Mirroring what has become a worldwide trend, the Pacific Northwest forest products industry has not lived up to predictions for a 2015 "super-cycle"-a forecasted period of unprecedented growth in demand and prices for US lumber and logs resulting from high housing start projections (1.5 million annually), declining Canadian shipments and sizeable demand from China. Modest improvements have occurred in some peripheral markets. However, while western softwood lumber production is up slightly over 2014, Northwest log prices are well below what they were a year ago, largely because US housing starts are still relatively flat at an annualized rate of just over 1 million.
In the last ten years, Mato Grosso do Sul's forest sector has seen unprecedented growth. In 2005, the state had approximately 150,000 hectares of forest plantations; currently, plantation areas cover 820,000 hectares, accounting for an annual growth rate of more than 20 percent.
Mill inventory issues are nothing new in the Lake States. Forest2Market has been tracking fiber inventories and benchmarking prices in the Lake States for nearly three years. Over this time, the data shows that maintaining adequate system-wide inventories has been difficult across all species and products. As a result, price has increased significantly, making the Lake States the highest wood cost region in North America. The seasonality of wood supply in the region is the most significant factor mills take into consideration when planning for a consistent supply. While the specific inventory plan at each mill depends on a variety of other factors as well, the wood production system must not only generate a sufficient volume of supply, but the timing of the volume coming to market is also critical.
Forestry-related industry performance for the latter part of April and May was mixed over March data in both the manufacturing and non-manufacturing sectors. Total industrial production (IP) decreased 0.3% (0.0% expected) in April, its fifth consecutive monthly loss. At 105.2% of its 2007 average, total IP was 1.9% above its April 2014 level. Manufacturing output was unchanged in April; March was revised from +0.1% to +0.3%. The fall-off in oil and gas well drilling caused a 0.8% drop in mining output (its fourth consecutive monthly decrease) in April; the output of utilities also declined 1.3%.
In what has become the new normal, the monthly housing starts rollercoaster ride continues its unpredictable track into early summer. Coming off of an eight-year high and an impressive April rally that posted a 20.2 percent increase over the revised March estimate, the segment simply couldn't maintain its upward trajectory. While the market is accustomed to witnessing the month-to-month peaks and valleys of housing starts data, an early slowdown in May sure seems like an indication that economic growth is, at best, flat.
Since the latter half of the 20th century, generations of Americans have been loosely associated with certain defining trends or historical events that highlighted their particular moments in the limelight. The Greatest Generation is identified with its unwavering sacrifices made during WWII; Baby Boomers embody the post-war population explosion and the components that comprise the archetypal American dream-sprawl, consumerism, and freedom; Generation X came of age during the 1980s and is aptly coined the "MTV Generation" as they were the first to grow up with (or, on) cable TV. Generation Y, or the Millennial Generation, is routinely identified by its dependence on all things technological and, while this characterization is accurate to some degree, it only offers a shortsighted snapshot into the largest generation of Americans in history. Rather, Millennials possess a keen ability to prioritize and innovate that has been defined in large part by a single event: The Great Recession of 2008.
With extreme weather patterns already devastating various regions of the country, it's shaping up to be a long and costly summer. Parts of Texas and Oklahoma are still recovering from damaging Spring floodwaters, severe heat has blanketed most of the Southeast, wildfires have scorched parts of Alaska, and the wildfire season in the western US is forecasted to be highly active due to record low winter snowpack. And it's only mid-June. While we are constantly at Mother Nature's mercy when it comes to weather events and natural disasters, one Arkansas congressman has introduced legislation in the House that could potentially minimize the damaging effects of wildfires on federal forestlands.
