FEATURED PROFESSIONAL: Vincent P. Corrao, Log Market Expectations for 2017

By October 4, 2017Uncategorized

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.