Forest2Mill E-Newsletter
October 2009
In This Issue
Housing Market Update
Logging Prices in PNW Strengthen
F2M 2009 Sawmill Outlook on Track
BCAP Revisited
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Wood Products output ticked up by 0.7 percent in July, the second consecutive month of increases; activity in that sector remains 23 percent below year-earlier levels. Paper manufacturing activity rose for a third month, although July's 0.6 percent advance was muted when compared to the two prior months; activity in the Paper sector is nearly 12 percent lower than the levels of July 2008. 

For a performance overview of the Wood and Paper Products industries in August, click here.
House Sold  
Sales of existing and new homes failed to meet expectations in August, a result of concerns on the part of buyers that the $8,000 tax credit will expire before they have the opportunity to close.
Existing home sales were off 2.7 percent in August, despite lower home prices (down 2.1 percent) and mortgage rates (which fell from 5.22 percent in July to 5.19 percent in August, according to Freddie Mac).
In his statement, Lawrence Yun, the NAR's chief economist said "Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus....Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can't take a housing rebound for granted....An extension of the tax credit is critical to preserve incentives for financially qualified buyers to enter the market."
Forest2Mill August 2009
Log prices in the Pacific Northwest strengthened in August, stemming an 18-month slide. Diminished log supply and increased emphasis on export shipments led to the increases.
Forest2Market Pacific Northwest Delivered Price Benchmark data show that Douglas fir log prices were up for August across the Westside. They were particularly dramatic in the South Willamette Valley, where prices jumped about $30 per MBF. Length pricing data showed a strong inclination to favor longer preferred lengths.
Truck Hauling Timber
September brought another round of sawmill closures. Last week, Columbus Lumber in Brookhaven, Miss. was forced to close due to a financing issue with its lender, Bank of America. That announcement followed on the heels of AbilitiBowater's statement that it would shutter its Albertville, Ala. mill permanently on November 15.
In January of this year, as we developed our 2009 outlook for sawmills, our data suggested that a total of 15 mills would be closing throughout the U.S. South. As a result of these two announcements, the total number of closures now stands at 13 mills. To date in 2009, nearly one billion board feet of production has been removed from the market. One large mill, Weyerhaeuser's Wright City, Okla., facility accounts for almost 25 percent of this total. Interestingly, our outlook estimated that lost production would come in at the 750 million board feet mark.
US Capitol BuildingOur article in the last issue of Forest2Mill about the Biomass Crop Assistance Program (BCAP) generated significant interest and, it turns out, controversy.
To make sure we're all on the same page at this point, we'd like to repeat and clarify the calculation for determining the amount of BCAP matching payments.
Keep in mind that the examples you are about to read are hypothetical; the math--everything from the delivered price to the method for calculating moisture content--has been simplified to make the examples as clear as possible.

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