2020 Northwest Log Market: What’s Next?

By Eric Clippinger, Forester, Northwest Management, Inc

2019 Review and 2020 Expectations

Softwood log markets in 2019 did not meet expectations from many industry analysts. Overall, however, the U.S. northwest market maintained prices similar to 20-year averages for most species. Not surprisingly, the 2019 log markets were well off the mark from 2018, which saw very strong prices throughout the year. When breaking the 2019 log market down by quarter, very little seasonal movement was evident and stagnate would be a good one word synopsis of the overall market. This is likely explainable by the abundance of log inventories most mills carried into the first half of 2019, the generally lessened impact from weather, wildfire and trucking issues, along with the relatively middling demand for U.S produced lumber throughout the nation and globe.

Many industry forecasters are expecting the 2020 log market to have some opportunities for slight increases but it may also follow a narrow band of variability reminiscent of 2019. Similar to last year, although this time mostly due to a dry fall in 2019, many mills will be entering 2nd quarter with decent log inventories. If lumber prices continue to increase, many mills may be well-positioned to increase their margins but this may not translate to an immediate, equivalent rise in delivered log prices. Mixed signals continue to dominate the U.S. economy with some strong figures such as unemployment rates and recent housing starts while lower than expected GDP growth and a volatile stock market are concerning to some analysts. Add on that it is a presidential election year, and many signs point towards a run-of-the-mill kind of year for the overall economy. Moreover, it’s possible that a saturated supply chain may be problematic in certain species and sorts in 2020 – but maybe not.

Housing Starts

The U.S. Census Bureau reported January 2020 seasonally adjusted housing starts at 1.567 million units – a 3.6% reduction from December.  In January reporting, single-family starts were down while multi-family starts rose slightly.  December 2019, at 1.626 million units, was the highest level of housing starts recorded since December 2006, however, most of 2019 saw moderate housing starts at around 1.2 to 1.3 million units.  Another metric, building permits, jumped 9.2% from December to 1.55 million units in January.  This is the highest level seen since 2007.  If housing permits and starts stay near these levels through the year, this will greatly help the demand side of the equation.  Unfortunately, some housing forecasters are tempering optimism from the strong levels currently seen, attributing the brunt of the uptick to mild weather and hedging against potential adverse weather and a restrained economy in 2020, predicting seasonally adjusted figures around 1.1 to 1.3 million units throughout 2020.  However, builder’s confidence is high, demographics are favorable for first-time home buyers and supplies of available single-family and multi-family dwellings remain tight.  Mass timbers, such as cross-laminated timber, use in multi-story and commercial buildings continues to gain momentum across the country and consists of an emerging market for increased lumber consumption.  Conversely, housing affordability, a lack of skilled workers and extensive regulations (in some areas) continue to be critical issues for confidence in the housing/building market.  Additionally, low mortgage rates, currently around 3.5%, and continued demand for wood-framed buildings are expected to help buoy an overall U.S. economic market that may be soft in 2020.

Random Lengths Lumber Composite Price

The Random Lengths Framing Lumber Composite Price (FLCP) is currently at $428 as of the March 6, 2020 report.  The composite price has been bolstered by stud prices as well as promising lumber futures the last few weeks.  The FLCP was at $364 one year ago.  Log markets generally follow but lag lumber markets as finished lumber accounts for the most valuable and likely end use of softwood logs.   The FLCP serves as a strong indicator for price behavior in the U.S. framing lumber market.  The graph below displays recent activity in the FLCP since the end of 2018.  As you can see, the composite price is on the increase since the start of 2020 rising $53 to date.  Another important trend is the mostly muted tone in 2019.  A small spike in February/March was followed by a sliding drop into June and then the rest of the year was relatively unchanged.  Overall, the composite price stayed on a narrow width of variability, around $50-$55 in 2019.  For context, the FLCP hit an all-time high in June 2018 at $582 and dropped precipitously to a 2018 low of $332 at the end of December.

Recent events affecting the domestic log/lumber market

An increase in domestic log availability in the U.S. northwest may be hitting the market in the next couple years.  This is attributable to an increase in forest management projects and ultimately timber harvesting on federal lands.  The U.S. Forest Service is streamlining some aspects of the internal environmental review process (NEPA) of federal timber sales and is also working with state agencies through the Good Neighbor Authority and Shared Stewardship to increase the pace and scale of management within certain identified areas in the western U.S.  Typically, specific National Forests and project areas that have been selected to concentrate restoration on are at very high wildfire risk due to vertical and horizontal fuel concentrations, are suffering from high levels of damage and mortality from insects and disease or are directly adjacent to state or private lands that could be impacted from adverse effects of lack of management. Another supply side quandary is the U.S. southeast region, which continues to crank out cheap logs and lumber with southern yellow pine lumber now reaching nearly every corner of the U.S. and global market.

