The National Alliance of Forest Owners (NAFO) recently contracted Forest2Market to study trends in inventories and removals on privately-owned timberlands in forested areas of the contiguous United States to determine whether more wood is growing on US timberlands than is harvested.
As we head into the throes of summer, we've enjoyed a much cooler and wetter weather cycle than this time last year, particularly here in the Inland region of the Pacific Northwest (PNW). But with the hot temperatures of wildfire season on the horizon, it's a good time to reflect on industry developments in the region during the first half of 2016.
Housing starts slowed in May despite consistently warm weather (ideal for building) throughout the US and a stock market that remains unexpectedly strong. Even though 1Q2016 corporate earnings reports were largely lackluster and the US dollar (USD) continues to lose strength globally, southern yellow pine (SYP) prices remain strong along with oil prices and the Dow Jones Industrial Average, which hovers around 17,850 as of this writing.
Earlier this week, I traveled to Washington D.C. to participate in a Working Forests 101 panel to present findings from two Forest2Market reports that were commissioned by the National Alliance of Forest Owners (NAFO). The House of Representatives Working Forest Caucus organized the panel to educate Congressional staffers on the operational practices, public-private interfaces, and benefits of working forests- forests that are actively-managed to produce forest products. The Working Forest Caucus is a bipartisan forum to discuss government policies that promote and preserve working forests in the United States.
The strategy and practice of wood procurement varies depending on the type of mill that will ultimately consume the wood raw materials. Most active mills in the US South are either producing pulp and paper or lumber, yet their fiber needs (and thus their supply chains) are quite different.
The millions of forestland owners across America-from institutional investors to small families and individuals-maintain their ownership in these lands for a variety of reasons. For example, Real Estate Investment Trusts (REITs) generally focus on acquiring vast acreages of forestland and operate with the philosophy of generating annual income through the sale of both land and timber. Similar to REITs, Timber Investment Management Organizations (TIMOs) also generally acquire large tracts of forestland, but operate with a philosophy of generating long-term investment income; the primary focus is on a financial gain that is realized at the time the land and timber are sold, which could be years or decades. Federal and state government agencies also own large tracts of forestland throughout the country, which are primarily maintained for timber harvesting, recreation and the preservation of wildlife.
Forest industry performance in April and May was reported by both the US government and the Institute for Supply Management. Total industrial production (IP) increased 0.7 percent in April (Table 3) after a downwardly revised -0.9 percent during March (originally -0.6 percent). April's advance was the largest since November 2014, but only the second gain in the last eight months. Utilities, which jumped 5.8 percent in April as demand for electricity and natural gas normalized, were responsible for much of total IP's MoM increase.
The biological sustainability of a forest can accurately be measured via two primary methods. The first method seeks to measure the volume of forest inventory; analyzing inventory changes over time is an effective way to gauge the balance of growth and removals in a specific geographic area. In this scenario, inventory increases indicate that biological tree growth outpaces removals, and inventory decreases indicate that removals outpace tree growth.
