From Photius, Lexicon epsilon461 Theodoridis.
The headword phrase is the first part of a proverb, immediately completed by what follows. See also Paroemiographi Graeci no.372 Gaisford (= Gregorius 1.83), where we find a fuller explanation of its meaning and where it is classified as articulated in the form of an ellipsis; it has, however, the variant ku/fwn for to\ kou=fon (see n. 1 below).
Others seem to allude to this proverb, but without quoting it verbatim, and giving it a slightly different meaning. The closest occurrence is in Apuleius, who puts it in the mouth of Pythagoras: non enim ex omni ligno, ut Pythagoras dicebat, debet Mercurius exsculpi (Apuleius, Apologia 43). It is an allusion to the fact that the raw material for an object, here in particular a statue of Hermes, should be of good quality. Apuleius is discussing the possibility of children being possessed by a divinity and telling the future, and he argues that such a child must be good by nature in order to be seized by the god. Iamblichus alludes to the same situation in his Life of Pythagoras (ch.34). He also understands the proverb as meaning that not every material is appropriate for good work. Athenaeus in Deipnosophists quotes twice (5.187D and 5.215C = 5.12 and 5.55 Kaibel) a similar proverb used by Demochares (delta 472) of unscrupulous politicians. He mentions other material than wood for the comparison, e.g. a spearhead made out of savory. The first context of it seems to be criticism of Socrates' behaviour as a soldier. All such occurrences are rather far away from the meaning given by the Suda.
[1] There are several alternatives to the adjective kou=fon. The Suda entry kappa 2798 on the adjective kufo/s (bent, crooked) quotes the whole proverb with this adjective. The paroemiographers repeat the same proverb with the variant ku/fwn (a crooked object or a crook) instead of to\ kou=fon. In both cases the explanation of its meaning is basically the same even if the wording is different. In Zenobius, the proverb presents a third variant ki/wn (pillar). This reading brings us closer to the context of the statue of Hermes. It is attributed to the poet Epicharmus (epsilon 2766) who seems to have used it in a work on the Trojans.
Since there are several wordings as well as usages of the proverb, one has perhaps to assume two different but closely related proverbs (as Gaisford long ago suggested). The one with the variant ku/fwn would go as follows: a crook could be shaped out of every piece of wood (e)k panto\s cu/lou ku/fwn ge/noit’ a)\n). The other bearing a negation could then be about the statue of Hermes: a Herm could not be shaped out of every piece of wood (e)k panto\s cu/lou (*(Ermh=s) ou)k a)\n ge/noito).