In September 2019, a joint U.S.-Canada trade panel gave the U.S. 90 days to rethink its softwood lumber tariffs, finding there was no evidence Canadian imports were causing injury to the U.S. industry.  Currently, U.S. duties on Canadian lumber are in the preliminary stages of being significantly reduced according to trade contacts within both countries.  The changes would likely take effect in August 2020 and would help relieve some of the log and lumber market free fall that has plagued Canada producers, most notably in British Columbia.  On the other hand, this development could create more competition for domestic mills and ultimately allow an increased flow of Canadian finished product into the U.S. marketplace.  The U.S. imposed duties on most Canadian softwood exports in April 2017, alleging that Canada was unfairly subsidizing its industry and dumping wood into the U.S. at unfair prices.

Another recent announcement was the signing of a Phase 1 trade deal between the U.S. and China which should provide some much needed relief for the beleaguered domestic hardwood industry.  China had greatly reduced imports of U.S. hardwood lumber at the beginning of the U.S.-China trade war turning to other global sources but the new Phase 1 requires China to source more hardwood lumber from the U.S.  However, Phase 1 did not address softwood logs and lumber which still face variable amounts of tariffs from China.  Softwood log export volumes and prices have been soft the last couple of years and are predicted to stay that way due to short-term impacts including the slowing Asian economies, the recent flood of European and Russian logs into SE Asian markets and the coronavirus situation….

Very recently, caution and restraint have overtaken global stock markets as well as the log and lumber futures market as the novel coronavirus spreads throughout the globe causing financial markets to respond negatively.  China’s lumber market has been particularly hard-hit, and all eyes are on the daily updates of the numbers of confirmed cases related to the virus to gauge the potential temporal and spatial effects on global markets.

2020 U.S. macro-economy indicators

The 2020 U.S. economy will be driven by certain fundamentals which include a very low unemployment rate at 3.5% as of February 2020.  Unemployment is forecast to hover around 3.5%-4% this year.  Inflation rose to 2.5% in January and is estimated to be 1.5%-2.5% throughout 2020.  Interest rates are currently at 1%-1.25% following the emergency rate cut by the Federal Reserve on March 3rd.   Analysts predict that the Reserve will be forced to make several more cuts this year lowering the rate to 0%-0.5% to keep the economy invigorated and healthy.  Last, 2019 4th quarter GDP growth (quarter over quarter) was 2.1%, while overall annual GDP growth in 2019 was 2.3%, the lowest figure since 2016.  Forecasters are estimating GDP growth to hover around 2% throughout 2020.

Sources:
Trading Economics; https://tradingeconomics.com/
Forest Economics Advisors, Wood Markets Monthly; 2020 Global Lumber Markets Outlook https://www.woodbusiness.ca/2020-global-lumber-markets-outlook/
Random Lengths, 02/28/2020
Random Lengths, 03/06/2020
Forest 2 Market, PNW Log & Lumber Prices: 1Q2020 Update https://www.forest2market.com/blog/pnw-log-lumber-prices-1q2020-update

Lidar Use in Forest Inventory

LiDAR + ForestView™

[vc_row][vc_column width=”2/3″][vc_column_text]LiDAR use in Forest Inventory

Knowing the structure of your forest and the patterns that exist across your ownership are the most critical aspects needed to manage the resource. The development of this information for the past century has been accomplished through traditional forest inventory, most commonly known as Variable-Radius Plot (VRP) data collection. Often sampling intensity is 1 plot per 3 or 5 acres. These data necessary for forest growth & yield models that provide the foundation for forest volume and appraisal valuations.

Variable-Radius Plot (VRP) data collection was developed in 1947 by Walter Bitterlich and applied in 1952 by Lewis Grosenbaugh. Northwest Management, Inc. has provided inventory services for nearly four decades with plot totals reaching 50,000 to 70,000 a year for the last decade. The importance of accurate field data and the nature of where forests grow has continued to apply pressure on the inventory workforce industry-wide. The result is a continued decline in inventory personnel despite an increase in our Nation’s desire to “increase the pace and scale of forest restoration” (USFS Chief Vicki Christiansen). As technology enters the forest industry, and particularly harvesting and silviculture, field inventory has become the most costly and time-consuming part of forestry.

