Cost of drying lumber

[Charles]

I have a small DH kiln that I built for drying my own lumber as I need it (2-300 bd ft). I had no intention of drying for others, BUT around here it is almost impossible to get small quantities dryed anymore, SO I am being asked more and more to dry small qantities.
My question is: how does one determime a price for drying. Should it not be so much per bd ft per day since air dried will dry faster than wet lumber off the mill. I have taken the amperage of all the elec. units in the kiln and will be installing hour meters on any elec. units that cycle to determine on time. This is the only way I can think of to determine daily cost of hydro.
When somebody says that they dry lumber for .35 cents a bd ft what are they saying. What is a reasonable rate for drying and how do you guys determine a cost.
Thanks for any help

Charlie

[OneWithWood]

You are on the right track.
Determine what your cost per day is to dry a full load.  Add a markup that makes it worth your time and you will have a price that works.

[solidwoods]

Our rate is
Kiln drying.       
$.20 bf, 1" thick material 1000 sq' or more.
$.25 bf, 1" thick material 500-999 sq'   
$.30 bf, 1" thick material 1-499 sq'   
For thicker material add 10% more per qtr. thickness.

15%mc or less is 25% less cost.
jim

[Charles]

Thanks for the info guys it was very helpfull

Charlie

[red oaks lumber]

we charge .20bf no matter the quantity(sp?) our kilns are so booked up most wood is somewhat air dried anyway, so there is no break on mc

[DR_Buck]

When somebody says that they dry lumber for .35 cents a bd ft what are they saying.

They're saying that they are cheap.     I charge 60¢ a bf no matter the quantity or initial MC.   It must be OK because I've been keeping the kiln going.     

[Ironwood]

I like .50 cent or more. For me they are really paying for my time and handling.

 Ironwood

[scsmith42]

I like .50 cent or more. For me they are really paying for my time and handling.

 Ironwood

+1.  I charge a daily rate, which usually equals out to .50 - .70., depending upon the species.  I also charge for handling on loads less than 1000 bd ft.

In the archives is a post that I made several years ago on this very same topic.  I looked at it from not only direct costs, but also depreciation, return on investment, business taxes, repair costs, labor, etc. 

When I made the investment in my kiln, it was in anticipation of the following:

1 - I would have a positive return on that investment, the same as if I had put it in a CD.  Typically I like to see at least a 10 - 15% return, which means that I should generate 2 - 3K annually in ROI from the 20K investment in my kiln.

2 – If my business had to borrow the money to make the investment, then not only should I see a positive return on the investment for my business, I would also need to factor in the payments on the loan.  Using simple arithmetic, if I amortize 20K over 5 years then I’m looking at 4K per year in payments.  So I’m now at 7K per year for investment return and payments.

3 – A kiln is not going to last forever – it is a depreciating asset.  Thus, over a period of say 7 years my 20K investment will disappear.  I need to recover that money, in addition to my return.  Simply put, figure another 3K per year in depreciation.

So now I’m at 10K per year, just for ROI, payments, and depreciation.  If my kiln stays in operation for 50 weeks per year, then I need to generate $200.00 per week, or $28.57 per day, before labor and operating expenses, just to cover principle, interest, depreciation and ROI.

4 - Next, we have labor costs.  It takes two men several hours to stack, sticker, load, baffle and unload a 4000 bd ft kiln.  As a business owner, not only do I need to recover my labor costs, I also need to make a profit on that labor.  So, if I’m paying two guys 15 bucks an hour, by the time that I calculate in overhead, taxes, etc, that 15 bucks an hour is now somewhere around 23.50 per hour each.  If I want to make 30% profit on their labor, it is now 33.57 per hour each, or $67.00 for the pair.  If they are able to load/unload 4000 bd ft in 6 hours, I now 200 bucks in loading/unloading costs, plus 30% profit.

Based upon a 30 day kiln cycle, that’s another 6.71 per day, for a total of $35.28 (labor and ROI, payments and depreciation). 

5 - Now, we have operating costs.  It seems like on an annual basis I’m spending around 1K in spare parts, maintenance costs, etc. on the kiln .Another 2.85 per day, taking our total up to 38.13 per day.

6 - Next, we have utility costs.  These are going to vary depending upon several factors, including your utility rate, how well insulated your kiln is, and your average temperatures, just to name a few.  Maybe another 6.60 bucks a day if your bill runs $200.00 per month.  So we’re at 44.73 per day. 

7 – If one man spends 30 minutes per day in checking the load, doing the sample boards, etc, then you’re looking at another 16.78 bucks a day in labor (1/2 of the estimated 33.57 estimated actual labor cost + profit), taking us to $61.51 per day.

Thus, if I have 4000 bd ft of 4/4 oak wood in my kiln – dried from green - my costs plus a small amount of profit will be 1,843.30 for that load, or .46 per bd ft.

