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New records for lumber, logs, housing starts

New records for lumber, logs, housing starts

February 4, 2013

By Rick Sohn, PhD
Umpqua Coqullie LLC

New records for lumber, logs, housing starts, building permits, and unsold inventory, while mortgage rates remain low.  Consistent annual improvement  is expected.  Five-year data of lumber, logs, housing, and mortgage statistics are shown below.

  Prices in Dollars per Thousand Board Feet

Jan‘13 Dec’12 Nov‘12 Oct‘12 Dec‘11 Dec ’10 Dec ‘08
Southern Oregon Studs1 $335 $318 $ 300 $273 $220 $235  $140
Southern Oregon Logs2 Not avail. $607 $ 588 $570 $549 $533  $434

Thousands of  Housing Units

US Private Housing Starts3 954 851 889 697 539 560
US Private Building Permits3 903 900 868 701 632 654

Months of  Inventory of Unsold Homes

 Portland OR Unsold Home inventory4 3.6  4.2    3.8 5.3 7.9 14.1

Percentage interest rate

30-year Fixed Rate Mortgage5 6  3.42  3.35    3.35    3.38 3.96 4.71 5.29

 

Interpretation

Supply and demand are so much a part of the wood products industry prices.  Both housing starts and building permits posted new highs, over 900, and the highest since 2008.  Production capacity at the mills and in the woods remain constrained, pushing prices higher.  Stud prices at $335 are at a 7-year high, while log prices at $607are at a 6-year high.

Logging companies do not have the cable yarding capacity they had 6 years ago, and the wet season constrains logging to gravel road systems, which decreases runoff of mud into streams.  This year, many companies do not have as many logging units prepared for winter work, which also pushes logging prices higher.

The Financial Times reports a surge in March lumber futures to a high of $380 in mid-January, with a high near $400 in late December, while currently over $350.   The futures prices surged nearly 45% in 2012, as demand rose.  The lumber and timber supply constraints discussed above, along with demand from China, and the Canadian pine beetle epidemic, have all contribute to the increased prices, according to theTimes.  Paul Jannke of Forest Economic Advisors in an interview with the Times, forecasts a 10-15% increase per year “for the next 3 years at least.”  Industry predictions are for a 20% rise in homebuilding in 2013, over 2012.

The healthy log and product prices will be short-lived if woods capacity increases and mills jump into more production by adding shifts, in excess of the increase in demand.  Temporarily, logging capacity will limit the growth.  Fortunately for the business, producers are reticent to increase production at the still-anemic levels of housing starts and building permits, compared to the historic levels, where normally housing is above 1.5 million starts and permits.  This allows companies to recapture some of the losses of the last 5 years and become healthier.

Data reports used with permission of:

1Random Lengths.  Through Sept. 2012, 2”x4”x8’ precision end trimmed hem-fir stud grade from Southern Oregon mills.  Starting Oct. 2012 the stud grade was consolidated with and is now reported as  Kiln Dried Studs, Coast Hem-Fir 2x4x8’ PET #2/#2&Btr. Price reported is Dollars per Thousand Board Feet, generally the third week of the month.  One “board foot” of product measures 12 inches by 12 inches by one inch thick.

2RISI, Log Lines.   Douglas-fir #2 Sawmill Log Average Region 5 price.  Current report is for the prior month.  Dollars per Thousand Board Feet of logs are reported using standardized log measurements from the “Scribner log table,” which includes expected saw trim.  This is much larger than a product board foot.

3 Dept. of Commerce, US Census Bureau.   New Residential Housing Starts and New Residential Construction Permits, seasonally adjusted, annual rate.  Current report is for the prior month.   Recent reports are often revised in bold.  Also, major revision made each May, reaching 2 1/2  yrs back.

4Regional Multiple Listing Service RMLSTM  data, courtesy of Janet Johnston, Prudential Real Estate Professionals  Broker, Roseburg, OR.  Inventory of Unsold Homes (Ratio of Active Listings to Closed Sales) in Portland Oregon, for most recent month available.

5Freddie Mac.  Primary Mortgage Market Survey.  30-year Fixed Rate Mortgages Since 1971, national averages.  Updated weekly, current report is for the prior full month.

6Mortgage-X Most recent weekly rate of 30-year Fixed Rate Mortgages, national average.

Issue  #6-1. © Copyright Rick Sohn, Umpqua Coquille LLC.   For permission to reprint, e-mail rsohn@umpquacoquille.com

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AOL: Update on five forestry lawsuits

Update on five forestry lawsuits

October 11, 2012

by Rex Storm, Forest Policy Manager
Associated Oregon Loggers

Forest Owners React to Fire Suit: The fallout from the punitive US Forest Service lawsuit that extracted over $122 million in a fire damage settlement from Sierra Pacific Industries has Oregon landowners scrambling to prevent similar attacks by Obama administration federal prosecutors. Potential fire liability impacts and defensive strategies are being explored by state and private forest attorneys. Forest landowners near national forests have stepped-up fire prevention and closed their private lands to public recreation use until fire liability changes can be enacted in Oregon law.

Forest Road Legal Brief: Associated Oregon Loggers joined several forest industry groups who submitted to the US Supreme Court a legal brief, which supports the high court overturning a harmful Ninth Circuit Court of Appeals ruling. The wrongheaded Ninth Circuit decision—if implemented—would require every forest landowner across the West to seek a federal Clean Water Act permit from the Environmental Protection Agency just to use a forest road. Concurrent with the high court effort, industry is lobbying Congress to pass legislation that would exempt roads from federal permitting.

Suit to Overturn Planning Rule: In August, the American Forest Resources Council (AOL a member) and several national forest user groups, filed a lawsuit in the Washington DC District Court to overturn the flawed National Forest Planning Rule that was adopted in April 2012. For three years during Rule development, forest users had argued that the proposed Forest Service Rule was both unbalanced and illegal. The new Rule wrongly dictates future forest plans must discard multiple-use, instead illegally making environmental & species preservation the preeminent Forest Service goal.


State Forest Plan Revision Begins:
 At its July meeting, the Oregon Board of Forestry unanimously approved the first step to revise the forest management plan for Oregon’s Northwest and Southwest state forests. After several years of urging from the trust counties and forest sector—including AOL—the Board directed the OR Dept. of Forestry to determine how the forest plan can be revised to produce more income, through significantly increased timber sale volume. AOL is working with our allies to convince the Board and ODF to shorten its proposed 5-year plan revision process.
Roadless Amicus Brief: In June, American Forest Resources Council (AOL a member) joined with the BlueRibbon Coalition and other recreation groups on an appeal asking the US Supreme Court to review a wrongheaded Tenth Circuit Court of Appeals ruling upholding the Clinton-era Roadless Rule. Forest users have long-opposed the 2001 Clinton Roadless Rule because it creates a blanket, nationwide scheme that makes 69 million acres of national forests into de facto Wilderness areas. The Supreme Court is expected to decide in the fall whether to hear the case.

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