The Wood and Fiber Supply Chain Experts
Pacific Northwest Update
From the May 2010 Forest2Mill newsletter.
Log prices in the Pacific Northwest are showing continued strength.
In April, Douglas fir log prices increased by $30-35/MBF across the Westside region. Prices in
Southwest Oregon increased by $85/MBF since the beginning of the 2010; 2S grades were particularly
strong. Prices for preferred sawmill lengths are now equal to peeler lengths, erasing the price
premiums for veneer logs that held sway through most of 2009. By a slight margin, Southern
Willamette Valley and Southwest Oregon domestic prices are now the highest west of the Cascades.
Supported by price gains for lumber and plywood and limited supply, log prices are likely to
increase during May as well. Because lumber and plywood prices are the highest they’ve been for
five years, domestic log prices will exceed $500/MBF, a level that has not been reached since late
2008.
Despite strengthening prices, log inventories remain quite low across the Northwest region.
Increasing prices for logs and timber have attracted the interest of timber owners currently on the
sidelines. However, once burned–twice shy operators are content with modest production increases
and just-in-time log inventory strategies.
One reason for low inventories is the nature of contracts between operators and public
agencies to harvest stumpage. Many timber operators in the Pacific Northwest hold these contracts,
which allow a maximum of three years for completion. A significant number of these timber sales
were consummated before the deepening recession drove prices into the basement. With the record low
prices, operators have held off completing these timber agreements because they would have been
economically harmful.
There is now a window of opportunity for completing these timber sales. The window of
opportunity is short, however, as much of this timber is subject to time restrictions that limit
logging to late spring and summer periods because of environmental and operational requirements.
Now that signs of life are returning to the market, we are likely to be reminded of one of
the major casualties of the recession: the logging and trucking infrastructure dedicated to the
harvest and delivery of Northwest timber. In Southwest Oregon, many contractors’ expertise is
operating under the stringent requirements associated with harvest of government timber sales. Many
of these contractors have downsized or simply gone out of business. Even if the costly specialized
equipment is available, many skilled loggers have moved on to other careers.
With signs of better times for the forest industry on the horizon, we are to face another
immediate challenge. Will there be sufficient logging capacity to meet the needs of public agency
and private forest landowner timber harvests? Timber owners should have legitimate concerns on the
pending shortage of harvesting capability.
Additional Stories from the May 2010 Forest2Mill Newsletter:
Industry
Performance Overview
Housing
Market Update
Version
1 of BCAP: The Final Tally
Pete
Stewart Gives Keynote Address at the Wood-Based Biofuels, Biomass & Bioenergy
Conference