Housing slowdown to affect 2019 timber markets


Issue Date: March 13, 2019
By Christine Souza
At family-owned wood products company Big Creek Lumber in Davenport, employee Ludovic Deshayes, guides a redwood log through a large bandsaw.
Photo/Richard Green
California timber operators such as Big Creek President Janet Webb, say following a great season of high demand and increased supplies for timber in 2017-18, prices have softened due to a slowing in new home construction.
Photo/Courtesy of Big Creek Lumber
At Big Creek Lumber, employees pull finished lumber off the line as it leaves the mill and sort it into stacks by grade and dimension.
Photo/Richard Green

After timber operators experienced record earnings last summer, they say a slowdown in new home construction and an oversupply of lumber going into this season points to likely lower prices for harvested logs and lumber products. But many say they remain hopeful the market for harvested logs and timber will stabilize during the spring.

"People are cautiously optimistic that things will be off a bit, but not precipitously so," said Janet Webb, president of Big Creek Lumber in Davenport, a family-owned wood products company that produces redwood and fir, and operates a redwood sawmill and five retail sales yards.

"Last year (2018-19), everybody thought it was going to be really strong, and then pricing dropped off," said Webb, a registered professional forester whose family has been in business in Santa Cruz County since 1946. "This year, I think people assume that prices are not going to be as strong as last year and that there won't be as much demand, but we're hoping that it won't fall off a cliff, either."

A year ago at this time, California timber operators say, there was much strength and optimism in the market, with a lot of business from new home construction that led to increased demand for harvested logs and lumber products.

"Last winter, there was a lot of interest in landowners to step in and do timber harvest, because log prices went way up and there was demand, and also because of added mill capacity (added shifts), and it really drove log prices up," Webb said. "But once you ramp up production, it's difficult to ramp it back down, so that made it a little tougher on West Coast mills and certainly California mills."

New housing construction represents a major indicator in domestic lumber prices, and California Forestry Association Vice President Steven Brink said housing starts declined last fall and early winter. That contributed to a declining lumber price, although housing has rebounded slightly.

Ponderosa pine and sugar pine held their value well, dropping only by about $25 per thousand board feet (mbf), Brink noted. However, white fir and Douglas fir dropped sharply, from around $570/mbf to about $410/mbf. Fortunately, he said, there has been some recovery in the prices for fir since last December.

Lumber prices for white woods and redwood have fallen, Webb said, adding there is also an expectation that sawlog prices will be down, although it is hard to track at this time, with only a few sales to compare.

With new home construction being very cyclical, Webb said, "there was a sense that the bubble was going to burst, so people are half-expecting it to happen."

Now that the demand and price for harvested logs and lumber products has slowed, Webb said, sawmills are being more cautious, uncertain of "whether there's enough demand out there to absorb higher production levels, or if production levels will drop off and mills decide they cannot sell what they are producing."

Zane Peterson, a licensed timber operator and owner of Peterson Timber, a logging company based in Redding, purchases U.S. Forest Service timber permits and does salvage logging and fuel-reduction work. He also delivers harvested logs to sawmills and harvests timber for private landowners.

"We're pretty fortunate that we have some great winter jobs on great soil that absorbs that water well, and that we can work," said Peterson, a member of the California Farm Bureau Federation Forestry Advisory Committee.

Peterson said timber prices typically decline in the winter.

"As we get into the summer, I expect it to level out and get a little more consistent, and then we'll see where the rest of the year takes us," he said. "In Northern California, we are a pretty stable market. We have more mills than most of the state, so we are able to get a lot of work done up here."

Brink said loggers and sawmill owners face another season focused on the need to remove burned timber from wildfires. This also involves addressing wood borer infestations, which lead to blue stain in pine that greatly reduces its value.

In California, the Forest Service timber-sold volume rose from 254 million-board-feet (mmbf) in 2017 to 355 mmbf in 2018. The 2020 sold volume target is 400 mmbf, Brink said.

This increase resulted from the Forest Service using categorical exclusions for National Environmental Policy Act compliance; designation of trees by a prescription rather than marking individual trees; and an increasing use of partners to do Forest Service work through Good Neighbor Authority and Master Stewardship Agreements. These tools substantially increase the Forest Service's ability to complete projects more efficiently, Brink said.

Webb said a large influx of salvage logs on the timber market "can depress the rest of the market, because there's all of a sudden a big volume that drops the price."

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.