Forest2Mill E-Newsletter
January 2010
In This Issue
Housing Market Update
Southern Yellow Pine Lumber Prices
Market Trends in the PNW
Pulpwood Market Trends in the South
News Regarding BCAP
Quick Links

From Forest2Market's Economic Outlook 
Wood Products manufacturing fell back by 0.4 percent in October, and remained 5.0 percent below its year-earlier level. Paper rose 1.4 percent, and was 5.5 percent below its October 2008 level.

The capacity utilization rate among Wood Products manufacturers ticked lower (-0.1 percentage point) to 50.5 percent, while Paper jumped 1.1 percentage points (to 74.9 percent). Wood Products and Paper were, respectively, 12.0 and 3.7 percent below their year-earlier levels.

Wood Products shipments increased by 1.1 percent, but were 4.2 percent below the October 2008 level. Paper Products declined for a third consecutive month (by 0.4 percent) and were 12.1 percent below year-earlier levels.
House Sold  
Sales of existing homes increased to 6.54 million units in November, up 7.4 percent from October (see Table 1) and 44.1 percent from November of 2008. This gain was primarily the result of first-time buyers rushing to close sales in order to meet the original deadline for the $8,000 tax credit; the National Association of Realtors estimates that 51 percent of all sales in November were to first-time buyers. Months of inventory fell once again in November, down from 7 months to 6.5 months. This is a 7.1 percent improvement from October and a 40.9 percent improvement from November 2008.
Southwide Trends 
Stacked Lumber
One of the benefits of Mill2Market, Forest2Market's lumber pricing service, is that the data comes from actual orders and invoices--with all the detail they contain. The amount of detail allows us to get behind the volume and price data and understand who has the price power in the marketplace.

In a six-week period between the end of October and the beginning of December, for instance, approximately 70 percent of framing lumber was purchased for construction-related purposes, either by builders or retail entities selling to builders (the remainder was purchased by treaters or remanufacturers).
Forest2Mill August 2009
The upward trend for Douglas fir and hem/fir log prices delivered to western Oregon mills subsided in November, after four months of increases. Most species and grades were flat or showed a decline. Western Washington prices increased 5-10 percent, but still trail Oregon prices overall.

Deliveries of logs are expected to be very slow over the next several months, as timber owners await higher prices before they resume normal harvest levels.
Wood Chips and Conveyor
Pulpwood prices have seen significant increases in the past six months, an average of more than $3.00/ton. As recently as this past summer, pine pulpwood averaged $8.56/ton Southwide. Currently, the average price is $11.86/ton. In the summer, hardwood pulpwood averaged $7.02. Today, the average price is $10.36.
Forest2Mill August 2009
Payment Sharing -- Reports from our contacts in all parts of the supply chain indicate that the financial benefits of the BCAP matching payment program are being negotiated between parties. The terms of the contracts vary widely but generally involve the sharing of the payments between the landowner and the dealer or logger.

First Quarter 2010 Funding for BCAP Raises Concern; Delay in Releasing Rules -- Just like the list of qualified biomass conversion facilities, the cost of the BCAP program has exploded: funding for the first quarter of 2010 has been reported at $500 million dollars. Why so high? The 2008 Farm Bill did not set a specific limit for funding the program. Instead, to determine the funding level for 1Q2010, the Farm Service Agency (FSA) added up the quarterly feedstock needs of all the qualified facilities. They then requested that level of funding from the Credit Commodity Corporation (CCC). The CCC apparently approved the request. And the controversy quickly followed.
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