Mark Green: Give us some background and history on BPM.
Richard Sturgill: I founded the company in 1989 to supply wood products to the mining industry. We made crib lock, mining timbers, header boards and cap wedges, which were used as roof support in underground coal mines in Eastern Kentucky. At that time, we were lucky to produce about 10,000 board feet of lumber per day. Today, we’re producing about 275,000 board feet of lumber per day.
MG: Did you harvest timber or buy harvested timber when you started?
RS: We did both. In the early days back in the late ’80s, we had one logging crew of our own, and we also bought gatewood logs, which we still do today on a much larger scale. We learned the business from the ground up, and it’s been a very fun experience. I feel very blessed to have people who have been with us for 30 years – the people of Eastern Kentucky are hardworking – and really thankful to be able to provide them a job; their dedication and hard work means a lot to us. We operate a lot like a family; we’re close to most of our people.
MG: Give us an idea of BPM’s size and where you fit into the state and U.S. hardwood industry.
RS: We’re probably third or fourth in the U.S. There’s a big West Virginia company that produces a lot of hardwood, and there’s another one that’s in several states, and there are a couple down South. So I would say we’re fourth or fifth in the volume of Appalachian hardwood production in the United States. We’re the largest producer of Appalachian hardwood in Kentucky. Our production is around 75 million board feet a year. We’ve worked continuously and not had any major layoffs. There was a huge downturn in 2008, but we kept working because the only way I feel we can keep good people is to give them a consistent job they can count on. We struggled for a few years, but that’s turned around now and it’s paid off.
MG: Hardwood products has been a major industry in Kentucky for more than 150 years. How large is it today?
RS: The hardwood industry in Kentucky is about a $9 billion industry. The total economic impact is about $14.5 billion, but it’s a very, very stable, large industry in this commonwealth.
MG: How many employees does BPM Lumber have?
RS: We have 280 full-time employees, and we provide over 250 indirect jobs in the logging and trucking industry. We have about 15 contract logging companies that work directly for us, and then we have what we call “gatewood,” which is individual loggers, mom-and-pop shops, that buy their own timber and bring their logs to us for purchase at the gate.
MG: You started off supplying products to the mining industry. What are your major product lines and operations today?
RS: The major product lines and customers we ship to today are: the pallet industry, which makes hardwood pallets for all different types of products manufactured in the United States; railroad ties for CSX and Norfolk Southern; lumber that goes into cabinetry, kitchen cabinetry, bath cabinetry. We sell to custom millwork shops that make millwork for offices such as banks. We provide architectural specialty woods used in buildings in New York and California – we’ll cut the lumber for a particular job. We did a very interesting big job a few years ago for a big museum in Chicago that wanted all a specific type of white oak, and we cut that for them.
The largest segment of revenue for our company comes from hardwood flooring. That is not the highest-priced product we cut, but it’s the bulk of what you generate from a sawmill. Hardwood flooring materials are predominantly oak but also hickory, hard maple, some walnut, some cherry. Somerset (Ky.) Hardwood Flooring is one of the very well-known hardwood companies, a very strong, good company. The hardwood basketball floors in college arenas are typically made out of hard maple, and we have supplied some of the people who manufacture the floors that go in these arenas. Oak fencing boards that line the horse farms around Central Kentucky is a very big segment of our market. And then, of course, the white oak that goes into the bourbon barrels. That’s kind of neat.
And there is the furniture industry. The furniture industry used to be a big market for us, but after NAFTA was enacted (December 1993) a lot of furniture manufacturing got exported to Mexico and other places. You hear Washington is trying to get some of these jobs back to this country – the jury’s out on Trump, but hopefully some of these jobs can come back and we can be competitive. It doesn’t make a lot of sense that we’re shipping lumber all the way to China, and they’re manufacturing furniture and shipping it back, and we’re buying it. It baffles the mind to think about that.
MG: What varieties of trees are part of your supply chain?
RS: In the higher region of the Appalachian hardwood basket, the primary species in the forest are poplar. Then you have the oaks: red oak, white oak and chestnut oak. White oak is the wood that goes into bourbon barrels because the density of that wood allows it to retain the bourbon in the barrel and it won’t leak. Our forests also have an array of other species such as hard maple, ash, cherry, walnut. Some of the lesser volumes of wood are sycamore, beech and blackgum. We have a very diversified forest, but the largest single tree species that grows in Appalachia is poplar. It constitutes about 32 or 33 percent of the forest landscape.
MG: How big is the geographic footprint your lumber comes from?
RS: We like to say our “wood basket” is about a 100-mile radius around our three mill sites: Whitesburg, Hyden and London. We also operate satellite log yards in Jackson, Pikeville and Williamsburg, Ky., and in Speedwell, Tenn., where we buy logs and haul them to our mills.
MG: The U.S. housing market is beginning to rebound. Are you seeing an impact, and what are the expectations over the next few years?
RS: The market has been inconsistent the past three years but 2017 seems to be a little better. Consumer confidence is growing, and folks seem to be taking a longer positive view of the economy. A lot of our product does go into new home construction, so we’re excited about that. Housing starts are better than they were post-recession but nowhere near the 50-year average of what they should be. So there is some upside and some hope, and we’re seeing some movement there.
