Pricing for Kiln Drying
Sawmillers share numbers on kiln-drying service charges. November 14, 2009
Question
I would like some different points of view on how much to charge for drying wood. I have been thinking of pricing per day, per load, per foot, and etc. I’m looking for reasons and ideas that I do not foresee yet. I’m trying to keep from being "surprised".
Forum Responses
(Sawing and Drying Forum)
From contributor A:
I charge $0.20 bdft for up to 8/4. Thicker than that doubles the price. I have a Nyle DH200 kiln and put about 2,000 bdft per load.
From contributor B:
Do you ever get requests for small loads - less than 250 bf at a time?
From Gene Wengert, forum technical advisor:
If drying someone else's lumber, will they let you air dry it? Do they want you to stack it? Do they want you to un-stack it or will they take your stickers? Do they want you to store it for a few days or longer until they can come and pick it up? How precise must the final MC be? Do they want you to grade it? Who has insurance in case it floods, blows hard, or a fire comes? Who will be responsible for the quality loss (for example, is the wood is bacterially infected so it will check under normal drying, or is from old logs so will likely stain under normal drying, or is from small logs and is flat sawn so it will likely cup and develop side bend)?
I do believe that at $.20 per BF ($200 per MBF), you will make a far amount of profit (especially if they let you air dry and will not hold you responsible for defects that develop in drying). But, if you have one disaster, you will find that you past profit will evaporate to satisfy this claim.
So, I think that $.20 is a bargain. I also think you need a very clear contract that indicates your responsibility and also indicates those items that are not under your control and that you will not be responsible for including catastrophic loss and "normal" drying losses.
From contributor A:
Yes, I have done piles as little as 10 bdft. Most of it comes after we have custom sawn their logs. So I sticker it as it comes off the mill and let it air dry for two to six months. Then we run it in a load of like wood. We write their name on the boards if it is just a few and larger orders we paint the ends of the boards all the same color. Some customers fill the whole load with their lumber. We do not sort or grade and dry it all. I treat it as well or better than I do my own for retail sales.
From contributor U:
To contributor A: I would appreciate seeing your numbers that led you to charge only 20 cents a foot for drying with a Nyle 200. I read your post and went back and re-ran all my numbers, and well, let's just say I must be missing something. I also dry with a Nyle 200 or WMDH4000 (same machine) and also run on average 2000 bdft per load. My price is .65 cent per bdft to dry, and I do not air dry prior to kilning - too much defect for me. I start with it green right off the mill. My average kiln run time is 28 days, and I can do about 13 charges per year, and I'm up here in PA. Mainly I'm curious to see if the air drying prior to kilning is saving you so much run time that you can charge so much less.
From Gene Wengert, forum technical advisor:
Most people would not dry green from the saw but would carefully air dry prior to kiln drying. This would shorten the drying time to 1/3 of your time and reduce costs proportionately. In any case, you need about 600-750 kWh or so to dry oak from green and at 12 cents per kWh (including demand and usage; maybe too low), that would be $75 right there per MBF. Further, there is stacking costs of $25 per MBF, equipment amortization $20, labor $25, degrade $15, office overhead $5, taxes, insurance, inventory, and so on. So, it is easy to get $.20 per BF without even adding in profit. On the other hand, I do not see how you can get this number up to $650 per MBF (65 cents per BF) for a load or over $8000 annually for 26 MBF (13 loads at $2 MBF per load).
Note that many species and grades have an increased value, after drying, of $300 per MBF. (Some are less and a few are more.) So, your drying costs must be under $300 per MBF (30 cents per BF) or else you will not make a profit for most speceis and thicknesses. Note that if you take ten days and the increased value is $300 per MBF, you have a gross profit (before expenses) of $30 per day. If you take 25 days, the gross profit is reduced to $12 per day. This comparison certainly makes using an open shed or other quality air drying process very attractive.
