Forest2Mill Newsletter

June 2011

In This Issue
PNW Log Prices
Effects of High Fuel Prices
Housing Update
Spring of Destruction
50-Year 4Cast for Southern Forests
Stewart at Argus Trading Summit
Economic Outlook Podcast

Quick Links

Top 3 Stories from the May Issue




Log prices in the Pacific Northwest have reached a tipping point, according to Forest2Market. Prices have begun a correction cycle in response to the faltering building products market. China--flush with logs--is likely to re-evaluate its aggressive buying strategy. Historical precedent suggests the price correction will shave 10-15% from the price of Douglas fir and hemlock logs.


The correction follows a two-year period of generally rising trends for log prices in the Pacific Northwest coastal region.  Hemlock log prices doubled from their 2009 lows on Chinese demand. Douglas fir logs climbed to more than $600 per MBF for the first time since 2007 as competition between sawmills and exporters met head on. As a result of this competition, prices increased by 35% over 2010 lows.




High fuel prices have been one of the biggest stories in the news in the first half of 2011. Daniel Stuber, Forest2Market's Director of Operations, took a look at the numbers to identify the effects of these prices in the forest-to-mill supply chain. The following presentation details these results. 
A Look at US South Delivered Cost Components Pine Sawtimber and Pulpwood, January 2010 to March 2011
A Look at US South Delivered Cost Components Pine Sawtimber and Pulpwood, January 2010 to March 2011


To download a pdf of video content . . .


Unstable Housing 

Two recent pieces of news will have an offsetting effect on movement in the housing market. Applying negative pressure will be the growing number of adjustable rate mortgage resets and recasts on the horizon.  


A reset refers to a change in the interest rate of a loan; while a recast refers to the process in which a loan is recalculated taking into account both the new interest rate and the remaining principal to fully amortize the loan over the remaining term.


In 2011, upwards of 1.74 million mortgages (worth up to $421 billion) are due to be reset or recast. Though not all of these mortgages will end up in delinquency, a significant number of these homeowners will find themselves unable to make the new, higher payments and end up in either short sales or foreclosures. According to Kevin Brekke of Casey Research, this wave of resets will continue through late 2012. "With house prices behaving like they intend to resume the trajectory of descent seen in 2008/2009, a bottom in housing prices does not look possible until at least 2013."


While the potential for new foreclosures will place downward pressure on the housing market, two recent court findings could have the opposite effect. In U.S. Bank v. Ibanez a court determined that a bank cannot foreclose on a homeowner unless the bank can produce clear title to the property. Recently, the Massachusetts Superior Court, ruling in the case of Bevilaqua v. Rodriguez, found that a homeowner cannot obtain clear title to an improperly foreclosed-upon property.





It's going down in the record books as one of the most destructive springs in the South in more than a half century. Record tornadoes, heavy rains, floods, hail and forest fires seem to converge throughout April and May to cause a huge amount of damage to people, property as well as the timber industry. According to Time magazine (June 6), this year's tornado season is-so far-the deadliest and most widespread since 1953. And it's not over yet.


The timber industry in the South has been particularly hard hit. According to the Georgia Forestry Commission, depending on the strength of the tornado, individual landowners can expect to derive about 20 cents on every dollar they have invested in their timber, taking away the bulk of their projected earnings.


Urbanization, bioenergy use, weather patterns, land ownership changes and invasive species will all impact and alter the South's forests between 2010 and 2060, according to the Southern Forest Futures Project Report. During that period, the United States Forest Service (USFS) and the Southern Group of State Foresters (SGSF), southern forests could decrease by as many as 23 million acres.
"The Southern Forest Futures Project: Summary Report," developed by David N. Wear and John G. Greis, identifies key areas forest managers will need to focus on to maintain southern forests for the 50 years.
 The release of the full draft report begins a 60-day public comment period.  Those interested view the complete report at the Futures Project website and submit comments by following the Public Input link on the left side of the screen.
We have summarized the 10 key findings from the report at the link below to help industry participants identify whether they will need to read the full report and submit comments.


Pete Stewart
Pete Stewart will join other renewable energy experts and decision makers at the Argus Renewables Trading Summit Americas 2011, June 7 & 8 in New York City. The event will focus on the newest trends in renewable energy generation, developments in regional and national legislation, a market-focused look at RECs trading programs, and growing opportunities in global biomass markets.



QR Code_to EO Podcast_to RSS Feed

Listen to Forest2Market's Economic Outlook podcast. Each month, join host Angelique Mitchell as she welcomes a guest to discuss the general economic indicators that affect performance in forest-related industries. This month, Angelique talks to Suzanne Hearn, Manager of Sales and Marketing. Among the topics discussed: oil demand, unemployment, housing, mortgage rates and new pockets of opportunity for lumber manufacturers.


Scan the QR Code or click the link to the Economic Outlook podcast...


PS - Barcode scanners are available at iPhone's App Store or at the Droid Marketplace.


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