone in your competitive set is carrying the same set of knives.”

“I started my career as a sales guy in the nineties, when the funnel was controlled by the sales rep who had all the information the prospect wanted, including pricing and discount options. Now 90 per cent of it has swung to marketing. It’s self-service and you need to be very, very helpful to see to the top of the funnel. The game has changed a lot.”
– Brian Halligan, HubSpot

“The difference between helping and selling is just two letters. But those two letters are critically important to the success of business today. Youtility is marketing so useful, people would pay for it. It’s a new marketing model for the age of information overload.”
– Jay Baer

Kalibo

The following images indicate the impact of the typhoon on my aunt’s house in Kalibo, in the province of Aklan, on Panay Island, Philippines.. where they are presently finding shelter under whatever corrugated metal is providing protection against the weather.

“What’s the market doing?”

For most lumber traders, that’s likely been the question of the week. While you won’t find a concrete answer at this Reality Check at MNI, the report does offer an accurate account of what’s transpired this year in view of a U.S. housing market in recovery mode. Here are 12 money quotes pulled from the full story:

  • U.S. lumber prices have firmed in recent months as rising housing starts have put pressure on lean inventories, creating a supply shortage that has yet to fully unwind
  • Some further gains can be expected in 2014 as the housing recovery strengthens although the growth in single- and multi-family starts is expected to be modest by pre-recession standards, pointing to commensurate gains for lumber prices
  • Any further price gains likely would be in line with an anticipated incremental rise in housing starts, which are expected to rise to a seasonally adjusted 1.15 million rate in 2014 from 924,000 this year, according to the National Association of Home Builders.
  • Recent price gains were helped by mild weather throughout much of the United States, boosting construction industry demand
  • “With supplies flowing smoothly through the distribution system, dealers and distributors were forced to replace more frequently than they had anticipated”
  • The gains of recent months partly reflect the reluctance of retailers, wholesalers, and distributors to rebuild inventories after a sharp price decline to around $320 in the composite price during the second quarter of 2013
  • Although housing starts are now almost double the annual rate of some 500,000 seen at the depths of the recession, they are still sharply below the pre-recession rate which single-family starts hit a peak of some 1.7 million units, or around twice the current rate.
  • “It’s not like we couldn’t figure out a way of producing lumber for more houses.”
  • “All the wood they are buying right now has a home”
  • “There is a really strong correlation between jobs and household formation”
  • After the lumber market’s convulsions earlier in the year, supply and demand are now more closely aligned, although the market is still “a little short” and producers are in the driver’s seat
  • (It’s) all consistent with a “slow-moving recovery” that is hampered by a high jobless rate and a sluggish global recovery.

What happened?

At the moment it remains a mystery. Three different sawmills shipped carloads of lumber to a U.S. reload. The carloads on that train all arrived in an unusual state of ‘undress’. That is, one side of the train appears to have encountered someone/something enroute that stripped the paperwrap. The uniformity of the wrap removal, or destruction of same, on all carloads involved, has transportation folks puzzled. Were the impacted cars exposed to heat from a fire, that melted the paperwrap? Why is the exposed lumber in otherwise perfect condition? Did someone cut the paper for shelter? Or did Santa’s helpers gain access with aims of securing exotic sawmill wrappings in advance of high seasonal demand? ………. Who knows?

000_1246

Stress?

“I’ve got one eye on the weather and one eye on the market,” said a local distributor in the Northeast this morning, capturing the correlation foremost in the minds of ever-wary lumber traders monitoring inventory levels these days. Much is written about managing sales stress. It’s part of a lumber trader’s life. It can be a positive, but we’re cautioned to heed suggestions for managing it effectively. The 27 ways to manage sales stress are very helpful. All the usual ones – exercise, eat properly, drink lots of water, play air guitar between calls – make the list. Networking with people outside your industry is a good suggestion that makes the list. Nowhere is there any mention of being a father of two little girls in conjunction with perceived occasional stress. No matter what latitude is given to description of that relationship, it cannot be characterized as “networking outside the industry”. Sales stress has even been known to contribute to sleepless nights. Ha! To get a flavor of what role the joy of Daddy-hood can play in the big picture, check out comedian Michael McIntyre at YouTube here. Even so, I know of at least one Daddy who would hasten to note the benefits of that role include motivation to be at his trading desk by 6:30 a.m. each morning..

“China’s Fibre Deficit”

China forest products import data released this morning for October (CIBC Equity Research):

  • Lumber – In Oct 2013 China imported 2,170,000 m3 of lumber at an average cost of $286 per m3. Lumber imports are up 34% compared to Oct 2012 when they were 1,620,000 m3. YTD lumber imports are 19.720 million m3 compared to 16.870 million m3 in the prior period (up 16.9%).
  • Logs – In Oct 2013 China imported 3,680,000 m3 of logs at an average price of $201 per m3. Log imports are up 61.4% compared to Oct 2012 when they were 2,280,000 m3. YTD log imports are 36.940 million m3 compared to 31.390 million m3 in the prior period (up 17.7%).