From contributor A:
Well it cost me about $180 a month for electric bill and I do two loads a month on average. Some times in the summer we get 3 or 4 if doing some pine. We put in about two mbdft a load and it takes about 1 1/2 to 2 hours to load/unload. I figure it takes me about $80 a load for handling and $90 for electric and $30 for cost. I doubled that and then divide by bdftage and get $0.20 bdft.
Hardwoods go in at 20 to 30% MC and we try to give pine two or three weeks on stickers before loading. Hardwoods we target 6 to 8% MC and pine at 16 to 18% MC. Sometimes if I need "bright" pine we load green off the saw. Hardwoods take about 14 days and pine takes about a week or less.
I do not unload/reload the kiln on damp or cold days. I do not put wood in the kiln that has been rained on in the last 3 days. I try to get the wood out and back in as fast as possible so the kiln does not cool off much. I only dry 1C and better oak and 2C and better walnut for retail sales. I am good about throwing some green pine in at the end of a cycle to help condition the hardwoods. So when the oak is about 8 to 10% MC I will put in 200 bdft of green pine and it will drop to 16% most quick and the oak will drop on down to 6-8%. Does this help any?
From contributor U:
Yes, that does help - both of you. Contributor A, you and I have almost the same numbers for operation cost of our kilns, however, I factored in the construction and equipment purchase costs along with my operating costs. My purchase and first year costs were $11,125. My yearly costs for each year after are $2,025. Factored over four years, my total four year cost is $17,200. In those four years (without pre-drying) I ran about 104,000 bdft. That board footage cost me $0.165 or $0.17 a board foot. This number is why I questioned your $0.20/bdft.
Gene, the $50 reduction in cost with pre-drying would be negated by the $50 cost of double handling. Since it now comes off the mill and is unloaded straight into my kiln, but I do see how pre-drying could allow me to substantially increase the number of charges yearly and therefore dramatically increase my yearly bdft output. By the way "Drying Hardwood Lumber" has been a great resource and thanks - to both of you.
Gene Wengert-Wood Doc
From Gene Wengert, forum technical advisor:
To contributor U: although the $50 savings is partially offset by the extra handling (it costs about $4 per MBF to move with a forklift) and the air drying costs, the big benefit is that you can get 3x more loads through in a year and that means 3x more potential profit (assuming that you are targeting a certain $/BF profit). If a business expands, it is wiser in many cases to do more pre kiln drying (including appropriate air drying) to shorten kiln time rather than to build more kilns.
Regarding your cost figures, we would normally use a ten year amortization period (and similarly for tax depreciation, as a kiln is a piece of equipment from a tax standpoint; that is why one should incorporate using an LLC). As an LLC you can likely file taxes using schedule C with your personal taxes, rather than an involved tax treatment.
You should also be putting money away for major maintenance, so that when you need repairs in 6 years you do not have to invest more capital--$.03 per BF. Finally, you should add about $0.05 per BF for profit. This profit must also cover any potential claims that you might have or accidents (a switch sticks open and the lumber checks, the kiln electricity is off and the lumber stains, leak in the roof, a customer is hard to please, etc.) and must cover times when lumber sales are slow (maybe have enough money for four months operation without substantial sales).
From contributor S:
I think you should charge what the market will bear. If you can get $.65 a bd/ft, go for it. Most of the places in this part of PA charge about $.30. Too many people in the lumber business seem to trying to cut their own throat with low prices and minimal profits.
From contributor U:
Good advice. I did file Schedule C, and had incorporated with a LLC awhile back. Above the tax advantages, I wanted the liability protection provided with my LLC. Accountant is good and did write off the kiln as equipment, like I asked him to, and is depreciating that over a certain period.
I wish my handling costs were $4 per MBF, but the logistics of my operation don't allow me to calculate using that number. Regardless, the pre-dry will be incorporated in my operation in the near future - good timing actually, since we're just getting back into drying season up here. Which reminds me, I better start whittling down my softwood log piles so that I don't have to sell it all as blue denim pine.