Arguably, one of the most influential new technologies is Light Detection and Ranging (LiDAR or Lidar). Lidar is a box the size of a medium-sized desktop printer bolted to the bottom of a fixed-wing airplane that has a high-powered laser scanner sending out 50,000+ shots/pulses per second. As each laser pulse bounces off the ground or vegetation it provides a “signature” to the printer on the plane that includes a GPS position. A Lidar scan on 100 acres can have more than 5-million GPS points with 3D coordinates.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”1382″ img_size=”full”][vc_column_text]Dr. Corrao is the technology manager at NMI and an adjunct faculty at the University of Idaho in CNR and Ag Sciences.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]The movement of Lidar into the forestry sector about 15-years ago is now significantly affecting the way many land managers, and Northwest Management, Inc., are looking at gathering forest inventory. The 3D point data of a forest scanned by Lidar can be processed through to identify individual trees, heights, DBH, volume, trees-per-acre, roads, streams, fire fuels and wildlife habitat conditions. If high-resolution imagery is included in the processing of the Lidar measures of forest health, species, mortality and forest change detection can be accurately mapped.

Despite these advances in technology, highly accurate field data is still needed to validate the results of the Lidar and Imagery. The advantage to landowners from this new technology is that instead of 5 personnel completing an inventory on 20,000 acres in 2 months, the same 5 personnel can inventory 200,000 acres in the same time. The other advantage of this technology is the versatility of it to provide information across the landscape for natural resources; fire, water, forest, wildlife and is not constrained to silviculture.[/vc_column_text][/vc_column][/vc_row]

2019 Log Market Forecast

Northwest Management forecast

Log Market Forecast for 2019 by Vincent Corrao, President

Log markets in 2017 were strong and in second quarter 2018 log prices were very high and, in some cases, reaching all-time prices.  This volatility came from several different economic factors including the US- Canadian softwood lumber agreement which expired in November 2017 which placed an average of 20% tariff on Canadian importers. With the impacts of the lumber trade agreement and a trade war with China we saw increases in the global lumber market and as global markets expanded so did log prices. There was also relatively strong gross domestic product (GDP) growth and historically low unemployment rates through these years which led to strong economic improvement. The Feds raised the federal funds rate seven times in 2017 through 2018. Housing starts have also been increasing although underwhelming for the past few years, 2017 ended in 1.2 million units after a 10-year high and then a year end decline. There was a strong housing start reported in the first half of 2018 which was 1.26 million starts but then these sank 11% to a two-year low ending the year short of 1.1 million units.

The 2019 economic forecast will be driven by certain fundamentals which include a low unemployment rate for February 2019 of 3.8%. The January 2019 inflation rate was at 1.6% and the January 2019 wages were up 4.1%. We also saw a fourth quarter 2018 GDP growth of 2.6% and current federal interest rates between 2.25% and 2.5% with the current average 30-year fixed mortgage rate of 4.6%. The global economy is slowing down particularly with China and is in part to the unresolved trade war with the US but there are recent optimistic developments. Europe overall has a slower economic growth with its own trade disputes and the rise of nationalism.

Residential repair and remodeling continue to make up the biggest part of market share and mortgage rates are projected to stay stable. The forecast for 2019 housing starts range from 1.23 to 1.31 million units which is very modest growth.  Most forecasters expect the lumber market to track more similarly to 2017 then 2018 and all signs point to a strong lumber market in 2019 but not at the highs or the boom and bust nature that we saw second and third quarter of 2018.  Global softwood lumber supply forecast is to grow 2 to 2.25% in 2019 and global softwood demand is forecast to grow 2.5 to 3 % in 2019 and led by the US and Canada. The US softwood demand forecast is to increase 6 to 7 % in 2019 with the softwood demand trends in housing starts.

Log markets generally follow but lag lumber markets. These prices are highly dependent on US residential construction of housing starts but there are promising emerging markets such as Cross Laminated Timber and Mass timbers products and recent legislation is advancing these markets. Log prices in the Pacific Northwest will face competition from highly efficient Southern US timberlands but overall log prices are expected to be relatively strong but closer to 2017 values then the peak ones of 2018. Sources: Keith Balter- HNRG, Random Lengths, FEA January 2019, Forest2Market, timberinnovation.org, Federal Register, WA DNR.

