While lumber and panel prices have fallen sharply over recent weeks, log prices are still much higher than any time in recent years. May 2013 Douglas fir logs delivered to Westside sawmill and plywood operations averaged $673/MBF. This is over $100/MBF higher than May 2012 and more than double the recession low of $322/MBF posted in April 2009.
In the Northwest, most mill operators rely on government stumpage sales for a portion of their log requirements. Frequently this spring, bids for state timber sales in Oregon and Washington broke the $500/MBF barrier for Douglas fir stumpage. These contracts typically allow 12-24 months for harvest and will deliver logs to the mill at $650/MBF or more.
Based in part on the strength of the market and the longer term market outlook, Weyerhaeuser entered into an agreement to purchase 645,000 acres of forestland in Northwest Oregon and Western Washington from Longview Timber at a price of $2.65 billion, or $4,100 per acre. The price reflects the fact that the timberlands are very productive; they feature gentle terrain and large volumes of mature, high quality Douglas fir timber. They are also centrally located in close proximity to export facilities and some of the most efficient and productive sawmills in the country.
Because the lumber market is presently oversupplied (production has outstripped demand), a number of mills are taking extended July 4 shutdown periods to slow production. These curtailments, along with recent setbacks in forest product prices and improving summer weather, will cause Douglas fir delivered log prices to retreat closer to the $600/MBF level.
Timber values in the Northwest have rebounded significantly as the economy improves and operators move to secure timber resources. Companies appear much more optimistic about the future as the worst times since the great depression of the 1930’s have ended. Even considering the current slowdown, timber and timberland prices demonstrate the confidence Northwest operators have when deals closely fit their strategic plan and objectives.