A little over a year ago, we published a white paper on the future implications of inventory trends we were seeing take shape. Now that the US Forest Service's Forest Inventory and Analysis (FIA) dataset is nearly complete for survey year 2014 (Louisiana and Virginia are still outstanding), Forest2Market has pulled the 2014 data, projected datasets for Louisiana and Virginia and updated timber inventory and age/class distribution trends for the US South.
Since the market low in 2009, pine prices have been steadily rising. Sawtimber prices have increased despite the oversupply, and pulpwood prices have increased more aggressively. Compared to their 2007 highs, however, pine sawtimber stumpage prices have decreased significantly (25 percent), while pulpwood stumpage prices have surged (33 percent), confirming the demand for smaller logs throughout the US South.
The forestry sector in South America has undergone significant changes in recent years, changes naturally led by its largest forest producer, Brazil. Over the past three decades, a series of changes strengthened Brazil's forest industry. Intense scientific, technical and administrative improvements produced forests that are several times more productive than they were at the inception of Brazilian forest products industry in the 1950s and 1960s.
Navigating the dynamic wood supply market in North America can be challenging. As supply and demand factors constantly affect prices on a regional-and even countywide-basis, price volatility due to supply and demand exists independent of supply chain efficiency efforts. This means that any realized cost benefit is usually passed between members of the wood supply chain. It's an ever-changing relationship: generally speaking, when price goes up, the supply side benefits; when price goes down, the consumption side benefits.
Forest industry performance in November and December was reported by both the US government and the Institute for Supply Management. Total industrial production (IP) tumbled 0.6% in November (-1.2% YoY). It was the ninth month in 2015 with MoM IP declines, as well as the biggest MoM drop since March 2012. Historically, YoY declines in IP have often been associated with recessions.
During the latter part of 2015, we wrote extensively about the regional challenges that were unique to the PNW timber industry and log markets. From the expiration of the Softwood Lumber Agreement and its impact on import/export markets, to the high number of mill sales/closures, to the protracted effects of an intense and costly fire season, the PNW has experienced a period of drastic change. But the beat goes on.
Not surprisingly, the cold winter weather during much of January had an adverse effect on Q1 housing starts throughout the entire country. However, when also accounting for the poor performance of global markets during the same period, as well as the prevailing sense of economic uncertainty, January's housing starts are not a total disappointment.
