by Vincent P. Corrao, President, Northwest Management, Inc.
What is the Super Cycle? Some think it’s a Greek myth sent from the gods, others think it’s been calculated by an economist in a dark room. Many hope it’s true while others hold their breath in expectation and try to not think about it for fear that it may not happen. It is supposed to occur in the next 3 to 5 years and it has something to do with the possibility of reaching some of the all-time highest prices for lumber seen to date and the effects may be seen as soon as 2013.
Is it possible that sometime between 2013 and 2017 we could see some of the highest prices for lumber and therefore some of the best prices for delivered logs in recent history? What are the factors forecasters are using to speculate these results? Some of the basic factors include that in 2009 we had 550,000 home starts and sometime around 2017 home starts are projected to be between 1.5 and 1.6 million. This could be possible as the 2012 home start estimate exceeded expectations and reached 894,000 starts. The mountain pine beetle epidemic in British Columbia will kill over 60% of the pine and by 2014-2015 a decline in the available timber coming from British Columbia will occur. Additionally Canada overall is expected to reduce harvests throughout the country by 30%. Canada has historically provided up to 36% of the lumber used in the US and this is expected to decline during this period.
Internationally China will continue to use US and Canadian lumber products to feed demand and economic growth. The Asian markets are also expected to use US and Canadian lumber and between these economic powers, the demand for lumber worldwide is expected to continue and the outcome is a significant increase in lumber value.
Lumber prices on the composite index have increased almost 30% during 2012 and have provided increases in the delivered log prices through 2012. Species such as Western Red Cedar, White Pine and Douglas fir have seen the strongest gains in 2012. The State of Idaho timber sales have been receiving stumpage prices ranging from $200-$250/mbf, all good signs for the future. Landowners should begin to think about where and what they would like to manage in the next few years and start to monitor log prices. Take advantage of the Super Cycle when and hopefully it appears.
Vincent Corrao, President, Northwest Management, Inc.
Northwest Management, Inc. is a private natural resource consulting firm established in 1984. Services include: landowner forest management plans, range and wildlife management, water resources, land use assessments and wildfire hazard management. www.consulting-foresters.com