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A Look at the Future of the Hardwood Industry: New NHLA Executive Shares Insights on Changing Markets & Increased Globalization
Mark Barford Interview: Pallet Enterprise conducts an interview with Mark Barford, the executive director of the National Hardwood Lumber Association; Mark answers tough questions about the future of the hardwood lumber industry and what companies can do to adapt as globalization changes many of the old rules.

By Chaille Brindley
Date Posted: 9/1/2007

†† Last year, the National Hardwood Lumber Association (NHLA) selected Mark Barford as its new top executive. Mark joined NHLA after serving in the lumber industry as an association executive for more than 25 years. Before moving to NHLA, Mark was the president of the Appalachian Hardwood Manufacturers, Inc.

†† Mark travels extensively throughout the United States and around the globe and is a recognized spokesman for the U.S. hardwood industry. The NHLA continues to be the industryĎs largest hardwood trade association with 1,700 members.

†† Mark sat down with the Enterpriseís assistant publisher, Chaille Brindley, to discuss his new role, the future of the hardwood lumber industry, challenges facing the market and much more. Enjoy these insights from one of the leading voices in the hardwood lumber industry.

Pallet Enterprise: Why did you decide to take the top spot at NHLA? What do you see as the future of the hardwood industry and the association?

Barford: My background is forestry. I came out of school as a forester and worked in the industry for a number of years. Then I discovered the association business by doing some volunteer work for them. I started working for a wood association in 1980 and in the back of my mind have always hoped that I would get the chance to run the largest and the strongest hardwood lumber association in the world, which is the NHLA. To me it is the achievement of a lifelong goal to help the NHLA.

Pallet Enterprise: Is this a hard time to direct the NHLA given all the difficulties that face the hardwood lumber industry now?

Barford: It is a challenging time due to significant change. As they say, change is definite, but growth is optional. The NHLA is opting to grow despite the fact that the industry is contracting or at the very least staying the same size. There are still plenty of opportunities out there; we are just going to have to work a little harder to find them. The hardwood industry has faced a number of hard times through the years, and we just happen to be in one right now.

Pallet Enterprise: Please share your insights on the causes of the depressed state of the Red Oak market and how member companies can adjust to those changes. You were involved with a recent effort to market and boost demand for Red Oak. How is that program going?

Barford: Since Red Oak is such a large part of our forest, when demand changes, it has a very strong effect on the market. We are in an industry that has a very fickle customer, which has always been to our advantage. We want them to use different species. We want them to sometimes use ash, cherry or some
other species. That is the beauty of the hardwood industry since we have this array of species. But when that fickle customer turned his back on Red Oak, which is a natural event, it hurt our industry very badly.

†† Timing was a major factor. We were just coming out of a recession during the early 2000s. When things got better, a lot of the mills got aggressive and bought expensive timber and new machinery. They kind of laid themselves out on a limb. When the Red Oak market started turning on us, it hit the industry hard.

†† We realized that the industry needed to reach out to the end consumer to generate demand for Red Oak. A group of companies started the New Oak Partnership to re-promote the species, which included an advertising and direct mail campaign. That program is ongoing and is now being managed by Tom Inman
of the Appalachian Hardwood Manufacturers Inc.

†† What the industry has had to do to survive is to adjust the price for the Red Oak that they are buying because the price had gone down so dramatically. This allowed them to continue to supply Red Oak while making some money. Letís be clear on this. Red Oak is still in demand and is still moving. But it is in less demand and the pricing levels have come down significantly. You can still move Red Oak if you can make it. The problem is making it as a price level where you can still make money.

†† Many companies have responded by diversifying their species mix. That is the advantage of the hardwood industry. We can try to shift around our species production as customer changes occur. It is important for your readers to understand that hardwood sawmills cut what the forest gives us. The forest has a large supply of Red Oak, so we will continue to produce it.

Pallet Enterprise: Does the scenario you explained above indicate that secondary wood users, such as pallet companies, may be able to get better material at cheaper prices than when Red Oak was much easier to move and produce?

Barford: That certainly is the case for Red Oak. There are some species that have gone the other way on the scale, specifically White Oak, Cherry and Walnut. Those species have gone way up in value. There are some other species that have seen a dip, including hard maple that have seen reductions in record high prices.