MG: How much of your production goes to exports?
RS: About 25 percent of our 75 million board feet of production is exported. China, Europe, Spain and other countries are consumers of Appalachian hardwoods. We work with the American Hardwood Export Council and the Hardwood Federation, both headquartered in Washington, D.C., on policy issues pertaining to the timber industry. As I said earlier, the jury is out on President Trump, but we have been given input opportunities on policy and submitted our suggestions.
MG: What kind of advice are you giving federal officials on trade policy?
RS: We just hope they maintain a fair playing field for both the exporters and the importers. There’s a pretty good argument, as I understand it, going on between those who want to export their products and the Walmarts and those type of industries that import a whole lot of things that we consume, because a lot of those are manufactured over in China. We want to keep the balance right. It’s something that President Trump can hopefully get a handle on and in the end be very good for American industry.
MG: How does your product ship to market? What are your important supply chains?
RS: Our products are shipped mainly by truck and by rail and by vessel. If we’re shipping domestically on the East Coast, that goes by truck. If we’re shipping west of the Mississippi River, that typically goes by rail. And if we’re shipping overseas, which is about 25 percent of what we do, we load a container at London, it is trucked to either Nashville or Georgetown, Ky., and put on a train, then it’s taken to whichever port it’s going to: Newport News (Va.) or New Orleans. It’s then put on a vessel, and it goes through the Panama Canal and on to China or wherever it’s going.
Just as a footnote, we can ship a load of lumber to China for less money than it costs us to ship a load from London, Ky., to New York City. I know that’s a staggering comment. The reason is because you can get so much product on these vessels; they’re so large. It doesn’t seem like it would make economic sense, but it does because there’s so much going over there.
MG: What is the health of the Eastern Kentucky or the Appalachian forest today?
RS: The health of the Appalachian forest today is much better than in 1989. In past years, past decades, fires damaged timber, and damaged timber needs to be removed from the forest because timber is naturally rejuvenating all on its own. In the spring of the year, you can see all kinds of seedlings sprouting. We have five full-time foresters on staff at our company. We do not clear-cut anything; we manage timber based on what the landowner wants. As we’ve done that over the past 20, 30 years, the quality of the timber has gotten better. You need to have a harvest plan on timber land so it’s sustainable for future generations: our kids, our grandkids, our great-grandkids. A tree is like a human; it’s got a useful life and then it dies. It’s of no benefit in the forest if it’s dead, and it does stunt the growth of the young timber trying to come up. You have to get the big timber out of the way or the canopy that the big timber generates will hold the sunlight and get all the moisture, and the young timber will get stunted and won’t grow as well. As we’ve harvested in those manners, the quality of the Appalachian forest has gotten better.
MG: How much property does BPM manage or assist with?
RS: Around 500,000 acres is what we’re assisting with, managing or helping with.
MG: How long does it take a tree to reach harvestable maturity?
RS: It varies on species, but growing from a seedling to a 26-inch diameter oak tree at breast height may take 80 years. The forest is growing, so when we harvest a tree, other trees are coming right behind it – cousins, nephews. You’re not just taking it out; family members are left. That creates a sustainable product for the state. The difference between coal and timber natural resources is, when you mine a ton of coal, it’s gone forever. When you manufacture lumber out of a tree, there’s one coming back. In Kentucky, the latest numbers from the Division of Forestry are that for every tree we’re harvesting on the forest landscape in the commonwealth, there’s 2.45 growing back.
MG: Are landowners trying to put more land into forest?
RS: They’re managing their forest land better; they’re selling their timber. Today there are 74 billion board feet, net volume, of sawable timber within the sizeable trees currently standing in Kentucky’s forests. The forest is growing at a rate of 2.45-to-1, and that’s pretty good. We don’t want to see that decrease. That’s why we focus on forest management and trying to get even mom-and-pop loggers to understand the importance of getting the timber out that needs to come out so what’s left will do better and continue to flourish.
MG: Is there a minimum acreage needed to have manageable forest land?
RS: That’s a good question. We’ve harvested on as little as 30 acres, and we’ve worked on 30,000 acres and anywhere in between. We go to the landowner, and we have forestry staff go in and assess what he has. We present him the opportunities: We give him how many trees he has, at what diameter and what the value is, and then he can choose whether to log it. He owns the timber, so he calls the shots. We can log it over time. Whatever he would like to, whatever prescription he wants, is what we do.
MG: What are the key issues of forest management? What education do BPM foresters give property owners?
RS: The biggest key to the whole forest is you have to get the old growth that’s ready to harvest, and the unhealthy, fire-damaged, wind-damaged, shake, that type of timber out of there so the young timber can flourish. These forests have been here a lot longer than we have, and they’re going to be here when we leave. We just have to manage them properly.
MG: You mentioned that the Kentucky forest products and timber is a $9-14 billion industry. Is that a constant figure?