But what if the load is less than 4K bd ft?  My daily operating costs remain pretty much the same, my depreciation, ROI, and daily labor costs are about the same, perhaps I have a small savings on the labor associated with loading and unloading (estimated 50 bucks for 1.5 hours of time savings), but that’s about it.  It will still take 30 days in the kiln to dry 3000 bd ft of 4/4 oak from green to 8%. 

So if I subtract 50 bucks from the 1843.30 for the load, I’m at 1793.30, divided by 3000 bd ft., or .59 per bd ft.

If you’re drying 100,000 bd ft at a whack, with a kiln that’s heated by waste wood, perhaps you can get your costs down low. 

IMO, the reality is that most folks do not charge enough to kiln dry.  I look at many of my fellow Forestry Forum members with nothing but respect for their hard work and desire to be independent businessmen.  They work incredibly hard for not a whole lot of income, and unfortunately too many end up going broke down the road because they did not charge enough for their efforts.  And the rest of us have to compete with that, which only keeps the prices artificially low.

[red oaks lumber]

 i dry wood  so "cheap" because of several factors.
 1) we dry 15000 bf per load
 2) we use loaders can fully change in 30 min.
 3) only put in air dried wood under 15% mc
  why spend money drying wood that mother nature does free, on ave we dry 45000 bf per month, electric bill runs 800.00 per month. so 45k bf@ .20 bf =9,000.00  subtract my elec thats a good return on investment. wood is only worth so much if costs are to high its over valued not a good deal for anyone

[scsmith42]

i dry wood  so "cheap" because of several factors.
 1) we dry 15000 bf per load
 2) we use loaders can fully change in 30 min.
 3) only put in air dried wood under 15% mc
  why spend money drying wood that mother nature does free, on ave we dry 45000 bf per month, electric bill runs 800.00 per month. so 45k bf@ .20 bf =9,000.00  subtract my elec thats a good return on investment. wood is only worth so much if costs are to high its over valued not a good deal for anyone

Red Oak Lumber - I applaud the volume and scale that you're doing, and clearly it increases your efficiency. 

However, your answer above really does not address the issues that I brought up in my post. 

$9,000 less electrical cost does not consitute a"return on investment" - rather it is gross revenue less utility costs.  Also, changing the load in 30 minutes with loaders does not address the time to stack and sticker the lumber to begin with, or destack it after it comes out of the kiln.  Nor does it take into account the land required for air drying, cost of any air drying sheds (if  used), depreciation costs of the kiln, maintenance costs, property and business taxes, losses due to degrade, etc.

If you take some time to apply the concepts outlined in my post to your business, and analyze your actual costs, you might be surprised as to what your true "Return" is. 

I respect what you're doing; please do not construe my answer to be disrespectful as that is not my intent.

Regards,

Scott

[DR_Buck]

.........IMO, the reality is that most folks do not charge enough to kiln dry.  I look at many of my fellow Forestry Forum members with nothing but respect for their hard work and desire to be independent businessmen.  They work incredibly hard for not a whole lot of income, and unfortunately too many end up going broke down the road because they did not charge enough for their efforts.  And the rest of us have to compete with that, which only keeps the prices artificially low.

Well put Scott.  An excellent response and post.   Everything has to be considered otherwise your losing $$$. 

[Ironwood]

Um whicha Scott.

 Addtionally, how about return on the capital invested in that BIG loader. Sure it does it fast but you gotta have return on that too. If you specialize in Oak then air drying is totally reasonable and most yards do air dry first anyhow. Do you keep it in a building? Even if just outside, you still have "maintanence" costs to assembling those stacks and keeping them out of the elements.  Just a thought.

 Ironwood

[red oaks lumber]

let me explain further
 first we sticker wood when we saw so no double handling, down sticking comes at the planer or rip saw, so no double handling. if all i'm doing is k.d. for customer they down stick when picking up.
 far as the land it's been in the family for years, no purchase cost to me.
 big loader- no, john deere 328 skid loader which i run w.o.t. . this is used at the sawmill, planer mill, where ever needed, plow snow, grade the yards, load and unload trucks ect.
 really k.drying is just a small part of my buisness, it is a tool for more value added to my products. if i was only drying wood for other people all my depr. building maint. taxes ect. would have to come from the reve. generated you are correct
  if your or any buisness has a high operating cost for services is it really the customers fault?
 shouldn't the goal be to reduce the costs which gets past on to the customer.
 i know this statement might sound off to some,but, my therory is . being the most efficent as posable(sp)  running a low overhead leads to a lower price. which results in more work
 we operate on volume, fixed costs are there weather you handle 1 board or 1 million
  the bottom line is .. there isn't much money in wood, plain and simple, there is to many options , sheetrock, steel, carpet, vinyl ect. if the price for wood is to much your'e not working. do i think we should charge more? oh hell ya but the markets won't allow for that
 i'm not a writer i work with wood so sorry about the windy response. feedback always welcome

[raycon]

I hear you as well Scott.  
  
Looking at the  Hardwood Market Report (HMR online sample report for may 2009) the difference in pricing between KD  (4/4) red oak and green oak ranges between 200 and 300mbf when dealing in trailer load quantities. 200-300mbf to KD red oak in volume.
 