†† The beauty of the hardwood industry is that there are always some values out there. There are always hot and cold species. If you decide to buy the hot species, you will pay a premium for it.

Pallet Enterprise: How do you see the associationís membership and scope changing over the next few years?

Barford: The membership has actually stayed very stable although there has been a consolidation in the hardwood industry. There has been a shake out in terms of the total number lumber producers but we still represent about the same level of production. That trend will likely continue. We will probably see some growth in terms of distributors as well as international membership.

†† The scope of the NHLA has been to represent North American hardwoods. You are seeing a whole new look at the global influences on our industry and the global market. You will see the association become much more global in its focus in the years to come. The association will focus more on helping members compete in a very competitive global economy.

Pallet Enterprise: Does the NHLA have more international companies joining?

Barford: The NHLA currently has only twenty international companies that are members. But I think we may see those numbers increase. Whether or not they become members, we are already having much more contact with them.

Pallet Enterprise: Since you have joined the NHLA, what do you believe is your greatest accomplishment?

Barford: There has been a real increase in communication, promotion and working with other organizations. NHLA has not always done as much of this in the past as it could have. I have brought my 27 years of industry experience and passion for talking with other groups to see ways that we can work together.

†† Looking at it by itself, this industry is not big enough to have influence out there. But if we can work with other people, we can accomplish things that are not possible by ourselves. NHLA is the largest and best funded hardwood association, and our goal is to become the voice of the hardwood industry.

Pallet Enterprise: Has the family-run nature of the hardwood industry made it resistance to change?

Barford: Obviously, family-run, multigenerational companies have a way of doing things that have worked for them and are not easy to change. That can be an advantage for the industry when it comes to consistency and quality. This attitude can make it a challenge when it comes to initiating change.
But it can also be an advantage if you get to the right people because unlike public companies, these businesses can change much faster without having to go through corporate boards and stockholders.

†† Almost 100% of the hardwood members are family-run businesses. There are a few large corporations in the market.

Pallet Enterprise: What are some changes in the law that you feel would really benefit the hardwood industry? Where are those changes in terms of becoming a reality?

Barford: For years, the industry has fought for the opening of the national forests for more logging to improve and increase our timber base. Having fair regulations and improving existing laws, such as the Endangered Species Act has been a high priority. We donít want arbitrary rules being made that hamper our ability to secure a stable timber supply. Family inheritance taxes are a gigantic issue for us. All of those issues are in the process. But given the new Congress, we donít see anything coming soon that would be a major change on those fronts.

†† The NHLA is becoming increasingly interested in ways that the federal government can protect businesses at home. Iím talking about fair trade versus free trade. We believe in free trade and are certainly willing to compete in the open market. But we find that some of our competition gets to play on a different playing field than us. Many of these operations donít have the same regulatory restrictions that North American producers have. Also, they may enjoy government subsidies that allow them to flood the market with certain products. We may see some movement on those international trade issues. There is interest in limiting the import of illegally logged wood products, which would make the playing field fair.

†† The government has been very helpful through the American Hardwood Export Council to promote wood and our products overseas.

Pallet Enterprise: What are some of the top misconceptions that general consumers and lumber users have about hardwood lumber?

Barford: The basic misunderstanding about hardwoods is two fold. First, that we are cutting down trees faster than they are growing, which is definitely not true. We are actually growing trees at twice the rate that we are harvesting them. North America has a tremendous growing forest. It has been a tough battle for people to understand. We have this wonderful resource that God has given us that comes back naturally.

†† The biggest issue that we really have is seeing our forest land going to other uses. Forest land is being gobbled up into subdivisions and other uses. Despite resources going to other uses, we are still growing much more than we are cutting down.

†† Wood is good. Some people wrongly believe that wood has to be certified to be good. That is not the case. All wood is good. Whether or not you choose to certify is really a marketing not a forest management decision.

Pallet Enterprise: Do you see any problems with the certification systems and the current market acceptance of it?††

Barford: NHLA takes no position on certification because we believe it is an independent marketing decision that each company needs to make. We are seeing a definite increase in certification around the world, especially European markets. It is definitely an extra expense.

†† Hereís our concern about certification. It is not a problem of sawmills becoming certified. The problem is that landowners have to decide if they want to be certified. Almost 90% of the timber cut for our members resides on private land. Thatís not our decision to make. The only incentive that lumber companies can give is to pay more for certification.

