Forestry Report

In our last issue, the very favorable May housing start numbers caused some optimism on my part. At the end of the article, I promised to let you know in the next newsletter if May was an anomaly or the beginning of a favorable trend. It was an anomaly—but not completely. The June and July numbers, while not as high, were better than preceding months. So, I was still feeling a little optimistic. And then came the August numbers. Back to the bottom, the lowest since June 2020. We will just have to keep watching starts and the Federal Reserve’s actions on interest rates. As soon as rates start dropping—and I expect that to happen before the presidential campaign really heats up—I think we will see housing pick up and hopefully our sawtimber markets too.

Throughout the second quarter, most factors seemed to point towards continued declines in stumpage prices, quotas for loggers, and a depressed housing market. But late in the quarter, news came out that housing starts in May shot up to 1.6 million annualized units, the highest rate since April 2022. This was followed by a climb in lumber prices. And suddenly there was hope again! Hope that the downturn, which started hitting hard in the fourth quarter of 2022, might have bottomed out and we might have begun the recovery. It’ll take a few months of positive numbers to establish a trend, but I couldn’t ignore the positive signs that showed up at the end of this quarter.

It is with a great sense of sadness that I have to report that stumpage prices continued their retreat of last year, declining from both the fourth quarter and the same quarter last year (price graphs, pages 6 to 9). That makes it a trend, and it is not a good one.

Unfortunately, 2022 ended with a slowing economy, dour forecasts, declining stumpage prices, and lumber-adjusted housing starts well under 1.2 million (a benchmark for demand). Other than that, we are just fine. The trees are still growing, our land is not shrinking, and we still have one of the most robust markets for trees in the world. But I think the next six months may not be a lot of fun.

La Niña weather conditions are forecast to continue into 2023, according to the National Oceanic & Atmospheric Administration (NOAA), bringing wetter conditions to the Northwestern U.S., where they are sorely needed, but unfortunately, this means drier conditions across the Southern U.S.