Local Youth Program Aids in Resolution for Dispute

A dispute between a local Cattlemen’s Association and a federal agency has been mitigated by students — more specifically, a summer youth work program called the Clearwater Basin Youth Conservation Corps.

“Cows go where cows go,” says the Mason Butte Cattlemen’s Association President Roy Busch, as he describes the longstanding issues of free-range cattle roaming onto recreational land managed by the U.S. Army Corps of Engineers (USACE) in Ahsahka, Idaho, near the Dworshak Dam. “They have a fence line that they put in back when they constructed the dam in the ‘70s, and for the last few years they haven’t done anything with the fence.”

Contention between state and federal land management issues are nothing new in Idaho, with public lands covering over 80% of the state. “The issue with cattle trespassing on Corps of Engineers managed lands didn’t develop overnight, and it’s not going to be solved overnight,” says USACE Natural Resource Manager Paul Pence, explaining that the fence line between the two pieces of land divides cattle grazing land and recreational sites. Due to the broken fencing in certain areas, cows can wander through campsites, through habitat development areas, and down to the water’s edge.

The primary boundary fences that serve as the source of contention between the USACE and the Cattlemen’s association were installed and maintained by the Corps until the year 2000. Budget cuts and reduction in labor force have limited recreation dollars for projects such as fencing upkeep. Grazing on Federal land requires a permit, and without one, these cows could be considered trespassing, causing their owners to be cited with tickets and fines.

Idaho open range law [Idaho Code 25-2118] states that cows are permitted to roam, but Federal law requires a permit to graze on Federal lands. This point of contention is another example of how discrepancies form between government and the private sector.

Despite the often contentious relationship between the Mason Butte Cattlemen’s Association and the USACE, both parties look for solutions.

“Along comes YCC,” says Paul Pence. He details that at one of the Cattlemen’s Association meetings, he pitched the idea of having the Clearwater Basin Youth Conservation Corps
(CBYCC) assist in rebuilding the fence line.

Pence asked Busch to point out the problem areas with the fence line that have been the source of the issue. “Not only will we supply materials, we’ll come out there with a crew of kids, and we’re going to help fix this fence and try and get it stood up. That’ll help solve the problem for both of us.”

The CBYCC employs youth between the ages of 16 and 18 for eight weeks each summer in order to prepare North-Central Idaho youth for a career in natural resources. Students work on projects from trail maintenance to wildlife habitat restoration, and work with a variety of state and federal agencies, such as the U.S. Forest Service and the USACE.

The Mason Butte Cattlemen’s Association sent ranchers and range riders out this past summer to teach the CBYCC students how to repair and rebuild fence. Of the 5.2 miles of fencing, about 2 miles that surround Elk Creek Meadows have been completed.

USACE Lead Ranger Gus Garbe oversaw the site work performed by the students of the CBYCC. “[The students] are doing a great job. Fencing is tough, unless you grow up doing it all your life like these ranchers have,” says Garbe. He also adds, “A big thank you to Mason Butte for coming out and helping us out, and the Clearwater Basin Youth Conservation Corps.”

The CBYCC is made possible by partnerships with local agencies and organizations that hire the crews for 8 weeks during the summer. Northwest Management, Inc. is a proud sponsor of the CBYCC’s mission to get local youth out in the woods and provide them with an introduction to natural resource career paths. If you would like to make a donation to this great program, please contact Barbie at the Clearwater RC&D office, 208-883-4471, or visit their website at clearwaterrcd.org.

Forestry Assistance for Landowners

Timely management often makes a difference in forest health, fire risk, pest management, and wildlife habitat. For a small non-industrial private forest owner, finding the time and financial resources to manage a forest is often overwhelming causing delays in implementing a practice or needed treatment. The results of procrastination, when it comes to forest management, is often increased wildfire risk, reduced timber growth, increased presence of invasive plants, erosion and site degradation. Fortunately, there are programs available that can ease the burden of implementing forest management.

One program that the foresters at Northwest Management Inc., recommend landowners investigate is the Environmental Quality Incentives Program (EQIP) available through the Natural Resources Conservation Service (NRCS). Through EQIP, NRCS provides both technical and financial assistance for landowners so they can improve the health and productivity of their land, and accomplish their Forest Management goals and objectives.