RS: The number of timber facilities in Kentucky is 722, and there’s forest industries located in 110 of the 120 countries; that may be a cabinet shop, a sawmill, a pulp or paper plant. The timber sector has been gaining steadily since the recession of ’08. Sawmills and secondary wood manufacturers were responsible for $3.4 billion in direct revenue. Logging, pulp and paper, converters and wood waste manufacturing was about $830 million. The logging sector alone accounts for about $149 million. All those numbers are up since 2000. We’ve steadily had an increase in the number of dollars in the industry.
MG: Has digital technology had any impact in your industry?
RS: Yes, sir. From when I started in 1989, the improved optimization from computers and the scanners that we have in our sawmills is really amazing and has increased our yield per tree. We’ve been able to maximize the saleable product out of the raw material due to the technological advancements and the equipment that we utilize to process timber at our plants.
MG: How do property owners know if they have harvestable wood resources?
RS: They will typically contact us or the Division of Forestry in Frankfort or the Kentucky Forest Industry Association, and those guys will put them in touch with someone like us. We have one of our professional foresters go and look at their property and assess it at no cost to them. Then we will say to them, “Okay, this is what you have.” And they can make a decision at that point of whether they want to harvest and sell it or not. We get a professional forester to look at it and value it, tell them what it’s worth, and then they make a decision of what they want to do with it.
MG: How often is a forest harvested?
RS: Let’s say you take everything that’s 12 inches in diameter at breast height when you stand up with it – that’s called DBH, diameter breast height. If you take everything out that’s 12 inches and bigger on a particular cut, that’s going to yield you X amount of dollars. Then you may come back in another 20, 25, 30 years and do the same thing again. And your yield, if you do it right, may even be better. So in 25, 30, 35 years, you should be able to re-harvest.
MG: The furniture industry used to be a big sector throughout Appalachia. Does the fine wood furniture industry still exist in the U.S. today?
RS: On a very high-end scale. Most of the high-end furniture designers you’ll find in New York and California. On a volume scale that produces a lot of furniture. Stickley Furniture is still around. There are several but not anything like it was. All of them, back in the day, were in North Carolina. They were there in the late ’80s, but they’re not there anymore. They’ve all gone overseas.
MG: Looking on a wider basis, how does the U.S. forest products industry today compare to years past?
RS: We’re focused on Appalachian hardwood. Down South where there’s a lot of southern pine forest, that’s a whole different process – a lot of that goes into 2x4s and 2x6s that actually frame the houses. There is a lot of that out West as well. The softwood timber is kind of a whole different business model from what we do. We’re kind of a specialty; the Appalachian hardwood timber region is kind of unique.
MG: Aside from a productive federal trade policy, are there other public policy changes the forest products industry is advocating for at state or national levels?
RS: Trade policy is important because manufacturers of hardwood lumber have significant amounts of revenue generated from overseas. Our products have the markets I described. Meanwhile, when you harvest a tree, bring it to the mill and manufacture the wood, you get byproducts: You get sawdust, mulch, bark and woodchips. The paper industry in Kentucky was once thriving, but due to the evolution of technology and cell phones and computers, the fine paper industry is declining about 5 percent a year. The need for pulp and paper has gone down, and a lot of these companies have shut down plants and consolidated. In Kentucky, we have a real need for a market for low-grade timber, what we call pulpwood, and for the residuals that come out of the sawmills. Bark typically is ground up and goes into landscaping, but we’re still making more bark than the landscapers can move. We’ve got a significant problem today. Now, you can utilize this byproduct for fuel to generate electricity. It would be great if we had some sort of market here in Kentucky that could consume Kentucky products. There are different things on the state level we can look at. I don’t know what the administration’s doing; I haven’t seen what their new policy is on energy, but certainly energy is something that can be looked at.
MG: Is BMP involved in fuel pellet production?
RS: Very little. Some colleagues in the industry have done that. What I understand they’re doing is they’re bagging these pellets, and then most of them are sold in the Northeast for boiler fuel. A lot of the pellets are going overseas and are being utilized for fuel for electricity production in Japan, and in other countries, including Germany.
MG: There’s been an effort to reestablish or improve the Eastern Kentucky or Appalachian hardwoods as a habitat for the honeybee, whose populations are under pressure. Is that a realistic goal?
RS: I have a good friend who raises a lot of bees in Winchester. Bees love tulip poplar, which we have a lot of, and they love locust trees. There’s been a movement to take bees into the forest and try to establish hives and try to get that going, but there have been issues with bears and skunks – and people, probably. I think definitely it would be very interesting. They’re going to have to get areas that might be really good for that, with a lot of poplar and whatever the bees need. But I think it’d be great. It’d be wonderful.
MG: Do you have a personal favorite variety of wood, and why?
RS: I love red oak. When we first started, we were cutting lumber up into crib lock and mining props and header boards. The very first load of graded lumber we sold was red oak. I’ll never forget that day. Red oak makes a beautiful floor. Wood goes through fads. You get into the white woods, for example. Certainly I love all hardwoods, but red oak is probably my favorite. ■
Mark Green is executive editor of The Lane Report. He can be reached at [email protected].
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