I live in Canada, where we are swimming in lumber (in theory). I just don't understand why it is so expensive. I know the processing and treatment is very sophisticated but there is so much automation throughout the whole chain. My only explanation is that lumber is a globally traded commodity .. price isn't determined by just Canadian demand for lumber but the global demand.
It makes me wonder .. if the US shutdown Canadian wood imports, would that significantly lower prices for Canadian consumers? How low would it go?
my un-schooled guess is simple - the rest of the industrialized world has benefited from profit markups in real dollars of today - that fun book or skateboard was priced in modern terms.. while lumber is a commodity from the previous century or three.. their dollars and costs were low to start with, and were pressed down by commodity markets.
I once asked a recent undergrad in Economics graduate, at a party, why one pound of bread costs more than one pound of meat (the inputs and processing costs are vastly different, through the life of the animal, the meat should be way, way more) but, blank stare, more beer.
I for one believe that most of the markets, most of the time, make no sense at all from the perspective of the real natural inputs, and all the sense in the world from the point of view of one human group selling things to another human group, any way they can; old timber included.
Bread doesn't seem like the best example here, because the finished product is not dense, can't be smushed, and has to get shipped to the store. Transport plus the shelf space (and rotation) can explain most of the price.
If you look at pure flour, rice, beans, pasta, and stuff like that, there are lots of cases where it drops from prepared-foods price down to something closer to its commodity value. Looking up rice, it goes for $14/c.w.t., which I think translates to a little over $0.10 per pound. You can't buy it at that price, but you can buy a literal 1 lb bag of the bad rice for $1.00. Consider larger quantities and you'll probably see an asymptote to a reasonable multiple times the commodity value.
Meat will not follow those rules. The floor for meat is much higher due to the physical inefficiency of production. Even at that higher price floor, there are huge untaxed externalities. A lot of people know the reality that we have to eat a lot less meat due to halt climate change. I think there is a strong business and social culture for businesses to move meat at close to its price floor, with business models like fast food.
as a consumer, I will walk to the corner store here in the California city, and I will check the price of a loaf of ordinary bread, and the price of a pound of ordinary meat, again today or tomorrow. Not "the cheapest rice by the ten pound bag" .. or "chicken parts whole in a ten pound bag" I believe my point stands.. yes, there are layers in the consumer markets.. times one hundred for a fast food meal, too.
Where is a pound of meat cheaper than a pound of bread?
Either way, no offense, but your economics grad needs to re-take some basic classes. To simplify, input costs only establish a floor on prices. Otherwise, prices are set by dynamic market supply/demand curves.
>It makes me wonder .. if the US shutdown Canadian wood imports, would that significantly lower prices for Canadian consumers? How low would it go?
It probably wouldnt go low because you are not recognising global demand and a growing global population, cost of automation for factory (automated built) furniture, bespoke furniture by individual or small teams of carpenters, cost of transporting wood to other countries where costs are different.
Here in the UK we have this place https://www.oakfurnitureland.co.uk/ it does real solid (oak) wood furniture, not some furniture made of chipboard.
It seems quite cheap but there are visible cost savings, like the furniture isnt that big, its suited to smaller homes than some grand mansion or luxury home, and with a lot of businesses, where finance/credit is available, sometimes the company main business is actually a credit broker/finance specialising in a niche market product.
Some people have said GE (General Electric) is now more a financial entity than a manufacturer, this is business diversification over the decades.
> the furniture isnt that big, its suited to smaller homes
To be fair, pretty much anything built after 1960 is small, and all UK housing is small by American standards.
I also don't think most people in the UK consider OakFurnitureLand a cheap, or even an affordable place to buy furniture. Despite being made of cheap internationally sourced oak, and somewhat mediocre, it's definitely a premium brand. If you were to buy all your furniture there many people would consider you well off.
Spot on with the reality of their finance business though
I spent quite a lot of time in https://www.oakfurnitureland.co.uk/ returns outlet picking through stuff. I furnished most of a house from there. The furniture is made in places like Thailand, and woods like mango are used as well as 'oak'. They must make reasonable margins even with the normal prices they charge. I'm sure they also benefit at least on their lower tier of credit plus upsells on insurance etc. I didn't encounter any of that as the outlet was strictly cash.
Even the carcasses use solid wood. Some of the returned furniture had cracks in interior wooden boards where a composite like ply/chip/MDF would not have cracked. I guess solid wood is lighter, part of their brand and they have less diversity of material sourcing. It must pay off, even with slightly higher returns.
I don't think most countries build houses of wood like North America does. In Europe houses are mostly built of various kinds of bricks and concrete. Only the roofs in detached houses are usually made of wood (and not all of them).
In the American south, there are a lot of masonry, or concrete homes or even AAC. See florida.
In the north masonry homes have a lot of problems with freeze thaw cycles. As far as upgrades
, remodeling, overall costs goes stick built homes are superior.
> In the north masonry homes have a lot of problems with freeze thaw cycles
That's weird, central Europe has pretty northern climate with cold snowy winters and hot summers and I've never heard about any such problems. I've lived my whole life in such houses. You just need proper insulation (but you need it anyway cause heating is expansive). I think Americans don't much care for good windows for example, at least in the movies they have these weird 1-layer sliding windows that nobody would use here :).
> As far as upgrades , remodeling, overall costs goes stick built homes are superior.
There's a bit of stigma against wooden houses here and they are considered worse investment because they degrade and lose value much faster.
Single pane windows are not common in the US in anything built in the last 30 years or so (give or take a few decades). Sliding windows are usually 2 or even 3 pane. Movies use single pane candy "glass" windows so characters can be thrown through them.
I would not be surprised if Canadian lumber was going to China. I believe a lot of Alaskan lumber, if not the majority of it, was China bound (this may have been close to two decades ago though when I had heard that).
Canadians are so stupid that we have allowed raw logs to be sold to Chinese offshore lumber mill ships, to be sold back to us, instead of insisting that the value-added processes be kept on-shore so that we have good-paying jobs for our own citizens.
> so that we have good-paying jobs for our own citizens.
Protectionism isn't always a good idea. Doing so would've made the final lumber output more expensive for Canadian consumers.
Automation is coming for the good-paying jobs sooner or later, anyways. The solution wasn't/isn't to ban outsourcing/automation, it's to better distribute the gains from outsourcing/automation across society.
The better mills have amazing automation. Penetrating scan of the log and then laser-guided slicing and dicing to maximize wood usage and profitability.
Now if only the lumber were properly dried instead of shipped slopping wet. (Actually, I suspect the kiln-dried lumber is destined for wealthy foreign markets; we locals get the c-grade crap. I have spent literally more than an hour picking through stacks to find enough good lumber to build a shed.)
The kiln drying process is exactly why you get what you get. When you crank the kiln to 11 in order to get the most throughput out of it you get residual stress and bent boards.
A covered pile outdoors or in a warehouse will yield straighter lumber (or just don't crank the kiln to 11) but that is not economically viable for random pine that people frame things with.
Canadians know that - they have only to look at dairy. Milk is probably fine from a consumer perspective (just not if you want to get into farming it), but whether deliberately or as a side-effect it cripples cheese.
Imagine my great-grandfather planted a seed 150 years ago for $0, then we did nothing but wait for 150 years, then I chop it down and get $100 of lumber.
But you can't enter the market and compete with me, because you don't have the right grandfather.
Property values in Canada are quite high. That free free squatted on non-free land for 150 years before you got to chop it down. How many dollars per year did the land cost for those 150 years?
It makes me wonder .. if the US shutdown Canadian wood imports, would that significantly lower prices for Canadian consumers? How low would it go?