The process begins by contacting the NRCS and signing up for the EQIP program. If your property and needs qualify, the NRCS first requires that a Forest Management Plan (FMP) be developed by a qualified forester. NRCS will fund the development of the FMP up to a specified cost-share limit based on the size of your forest land. The landowner finds and selects a forester to develop and write the plan. The plan identifies your property and makes recommendations on forest management practices that meet your forest management goals and objectives.
Once the cost shared management plan is completed, practices that are identified in the plan can then be applied for and cost-shared through the EQIP program. Funding for practices is based on a first come first serve basis depending on allocated funds made available on an annual basis. Once your practice is accepted and funded, the landowner can contract for the work or undertake the work themselves.

Northwest Management Inc., has been working with landowners on their EQIP projects for several decades. We write the forest management plans and work with landowners to implement the practices identified in the plan. Projects we currently are involved in include tree planting, stand improvement thinning, fuels treatments, home defensible space, tree pruning, invasive plant eradication, access control, road revegetation and many more. To get started in the program or find out more about the EQIP program contact NMI or visit your local NRCS office.

Reviewing your Forest Management Plan

Northwest Management articles

Those of you who are reading this article are probably involved in some aspect of forest land management; it may be a daily activity or something you are only involved with on a periodic basis. You may manage land for your family, tribe, public tax payer, shareholder, corporation, NGO, or some other entity. Hopefully, at some point there was a forest management plan prepared for the forest land you manage.

So, when was the last time you read the plan? How long ago was it prepared? What changes have happened to the land or the ownership objectives since the plan was prepared? Have your management experiences taught you anything on the projects you did implement that should be applied to future projects? Have log market conditions changed? Is your forest inventory up to date? Have you experienced timber harvest, fire, insect infestation or other agents of change to the forest? Has the actual ownership of the land changed?

These questions are intended to highlight the fact that as forests, markets, ownership objectives, skills, knowledge, and technology change, our forest management plans need to keep pace in order to become remain relevant. If the forest management plan is outdated on what basis are forest management decisions being made?

Understanding that change is continually going to influence our management should motivate us to periodically review our plans and ensure that they are still applicable and relevant. The objective of this article is to encourage you to find your forest management plan, read it carefully, and evaluate if it is still pertinent. It is likely that at least some sections would benefit from an update.

Here are a number of key questions you might consider as you review your forest management plan.

• Are the goals and objectives all still relevant?

• Is everyone involved with management of the property familiar with the plan?

• Who is responsible for ensuring the plan is implemented?

• Is the plan being implemented as intended? If not, why and what needs to be addressed?

• Have financial conditions that impacted the plan changed significantly (log markets, financial assistance programs, owner finances, land values)?

• Is forest inventory information current and comprehensive enough?

• Have completed project records been updated and recorded?

• Is there better information available to inform the plan (aerial photography, soils, forest inventory, completed project experience, cost and income estimates, new markets)

• Are there recommendations in the plan that have been implemented and not been as successful as hoped?

• Has the ownership changed?

• Are there newly emerged management concerns not currently addressed in the plan (weeds, fires, legal issues, easements, insects and disease infestations, etc.)
Keeping your forest management plan updated is a key aspect of responsibly managing forest land. The plan communicates to all involved parties what is important and what needs to be done to remain successful in regards to achieving ownership objectives. If an update of your plan requires technical assistance NMI professional forestry staff work with you to get back on track. In some cases maybe there are only minor updates that need to be made. Reviewing your plan on at least an annual basis will remind you about what is important to be thinking about in the coming year and help to maintain focus. It might also be inspiring to reflect on all you have accomplished since the plan was initially developed!

2018 a Promising Year in the Log Market

Northwest Management forecast

2018- A Promising Year in the Log Market

Luke Machtolf, Northwest Management, Inc.

National Market Condition

2018 should be an excellent year for forest landowners to market and sell logs throughout the country, including the inland west. National lumber demand is increasing due to a robust housing market. The U.S. Census Bureau reports January 2018 seasonally adjusted housing starts at 1,326,000 – nearly 10 percent above the December estimate. The national lumber demand for 2018 is an estimated 51.6 BBF (billion board feet) and with an anticipated reduction in Canadian exports, U.S. producers will need to cover the difference. Most of this demand is expected to be filled by the US South (forest2market).

