Forestry Report

The recent closure of a pulp mill in Cedar Springs, Ga., got me thinking about the human impact of these mill shutdowns. Cedar Springs is a town of about 75 people. Early County, where it sits, has a population of around 10,000, half of whom live in Blakely, 16 miles from the mill. The mill employed over 500 workers, so this is a massive blow to Early County. The hit to the tax base will be damaging to schools, public services, and roads, and will likely result in city and county job cuts. It doesn’t end there. The mill relied on many loggers to supply their wood. Now, with nowhere to send their harvests, more jobs will be lost, and bankruptcies are likely. We’ve seen this story unfold before. It happened a few years back in Perry, Fla. Last December in Georgetown, S.C. Across the Southeast, similar shutdowns have hit communities hard. In larger cities, the impact is more muted, but it’s still there. In rural places like Cedar Springs and Perry, the consequences are profound. The rural South recovered from the Great Depression, in large part, riding the explosion of pulp and paper mills across the South. Roughly 100 mills were built between 1930 and 1977, driving employment and local economies. But now, due to changing markets, lack of investment, failure of some industry players to innovate, and government policy, we are losing this industry.

Timber prices remained flat and low in the first quarter compared to a few years ago (see graphs pages 9-12). Unfortunately, housing market forecasts have been revised downward for 2025, meaning a recovery in sawtimber tree prices probably won’t happen this year. As long as the broader economy remains sluggish, don’t expect improvements from the pulp and paper sector either, which means continued weak demand and low prices for small-diameter trees. Unless, of course, tariffs on Canadian lumber reduce imports and boost sawtimber prices—though that could be offset by continued declines in exports to China… which could, in turn, be offset by reductions in lumber imports from Europe. You get the idea. There are so many moving parts that no one really knows how this year will shake out. See page 7 for a discussion on tariffs and some new executive orders you will find interesting—turns out, our trees might just be a national security issue. Southern Yellow Pine (SYP) lumber prices have been fairly stable at just over $400/MBF for the last couple of years. They need to be in the $450 to $600 range to support a boom. Current SYP prices don’t suggest an imminent recovery—unless tariffs shift the market. Same story: we just don’t know.

The recent election highlights the enduring relevance of the political slogan from Bill Clinton’s successful 1992 presidential campaign, and it also aptly captures where we are in terms of forestry as a business: It’s the economy! The products that are made from the trees we grow are integral to all aspects of the economy: packaging, lumber, panels, paper, sanitary products, and countless other essentials used to ship products and build America. Only sanitary products are relatively unaffected by the economy - somehow toilet paper sales weather economic slumps. Interestingly, I have heard that beer packaging tends to flourish in downturns as well. But toilet paper and beer sales aren’t enough to drive enough demand for our trees to support high prices. We need an economic turn for the country—and the world—in order to recover from the price and demand doldrums we are currently experiencing.

The Federal Reserve finally dropped interest rates in September, and hopefully will do it again in October. And keep doing it. It’s coming a little late for rural America, particularly in the forest and farm economies, which were badly hurt by the tight money policy and the corresponding high interest rates that came with it. We have seen it in decreased demand for trees and low stumpage prices, all while operating costs continue to rise. Farmers may have been hit even harder than our sector, with low commodity prices and record high input costs. It shows up at a high level in the economy. For example, the Institute for Supply Management (ISM) Report on Business Performance shows that the wood products sector has seen either a decline or no growth since September 2021—three straight years! Prior to that, there had been a long period of growth.

I’ve been attending various summer forestry association and trade meetings, and the recurring theme is that while the long-term outlook for our industry is promising, we are in for some rough times in the short term due to high interest rates and their impact on housing and the broader economy. The Federal Reserve’s reluctance to cut interest rates is delaying the positive developments forecast by most economists. If you want to monitor the single most important indicator for future timber markets, watch the Fed’s interest rates. The Fed holds our future in its hands.