Higher mortgage rates are slowing down business for this sawmill

Back in 2021, Katrina Amaral, co-owner of Timberdoodle Farm in New Hampshire, spoke about running her sawmill amid high demand for lumber. But currently the housing market is going through challenges with low supply and rising mortgage rates, and the changing conditions are affecting the timber business.

Marketplace host Kai Ryssdal speaks with Amaral about the company’s shift into new areas and a look into the crystal ball for 2023. The following is an edited transcript of their conversation.

Kai Rysdal: So it’s been about a year, maybe a little longer, since we spoke. What about the world of boutique sawmills?

Katrina Amaral: They’re still pretty busy, although we’re definitely slowing down. Our business at the moment is quite related to new residential construction. And that hasn’t been as robust as it has been for the last two years.

Rysdal: Yes, she says with a certain ‘Oh my God, what’s happening in my shop?’ What’s happening in your business now that housing construction is slowing? Because if you listen [Federal Reserve] Chairman Jay Powell, it could go on like this for a while.

Amaral: Yes. And honestly, that’s kind of OK. We have actually diversified to ensure that we are not completely tied to new housing developments. There are many other components in the wood business that we can benefit from.

Rysdal: Well, walk me through some of them. How do you diversify?

Amaral: Secure. So I think since we last spoke we’re actually fully vertically integrated, which means we can go to a property, chop down the trees, turn them into lumber and finished lumber for the house. Yes, it’s a lot.

Rysdal: Yes. Well, no, wait. Let’s take these one by one. How did you do that? Did you hire more people? Did you seek advice to find out how to do this? I mean, what was the business model that you said, ‘okay, that’s what we have to do’?

Amaral: Secure. We spend a lot of time investing in equipment that is appropriately sized for the operation, including some low-impact forest machines that are more efficient while still being really low maintenance and maneuverable in the forest. Investments have also been made in some new processing equipment. And we also added a second oven for drying lumber.

Rysdal: Okay, so basically you spent money to make money.

Amaral: Yes.

Rysdal: Well, does it work for you?

Amaral: It is.

Rysdal: What else have you done to diversify?

Amaral: We’ve got, well, another device that’s more focused on the ability to deal with storm damage, and we’re also looking at some consultancy work to help build local timber networks with other sawmills or architects and designers.

Rysdal: So you’re basically going into the service sector?

Amaral: Little bit.

Rysdal: How did you come up with that?

Amaral: Technically, my husband is a mechanical engineer and has built himself a sawmill. And we started sawing. And we work well together and we like to make heaps of things. So at the end of the day there is a very tangible result. And we both like being in the woods.

Rysdal: So as you look ahead to 2023, with inflation still on the table and the economy slowing, how do you think for Timberdoodle for the year ahead?

Amaral: Um, it’s definitely, the crystal ball is blurry. Yes, gear items have increased. We are still feeling a lot of supply chain impacts, especially when trying to modify equipment to suit our business. It will definitely be a challenge. But we can also open up markets that are less value-adding for us. So chicken coops, raised bed lumber, you know, the stuff that people are always going to build. It’s just not that high a margin for us.

Rysdal: What’s your stress level, Katrina?

Amaral: It’s not that bad now. We have a few more projects in the works, which helps, and a few we’re looking forward to.

Rysdal: Fair enough. Fair enough.

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