That be a tough market to make a living in. Don't see any reason for a small operation to try. 300 bdft. I'd not be surprised locally to hear it quoted at $1.00 a bdft.


On edit I hear what you're saying red oak as well. 

[scsmith42]

let me explain further
 first we sticker wood when we saw so no double handling, down sticking comes at the planer or rip saw, so no double handling. if all i'm doing is k.d. for customer they down stick when picking up.
 far as the land it's been in the family for years, no purchase cost to me.
 big loader- no, john deere 328 skid loader which i run w.o.t. . this is used at the sawmill, planer mill, where ever needed, plow snow, grade the yards, load and unload trucks ect.
 really k.drying is just a small part of my buisness, it is a tool for more value added to my products. if i was only drying wood for other people all my depr. building maint. taxes ect. would have to come from the reve. generated you are correct
  if your or any buisness has a high operating cost for services is it really the customers fault?
 shouldn't the goal be to reduce the costs which gets past on to the customer.
 i know this statement might sound off to some,but, my therory is . being the most efficent as posable(sp)  running a low overhead leads to a lower price. which results in more work
 we operate on volume, fixed costs are there weather you handle 1 board or 1 million
  the bottom line is .. there isn't much money in wood, plain and simple, there is to many options , sheetrock, steel, carpet, vinyl ect. if the price for wood is to much your'e not working. do i think we should charge more? oh hell ya but the markets won't allow for that
 i'm not a writer i work with wood so sorry about the windy response. feedback always welcome

Red Oak - your thoughts are well presented and make good sense.  On the one hand, your KD operation could almost be construed to be a "loss leader" in that it provides increased volume and overall profitability for your entire business operation. 

Your thought re efficiency are right on too.  Hell, I even agree about running the skid steer at WOT!

Thanks for taking the time to help us better understand your operation.

Us little guys cannot compete with the higher volume operations such as yourself or others with an even greater volume, but if we price ourselves too low then we will be out of business too.  And the customer bringing you 200 bd ft of lumber to dry on a one time basis should not necessarily get the same deal as the guy that brings you 10,000 bd ft per month either.

I think that one key to business success is to recognize where profit opportunities exist, and to take advantage of them when possible.  Let's face it, there are a lot more "loss opportunities" than "profit opportunities"!   

No matter what size operation you have, along with hard work a thorough understanding of the entire financial picture is key to being able to stay in business and make a reasonable profit.

[DR_Buck]

I even agree about running the skid steer at WOT!

What's WOT ?

[raycon]

WOT == Wide Open Throttle

[red oaks lumber]

i think you guys drying wood only should get .40-.60 bf for your efforts, here is the angle, jon doe has some oak logs from his woods he wants sawed, he finds a sawyer for say .40 bf, he then brings it to you( general terms) for k.d for say .50b.f., now he needs it planed, the guy down the road will plane it for maybe .35 b.f. now he has 1.25 bf. in his lumber which is still woods run, not to mention his time and gas hauling it all over. next time jon doe says pith on that idea i'll just buy my oak  select &better for 1.50 bf. and the guy using pine gets even less bang for his buck
 so sometimes charging what is real and what we want to be real can be complete opposite.if the customer still feels it works for him(repeat customer) great ,but most will not do it again, aka no work
 for me  aliitle bit of something is better than a whole lot of nothing, just my thoughts.
 12 years ago is when i started, just drying wood in my nyle l200 dh so i really do know where you guys are coming from.
   keep your eyes on the horizon and the wind to your back each step foward and non back!!

[Den Socling]

In my opinion, small kiln operators are taking in small jobs and should demand a premium. The big guys are more efficient and will be cheaper but don't deal directly with individuals. Whether you are big or small, you need to take Scott's approach if you want to make a living. If the market won't bear your price, find a new line. I'd be embarrassed to tell you how much I charge to dry 12/4 flitches in my vacuum kilns and they are piled up outside. Even if you love the work, as I do, everybody needs to make a living.

Thanks for defining wot.

[Brad_S.]

There is no where around here where Harry Homeowner can buy red oak at $1.50 a bdft. A good deal bargain would be $2.50 and retail is around $3.
Many of the customers I worked with did the process more as an experience than a money saving exercise anyhow. Having me saw and dry the lumber from their logs also allowed them to color/grain match their wood perfectly. Most would rather spend hour upon hour planing their rough cut lumber than pay even 10¢ a foot for planing. Again, the "experience". Many jobs were processing "sentimental" trees where price was no object. And who among us hasn't taken great satisfaction from building something from a tree we felled, sawed, dried, planed, shaped, assembled and finished? Many of my customers were no different. Most don't mind paying a premium for the sawing/drying service. If they did mind, I would rather they went to red oaks to buy thier lumber.
To set a price based on what one feels is "fair" to the customer without analyzing the true cost like Scott outlined is not a good strategy. I know because I've been there.