Interestingly, the report notes Russian log exports to China are down nearly 8.2% YTD. This decrease is explained by Russia’s export taxes on logs over quota limits and increasing log harvesting and transportation costs. Evidently filling that gap, there were substantial increases in log imports from New Zealand and the U.S. Pacific Northwest: “In fact, New Zealand is now a larger log supplier to China than Russia, which would have been unthinkable five or six years ago.” The October breakdown for B.C. exports is pending.

“We estimate that China’s fibre deficit in 2013 will be approximately 168 million m3 and it is forecast to grow some 30 million m3 (9% per annum) over the next two years.”
– Mark Kennedy, CIBC

Jack Munro

His impact in B.C. Forestry matters is legendary. The news of his death on Friday rekindles stories that harken to an earlier generation of politics and industry in this province. Columnist Vaughn Palmer, writing here in The Vancouver Sun Saturday, captured the essence of who Jack Munro was for forestry workers and for the labour movement in B.C.: 

“When word spread Friday that Jack Munro had passed away, my first thought was that those of us who write about B.C. politics and labour issues might have to retire the phrase “larger than life.” Munro was surely that, and not just in the physical sense: 6-foot-4, 265 pounds at fighting weight and I do mean fighting. From the ’70s to the ’90s, he was the most commanding presence in the B.C. labour movement, a position secured by sheer force of personality and his leadership of the union representing tens of thousands of B.C. forest workers. Munro was also louder than life and at his most quotable moments, never far from an exclamation point and a profanity. By his own testimony he once used the f-word 32 times in the course of a single speech to the employer’s side in a bargaining session.

Still, it would be a mistake to allow Munro’s personal brand of performance art to overshadow his reputation. In his day, he was the most highly regarded labour leader in B.C., not least by his adversaries in the political arena and across the bargaining table. He also served through the 1990s as head of the Forest Alliance, standing up for the beleaguered forest sector, losing ground to an increasingly influential environmental movement, but leaving his adversaries no doubt that they’d been in a fight.

His passing at age 82 recalls a time when forestry was king, when organized labour was a force to be contended with (especially on the picket line), and when the balance of power in the trade union movement was in the public sector.”

Holiday Hit

Back in September we learned of a little light burning bright in Vancouver’s Downtown Eastside called Tradeworks – “a unique trades training program for women facing multiple barriers to employment” (see original post here). So it was with real interest that I read an upbeat follow-up this week here in the local Metro, reporting that 2013 will mark the first year the non-profit business will break even. Why? “It’s all thanks to (Tradeworks trainee turned trainer) Toni Glick’s decision several years ago to design a set of 12 intricately cut Christmas ornaments using a laser engraver. The women are now struggling to keep pace with orders for the wooden bobbles, which are made of 100 per cent discarded wood. Their clients are some of B.C.’s biggest businesses, including Telus, Lululemon, and the Vancouver Art Gallery Store.”

We’re told that Tradeworks now trains 72 teen and adult women each year, while employing up to 12 in the carpentry shop’s bridge employment program. “I’ve learned a lot about production and it’s fulfillment,” Glick said of the experience “We knew nothing, like nothing, none of us, about business, at all.. Now the problem is we can’t keep up.”

“The whole difference between construction and creation is exactly this: that a thing constructed can only be loved after it is constructed; but a thing created is loved before it exists.”
– Charles Dickens

Toronto Mayor aside..

It may seem that in Toronto it’s all about the mayor or the Leafs. That’s not necessarily true. Not caught in the headlines so much, but increasingly newsworthy, is growing concern about the health of the Toronto condo market. The Condo Game, a new CBC documentary set to air next Thursday, reportedly exposes “a sea of troubles” behind all that glittering glass. Is the fastest moving condo market in North America the product of a global investments game? Check out the trailer here.

While on the topic of housing, a former member of the Canadian Parliament turned finance blogger recounts the origin of the 40-year amortization in Canada here. Says Garth Turner at The Greater Fool: “The era of zero-down and lifetime mortgage payments – resulting in an eruption of condo-building and frenzied, assembly-line house construction – was a crude attempt to deregulate real estate and blow a speculative bubble in Canada. Two years later when rates collapsed, it was too late to tame the creature. Now we have the average SFH sitting at $850,000 in 416 and a million in Van. ‘Buy now or buy never’ has created a culture in which fools jump into bidding wars for junk housing they think can only go up. While sage, experienced players around the world shake their heads and warn of coming consequences, we flub on. Reality is for other people.”