†† All that does is increase the cost of the end product or decrease profit margins. There are some challenges ahead for those who want to process certified timber. The main problem is finding enough certified timber to keep an operation going.

Pallet Enterprise: I have seen some question the effectiveness of existing hardwood lumber standards and the ability to police them. What is NHLA doing to promote and ensure its standards remain a viable option for member companies?

Barford:The NHLA is certainly coming out and aggressively supporting the needs for standards. NHLA understands that some proprietary decision may be made to the grades. It all goes back to a basic understanding of how our grades are developed and formed. †† NHLAís system is unique around the world. It allows people to know what they are buying without having to look at the lumber. Even though some businesses have used the grades in different ways, the good companies know it is to their advantage to have a system that is understood and administered objectively. We feel the future of grades is still strong. How they will be used may change. But it will always be there as the basis for trading lumber.

Pallet Enterprise: Many in the industry have blamed domestic problems on foreign competition. Is that accurate? How do you see globalization affecting the industry?

Barford: Globalization is the future of the hardwood industry. We still have a strong hardwood industry in this country. Even though it has come down a little from recent years, historically we have stayed at about the same level where we are now. Honestly, we expect to be at this level for years to come.

†† There will always be a strong demand for industrial lumber, such as railroad ties, pallets, utility poles, packaging etc. We appreciate those markets. Our other markets are changing. We are not sending as much lumber to the furniture industry in North Carolina. We are now sending more to the furniture industry in China. We have had to adapt where to send lumber. If there is going to be growth in the future, it will have to come from those global markets.

†† Let me be clear that we will be there to serve domestic markets and understand their importance. Is international competition hurting domestic industries? Not so much when it comes to lumber. But certainly it is putting a lot of our traditional lumber buyers out of business. We now have to go find the markets. Unlike in the past, the markets do not come to us. That is the biggest change.

Pallet Enterprise: How will changes in the grade market impact production of industrial lumber for pallets, wood packaging, crossties, etc.?

Barford: Obviously, we have to have a market for the entire log. Some is used for industrial applications; some is used for higher grade products. We have to work hard to ensure that we have a market for those higher grades because those are the markets that have been challenged.

†† Over all, the world is still growing in terms of total population. We have been talking about shipping a lot of lumber to China and it comes back here. What a lot of people donít know is that a lot of the lumber and wood products stay over there. If China begins to approach the expected demand over the next five years, they are going to need even more lumber from us.

†† The potential to grow wood that goes over there and stays over there is only going to increase. That will help us with those higher grade markets.

Pallet Enterprise: Arenít most mills somewhat removed from the process of marketing lumber abroad? Doesnít most of that fall on wholesalers and distributors? What do you see changing in the supply chain as exports grow?

Barford:No, not really. The way that hardwood moves to market is a gigantic hodgepodge of direct shipments, shipments through concentration yards, shipments through remanufacturers, distributors or wood treaters. There is no one way to say the system works. But what we are noticing is as these sawmills consolidate and become larger, they are becoming much more progressive in terms of their own direct marketing to foreign customers.

†† Originally, you could point your finger to 5-10 companies that were buying lumber and selling to these other markets. Now we are seeing less and less of that and much more direct marketing. I believe it is good for the industry.

†† The difficulty associated with getting talent to effectively market abroad has caused lots of smaller mills to close. There is no way for them to attract that kind of talent.

Pallet Enterprise: Are there any new services or major changes that you plan on having NHLA take over the next year?

Barford: The NHLA is going to be looking at new marketing and promotion services to membersí companies. In the past, we were the keeper of the rules, and we wanted to stay out of the promotion side of things. But we are sensing a strong demand to help members be competitive around the world. I believe that you will see a number of new educational opportunities as well as some market promotion activities.

Pallet Enterprise: What are some challenges that will take place in the future that will impact the hardwood market?

Barford: We are seeing a scaling down of the whole lumber buying process. Instead of being able to sell lumber by the truckloads or the half truck loads, companies are going to have to adjust to selling by the bundle or even possibly the piece. That is a whole different way to do business. It may take 5-10 years to happen. There will always be a market for hardwoods, but that market is likely to continue to diversify.

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