Forestry-related industry performance for the latter part of March and the month of April remained largely unchanged over February data in both the manufacturing and non-manufacturing sectors. Total industrial production (IP) decreased 0.6% (+2.0% YoY) in March, more than undoing February's 0.1% gain. For 1Q2015 as a whole, IP declined at an annualized rate (AR) of 1.0%, the first quarterly decrease since 2Q2009. The 1Q2015 decline resulted from a 60% (AR) drop in oil and gas well drilling and servicing, and from a 1.2% decrease in manufacturing production.
It looks like Home Depot's bid to fill 80,000 temporary positions has paid off; the company recently posted better-than-expected earnings and revenue numbers as consumers continue to spend money on existing homes. While we made mention of this trend last month in our housing market performance update, we also noted that formulating an accurate housing starts prediction would be a tall order given the available data at the time.
Among our predictions for 2015, we noted the likelihood that two events would occur. First, weakening world economies would mean increased imports of wood and paper products to the US. Second, that an insufficient rebound in solid wood markets, on top of the increase in imports, would degrade the economics for lumber mills.In the Northwest, these lumber market predictions have already begun to take shape. According to the Southern Forest Products Association (SFPA), softwood lumber imports in January 2015 were 10 percent higher than they were in January 2014 and 23 percent higher than they were in January 2013. In February, imports were 13 percent higher than they were in February 2014 and 20 percent higher than they were in February 2013.
Since peaking in the 2nd Quarter of 2014, US South delivered prices for wood fuel have experienced a slight decline, though they are still holding at a nominal price level above prices observed during 2006-2013 (Figure 1). Over the duration of this time period, three interesting trends have occurred.
The most recent survey by Brazil's central bank showed that economists in Brazil expect higher inflation rates and lower growth for 2015 than their earlier findings. They raised the estimate of 2015 inflation from 8.13 to 8.23 percent, and dropped growth from -1.01 to -1.03 percent. The weaker numbers were attributed to ongoing negotiations between the government and Congress to rein in the budget deficit with some combination of tax increases and spending cuts and to reduced investment by Petrobras due to the fallout from the kickback scandal.
As we kick off what will be a two-part series on the Millennial Generation-those born between 1980 and 2000-and their many differences in tastes, preferences and habits from their elders, our aim is to identify some of the nuanced labels and trends associated with this generation and compare them to the actual data. With the rise of the peer-to-peer sharing economy, we are witnessing a revolutionary way for individuals and companies to go to market, and for consumers to shop and interact with them. Like it or not, it's quickly becoming the norm for younger Millennials and, especially for their children, it may be all they ever know.
A comparison of timber prices across the South for the last 60-day period demonstrates the relative importance of location when it comes to timber prices. Southwide, for instance, in the 60-day period between March and April 2015, stumpage prices remained fairly stable, within one percentage point of the previous 60-day average.
Real differences emerge, however, when each of the three regions of the South-the East, West and Central-is compared to the Southwide average. In general, prices for smaller diameter pine logs (pulpwood and chip-n-saw) are highest in the East, while small diameter hardwood is higher in the West. The highest pine sawtimber prices can be found in the West, while the highest hardwood sawtimber prices can be found in both the Central and West regions.
Timber price volatility is perhaps the single biggest enemy of successful budgeting. Escalating prices, even if they are temporary, can undermine budgets and erode margins.
An increasing number of mills are operating in an environment where price volatility (the result of panic buying when wood yard inventories are low) has been high and the cost of capital (and therefore the cost of holding inventory) is low. The conventional wisdom to reduce holding costs by carrying less inventory may no longer apply. Holding an extra day's inventory could turn out to be far less expensive than the spot purchases required to reinforce the wood yard when supply gets too low. For this reason, budgeting raw material costs may be more directly tied to inventory management than ever before.
