Forestry Report

Unfortunately, stumpage prices across our operating regions remain flat to declining, with a few exceptions. A look at the graphs on pages 9-13 quickly identifies the regions and products where there has been significant upward or downward price movement. Periodically, we highlight trends shown in the Institute of Supply Management® Manufacturing PMI® survey. Published monthly, this data is a strong indicator of where various manufacturing sectors are in terms of growth—or lack thereof—and it reflects the current situation for our business. For paper products, there have only been three positive months out of 42 since June 2022. For wood products, in the same period, there have only been two positive months. Consistency is a good attribute, but it sure would be preferable to be consistently positive.

In a year that was supposed to bring a long-awaited recovery in timber prices, tree growers across our U.S. operating regions instead saw prices either continue their downward trend or remain flat over the last quarter. There are always exceptions, but they tend to be isolated to one region and temporary. Hence, the title of this article: We haven’t had any “satisfaction” in our sector since 2006. Mortgage rates are often cited as a reason, but when looking at past housing booms (the 1990s, early 2000s, mid-2000s), the current rates aren’t too different from then. The big difference appears to be construction costs. We’re all familiar with the inflation that hit various commodities after COVID. Lower interest rates will help, but we also need improvements in wages and broader economic confidence before housing demand strengthens. In the last Forestry Report, I discussed the Renewable Fuel Standard (RFS) and the exclusion of commercially grown, pulpwood-sized trees from the feedstock definition for renewable fuels (see page 6 for EPA ongoing review and forestry groups’ comments). Those opposed include AF&PA, the lobbying group of the pulp and paper companies. It’s not a good look for our business partners, given that their mill closures are creating large areas where there is little to no demand for the very trees they claim to need.

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.