Record Lumber Composite Price

The Random Lengths Framing Lumber Composite Price (FLCP) recently hit an all-time high of $512 on March 2, 2018. The FLCP serves an indicator for price behavior in the U.S. framing lumber market (Random Lengths Publications, Inc., 2016). The graph below displays recent activity in the FCLP since the beginning of 2018.

 

The finished product markets continue to be very strong and should remain so through 2018. While the finished product markets are a good indicator of the overall demand for raw logs, they are not always a direct correlation to log prices.

Canadian Lumber Trade Dispute

On November 2, 2017, the US Commerce Department made final determinations on the antidumping duty (AD) and countervailing duty (CVD) investigations. The Commerce Department determined that exporters from Canada “sold softwood lumber into the US at 3.2 to 8.89 percent less than fair market value. The Department also determined that Canada is providing unfair subsidies to its softwood lumber producers at rates of 3.34 to 18.19 percent” (US Dept of Commerce). The Department set the final combined countervailing and anti-dumping duties for most companies at 20.83 percent, with West Fraser, Canfor and Tolko receiving higher duties (US Dept of Commerce).

The expectation of this ruling caused a great deal of uncertainty in the market last year. However, a very strong lumber market has minimized the impacts of duties placed on Canadian lumber exports. Uncertainty in the market has disappeared, now that Canadian producers know what the duties are and have reportedly been able to pass most of this expense onto the consumer, given the strong lumber market. (CBC)

Regional Update

In 2017, coastal Douglas-fir log prices surged above $800/MBF while coastal hemlock increased nearly $100 to about $600/MBF (Campbell Global). This is a result of an overall log supply shortage and recently increased milling capacity. Prices for Douglas-fir logs have not been this high since 1993, when the Northern Spotted Owl was listed (Random Lengths).

The competitive log market west of the cascades is having some influence locally, drawing some of the Inland wood basket to coastal and export markets, particularly in eastern Washington. While this is creating marketing opportunities for inland landowners, there doesn’t appear to be a log supply constraint. The perception of several local purchasers is that current pricing structures are procuring the needed volumes of logs for their facilities. Furthermore, most area mills have been running on healthy winter inventories and have not needed to increase prices in Q1 due to shortages.

Moving into 2018, demand for logs in the inland will remain strong through the year. Mills however; will purchase largely based on their inventories and not directly by the lumber market. Landowners interested in harvesting should be prepared to capture seasonal spikes in delivered log prices, having their foresters and contractors under contract in advance. Selling logs in the early spring often creates an advantage for some private landowners, whom own land in lower elevations, allowing their logs to hit the mill prior to most agency and industry sales.

REFERENCES
Random Lengths, 3/2/2018
Random Lengths, 3/9/2018
Campbell Global – Timber Trends, February 2018.
CBC News: http://www.cbc.ca/news/business/softwood-lumber-demand-housing-starts-demand-1.4541742. February 2018.
US Department of Commerce: https://www.commerce.gov/news/press-releases/2017/11/us-department-commerce-finds-dumping-and-subsidization-imports-softwood. November 2017.
Forest2Market. “PNW Log Markets Causing Challenges for Regional Mills.” Swanton, Joel. https://blog.forest2market.com/pnw-log-markets
causing-challenges. March 2018.

2017 Announcements

Northwest Management annoucement

Northwest Mangement, Inc. is proud to welcome three new foresters and two remote sensing specialists to our team of natural resource professionals.

Katie Clyatt, Professional Forester, has joined the Helena, Montana Office
Gage Poss, Professional Forester, has joined the Moscow, Idaho Office
David George, Professional Forester, has joined the Moscow, Idaho Office
Bill Mathews, Remote Sensing Specialist, has joined the Moscow, Idaho Office
Silas Whitley, Remote Sensing Specialist, has joined the Moscow, Idaho Office

Log Market Expectations for 2017

Northwest Management forecast

Featured Professional: Vincent P. Corrao President, Northwest Management, Inc. Log Market Expectations for 2017

Since the collapse of the lumber market in 2008 many family forest owners evaluate the decision on whether it is a good time to harvest and is the market favorable to engage in a timber sale that may occur a few times in a landowner’s ownership of a property. The US economy is affected by many factors when it comes to the value of lumber and what the mills can pay for logs. When the economy is strengthening, employment is steady; inflation is held in check with favorable interest rates sets the stage for more building of homes and remodeling efforts. The forecast for 2017 shows the economy strengthening and home construction continues an upswing where lumber prices are expected to rise and log prices are to improve.

