Most pencils are made of cedar - here's a link with more details:
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Cedar being a relatively soft wood, you may need to make the cutter sharper than an end mill leaves it. From my woodworking experience, a little hand honing can work wonders. You can probably reduce honing time by cheating a bit by honing at a slightly different angle, creating a small honed surface at the tip of the milled surface.
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Roy
