Tag Archives: Logging

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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Governor wants to help Ore. timber industry by sharing wildfire costs with industry, state

Governor wants to help Ore. timber industry by sharing wildfire costs with industry, state

By JEFF BARNARD  AP Environmental Writer

January 19, 2013

GRANTS PASS, Oregon — For years, Oregon’s major timberland owners have felt they were paying too much of the cost of fighting wildfires, especially in years when blazes stayed relatively small.

A bill in Gov. John Kitzhaber’s budget would allocate $3.6 million over the next two years to change the payment formula, so the state picks up a bigger share of the costs in years when fires don’t rage out of control. The proposal also would pay up to $6 million to keep two air tankers on call and other resources to keep minor wildfires from getting big and expensive.

“Landowners since 1993 have paid 82 percent of the cost” of putting out large fires, said Kristin McNitt, executive director of the Oregon Forest Industry Council, which represents the timber industry. “And it’s killing us.”

The governor also wants to use $4 million in lottery-backed bonds to help the U.S. Forest Service turn out more timber sales from federal lands in the dry forests east of the Cascades.

Natural Resources adviser Richard Whitman said the governor sees the two proposals as vital to maintaining the struggling timber industry in central and eastern Oregon, both as a source of jobs and as a necessary part of the infrastructure for logging that will improve forest health and reduce wildfire danger.

The region almost lost one of the half-dozen surviving mills last year, for lack of timber from national forests, Whitman said.

“If there is any further decline, it will be very hard to get back,” he said.

A wildfire policy watchdog group, however, sees the funding change as a “scam” on taxpayers that benefits the timber industry — but not the public.

Andy Stahl, director of Forest Service Employees for Environmental Ethics said any money spent on air tankers and helicopters is a waste, because there is no data to show that they are effective tools for keeping fires from getting out of control.

“At a time when we are struggling to fund schools and fund health care, why we would want to divert those dollars to some of Oregon’s largest corporations is a bit mystifying,” said Stahl. “Historic data shows no correlation between the amount of retardant dumped on a (forest) and the success rate of keeping fires small.”

The timber industry has been trying for years to change the wildfire funding formula, and last year the state Board of Forestry appointed a committee representing forest landowners, government agencies and the governor’s office, which came up with the Wildfire Protection Act.

Under the current funding formula, private landowners, whether large timber companies or homeowners with a few acres of trees, pay a tax to cover the costs of the Oregon Department of Forestry’s firefighting efforts. The tax ranges from 80 cents per acre on the wetter west side of the state, to $1.70 on the drier east side.

The first $10 million of the cost of fighting large fires is covered by private landowners. The next $15 million comes from the state general fund. After that, a special insurance policy kicks in $25 million up to a total of $50 million. In recent years, the cost of fighting large fires has averaged $8 million, so landowners have covered it alone.

The bill calls for sharing the costs evenly from the start, up to a total of $20 million. The amount the state pays would increase gradually over six years, so that at the end the cost would be split 50-50, up to $20 million. Despite the lower deductible, the cost of the insurance policy would remain at $1 million, due to increased firefighting resources, said Travis Medema, deputy chief of fire protection for the Oregon Department of Forestry.

The idea behind the state taking a greater share is that the public benefits from keeping forests green, so they provide recreation, fish and wildlife habitat, and clean water, said Whitman, of the Natural Resources Department.

As for the bottleneck in turning out more timber from national forests in eastern and central Oregon, Whitman said the problem has been a lack of funding for the Forest Service.

Sales developed collaboratively by groups that include representatives of the timber industry and conservation groups typically are not held up by court challenge. The $4 million would go to planning and laying out timber sales.

“We put money into economic development projects all the time,” Whitman said. “In terms of bang for the buck for job creation” and helping mills and logging outfits stay in business, “it looks like a pretty good investment.”

The state is still in negotiations with the Forest Service, but wants to receive payment from the sale of timber in return for the investment in preparing sales, Whitman said.

Stahl said a similar arrangement had been worked out in Arizona to promote thinning to reduce fire danger. He said it was ironic for the state to pay the federal government to log, when federal payments to timber counties to make up for reduced logging revenues have expired.

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