The US Lumber demand forecast for 2017 through 2019 show a steady increase in lumber use for new homes, remodeling and other uses (Source WWPA). Home construction forecast includes single-family and multifamily units and is projected at approximately 1.3 million in 2017, slightly higher in 2018 and moving up through 2019 to approximately 1.5 million home starts (Source WWPA). Housing starts hit an all-time low in 2008 through 2010 and have slowly been recovering the last seven years. Delivered log prices have continued to improve and with home starts in the 1.2 to 1.3 million ranges, log prices are expected to strengthen considerably. Historically looking back from 1990 to present, delivered log prices for Douglas fir and grand fir improve when housing starts are at these levels and improving economic conditions exist and during these periods prices will range between $450 per thousand board feet (MBF) to over $500/MBF.

Delivered log prices on a competitive bid for Northwest Management Inc. (NMI) family forest owners have ranged between $335/MBF all species in 2012 to $442/MBF in 2014. Delivered log prices in 2015 and 2016 worked their way up to approximately $450/MBF including all species and reflects the high price paid for western red cedar which has been strong the past 3 to 4 years. The log market for 2017 is strengthening with Douglas fir open market prices starting at $420 to $500/MBF, grand fir $400 to $480/MBF and cedar ranging from $950 to over $1,200/MBF. Lodgepole, spruce, white pines are expected to be between $350 and $450/MBF.

NMI tracks delivered log prices through open market and bid sales and looking back from 1990 to present indicates that when open market logs have reached $450 to $500/MBF ranges for Douglas fir and grand fir that this is a strong market and if a harvest is desirable this is a good time to consider preparing to implement a timber sale and the log market forecast is projected to remain strong through 2019.

Anchor Forest: Sustainable Forest Ecosystems through…

Anchor Forest: Sustainable Forest Ecosystems through Cross-Boundary, Landscape-Scale Collaborative Management

Mark Corrao, Northwest Management, Inc.

The purpose of the Anchor Forest project was to develop a viable framework for institutionalizing collaborative cross-boundary forest ecosystem management, and to assess science-based metrics in order to overcome forestland fragmentation, maintain working forests, and sustain ecosystem services at a landscape scale.

Nation-wide more than 1,009 sawmills, 15 pulp mills, and 148 other mills have been closed since 2005 (Smith and Guldin, 2012) and in the wake of the 2014 and ‘15 fire seasons many forest land owners and managers throughout the West witnessed a marked change in the very resource we work daily to protect and hold near and dear to our families and livelihoods. Today with an ever-increasing urban population culturally removed from the functions of forestry and silviculture and an unparalleled flush of people from these areas into the wildland urban interface it is no surprise to see the resource decisions and practices available to forestland managers become exponentially more complex.

In the true spirit of a natural resource manager the Anchor Forest project took on the task of contextualizing the dynamic of diminishing infrastructure, jobs, funding and management tools with an exploding need to provide for the resource and the public in some “balanced” fashion. Therefore, the Anchor Forest project itself was an assessment of (1) forest land health and the forestry industry, (2) available infrastructure and (3) current capacity, (4) stakeholder interests / participation, (5) currently available support-funding mechanisms, and (6) forest ecosystem services on nearly 2.7 million acres across eastern Washington. And the Anchor Forest assessment reports were then completed

in March 2016 by Northwest Management, Inc. and included more than 480 peer-reviewed publication references, 1,000 surveys and responses from numerous stakeholder workshops completed over a 3-year period.

Again in true “forester” fashion the need for actionable findings that could be applied to the land was a critical part of contextualizing the challenges our forests face. Therefore within the Anchor Forest Final Report a summary of measurable metrics, actionable goals and a balance of landscape-scale social/cultural, economic, and ecologic management options were tied to recommendations that targeted maintaining ecosystem function and working forests. The findings and recommendations provide metrics for measuring success of invested resources that address deteriorating forest health conditions, maintenance of working forests, and the jobs, wages and revenue needed to sustain many rural communities throughout the western U.S. using eastern Washington as an example.

This project was initiated and funded by the US Forest Service through cooperation with the Bureau of Indian Affairs and the Intertribal Timber Council. The executive summary, final report and individual task-assessment reports are all available online at www.Anchorforest.org and on the Northwest Management, Inc. website under featured projects – Anchor Forests at www.TheNMIWay.com.