Economic Outlook
The economic outlook is not good. September’s wave of financial institution failures and bailouts has been followed in October by dismal housing and unemployment numbers, and a 0.3 percent decrease in GDP in the United States.
Housing numbers for September were mixed. After a 12.6 percent drop in August, new home sales rose 2.7 percent in September. Sales of new homes, while still 33.1 percent below last year's level, increased 5.5 percent. An increase in sales of existing homes is the first step in a housing recovery, yet analysts are not convinced that these increases indicate a bottom, since the numbers preceded news of an almost certain recession, growing numbers of layoffs, and a round of new ARM resets triggered by falling home prices. Median home prices fell again in September to $218,400, a 9.1 percent decrease from a year ago. In addition, inventory is currently at 10.4 months; though historically high, this number is down from August. Most agree that though there is some positive news, housing starts and therefore mill activity will not recover until 2010.
Credit markets have been showing small signs of loosening, and a 0.5 percent decrease in the federal funds rate, to 1 percent, should continue this trend. A sharp pullback in oil prices has also occurred; prices are approximately half their July high.
What does all this mean for the timber and forest products industry? Click here to subscribe to Forest2Market’s 4Cast to see how these global, national, and local trends are affecting your market.
Landowner Initiative for Forestry Education (LIFE) in Georgia Helps Limited Resource and Minority Forestland Owners
When Marc Thomas worked for the Georgia Forestry Commission (GFC), he met dozens of landowners who—for financial reasons—were selling their timber in a hurry. Many of these landowners had inherited their timberland from their parents, and they were either absentee landowners—trying to manage the land from a distance—or they had just moved home after years of city life. Others knew how they would like to manage their forests but didn’t have the financial resources to put this knowledge to work. While state and federal cost sharing and incentive plans were in place to help them, Marc discovered that very few of the people he met were taking advantage of these programs.
Today, Marc works at Fort Valley State University in Georgia, and one of his responsibilities is to continue the implementation of the Landowner Initiative for Forestry Education (LIFE) program. LIFE’s mission is to help minority and limited resource forest landowners.
“The goals of the program are to educate and raise awareness,” said Thomas. “We want to encourage landowners to develop goals and objectives for their land, to create and implement land management plans. We want to provide landowners with the information and technical assistance they need to implement those plans. We want make sure forest landowners have the necessary skills and information to negotiate market prices when it comes time to harvest their trees. Finally, we want to reinforce that the forest is part of our legacy and encourage landowners to retain this valuable natural resource for future generations, who will also make a living off the land and pass it on to their children. That is how wealth is created.”
Marc and the LIFE program use a variety of methods to raise awareness and provide information to minority and limited resource forestland owners—including workshops, marketing and the Forest2Market Timber Owner Market Guide. And they are beginning to see the results. Landowners working in the program, who generally own 30-250 acres of timberland, are writing land management plans that include recommendations for harvesting, maintenance, and replanting. They are enrolling in the Georgia Stewardship Program and taking advantage of state and federal cost sharing programs. And when it comes time to harvest, many are getting three or even five bids from wood-buyers and dealers. As a result, these limited resource and minority forestland owners are making better once-in-a-lifetime decisions when selling their timber.
More importantly, these forest landowners are re-establishing their ties to the land of their parents and grandparents and creating legacies for their children and grandchildren. They are finding in the forest not only a source of enjoyment and income, but also a source of wealth to pass on to future generations.
To read the full case study about LIFE program, click here.
Overload: Are Weight Limit Changes the Last Straw?
After the deadly collapse of a bridge in Minnesota, almost everyone agreed: the state of infrastructure in this country is due for an overhaul. Many states quickly began evaluating the soundness of bridges, and in some cases revising weight limits and scheduling reconstruction. Overall, this sounds good—if our bridges are safer we’re safer. Sometimes, though, the devil is in the implementation of the regulation, and not the regulation itself. That’s what is happening in the state of South Carolina.
South Carolina has begun re-posting weight limits on the state’s bridges. As a result, loggers are finding that bridges they have driven over for years have had weight limits lowered, prohibiting the trucks from reaching local mills by the most direct routes. For loggers, this is worse than inconvenient. We’ve heard one report of loggers in S.C. who have to take a six-mile detour through residential neighborhoods to reach a local mill. For these loggers, the change seems like the last straw. Not only is there concern about the safety of the residents on the new route, but these concerns are added to the already significant issues facing loggers. Squeezed by high oil costs, high equipment costs, tight credit, worker’s compensation, safety standards, shrinking demand for timber and slim profit margins, most loggers are wondering how they will survive. Others are planning an exit from the business. And this is not just in S.C. Loggers and logging companies across the United States—some of them generations old—are experiencing the same situation.
Once the housing market recovers, we have to wonder who will be around to harvest and deliver stumpage and chips to the mills. You can grow as many trees as you want, and you can reopen and boost production at local mills and even bioenergy facilities. Without a healthy logging industry to get the forest to the market, however, it’s difficult to see a path for the recovery of the forest products industry.
Bioenergy Hot Spots: East Texas
When SunMark Energy announced that it would build a $160 million, 60 MW biomass power plant in Henderson in Rusk County, Texas, it joined two other biomass electricity plants in the area: Aspen Power has broken ground on a $100 million, 50 MW facility in Lufkin (Angelina County) and Nacogdoches Power has received its air quality permit and is set to begin building a $300 million, 100 MW plant in Sacul (Nacogdoches County) in February of 2009. The SunMark plant is also scheduled to break ground in 2009. The combined total of 210 MW will use about 2.1 million tons of wood fiber per year. Add to this, three small pellet manufacturers and approximately a dozen sawmills and pulp mills in the area, and competition among wood fiber users is certain to intensify. Forest2Market recommends that all wood users in this area prepare for increased competition by establishing strong relationships with their suppliers.
Survey Results
Thank you to everyone who took our recent survey. Your feedback is important to us. What did we learn? We learned that the majority of our readers are satisfied with the content and frequency of the newsletter. We discovered that your primary areas of interest are the economic outlook and local news and market forces. As a result, we’ll bring you more of these items in future months. As a result of your responses, we will now be delivering the newsletter to you on the first Monday morning of every month. Finally, we appreciated your story suggestions, and we will be using many of them in upcoming issues. If you have additional story ideas or news that you think would be of interest to our readers, please contact Suz-Anne Kinney at suz-anne.kinney@forest2market.com or 704.357.0110 ext. 21.
If you do not want to receive our e-newsletter, you may remove your name and email address by clicking here.
