Timber Markets Off To Uncertain Fall Season

The economic recovery in the forestry sector got off to an uncertain start in the fall season, with timber prices softening and prospects for a wet El Nino winter looking less certain.

Marshall Thomas, president of F&W Forestry Services, Inc., one of the nation’s leading forestry management and consulting firms, wrote in his company’s quarterly newsletter, The F&W Forestry Report, that a sharp drop in housing starts in August was “disturbing” for timber growers and the housing industry.

“At the same time, inexplicably, lumber prices based on the Random Lengths Framing Lumber Index, rose from $377 in early July to $409 in late August.

“One positive (or negative, depending on your perspective) indicator is the ratio of the Framing Lumber Index to sawtimber stumpage prices.  From 1997 to 2011, this ratio ranged from 8 to 10 (meaning lumber prices were 8 to 10 times stumpage prices).  For the last two or three years, the ratio has been in the 12 to 14 range.  If we can get back to the “normal” ratio (and keep lumber prices up) it looks like we could expect to get back up to $40 to $50 dollars per ton for southern pine sawtimber—a figure everyone would be happy with.”

Other less promising developments for timber growers, noted by Thomas, was the decline in the chances of an “El Nino” event this fall and winter, which would normally bring more rainfall that would likely bolster timber prices because difficult logging conditions.

TO SEE THE FULL ARTICLE IN THE FALL 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

El Nino Prospects Reduced; Drought Returns To South/Southeast

U.S. weather and drought monitors have reduced their forecasts of the chance of an El Nino event this fall and winter and, separately, report the return of drought conditions to the South/Southeast regions of the country.

The National Oceanic and Atmospheric Administration (NOAA) has revised downward their forecast of an El Nino event this fall and winter.  NOAA lowered its expectation of an El Nino event in the Northern Hemisphere in the coming months to 60-65 percent, down from 80 percent earlier.

The Drought Monitor reports that early stages of drought conditions have returned to parts of Alabama, Florida, Georgia and Carolinas.  The western U.S., especially California, is still suffering severe drought conditions.

TO SEE THE FULL ARTICLE IN THE FALL 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

Wood Pellet Plants Keep Coming To Southern United States

Six new wood pellet plants have been announced recently for the Southern U.S. that could add an estimated two million tons annually of pellets for shipment to Europe.

Four of the facilities will be brand new plants and two are conversions from previous production of related products.

Production from all six is expected to be exported to countries in the European Union to reduce emissions from coal-fired electrical generating plants.

TO SEE THE FULL ARTICLE IN THE FALL 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

Wood Pellet Exports From U.S. South To Europe Set Record High In 2003

Wood pellets grown and produced largely in the U.S. Southeast for export to Europe virtually doubled in 2013 to 3.2 million tons with no slowdown in sight.

The pellets are in strong demand in Europe by electricity producers as a substitute or supplement for coal to fuel power generators with lower carbon emissions into the atmosphere and to meet European Union environmental requirements.  The United Kingdom accounted for 59 percent of the U.S. pellet exports in 2013.

With no slowdown on the horizon, new wood pellet producing plants—mostly in the U.S. South—continue to spring up or are in planning stages.  The bulk of pellet production in this country is in the Southeast, mid-Atlantic, and Gulf regions because of abundant timber supplies and relatively low shipping costs for export to Europe. 

TO SEE THE FULL ARTICLE IN THE SUMMER 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

Forestry Community Uncertain About EPA’s Proposed New Rules On Electric Plant Emissions

President Obama’s proposed new regulations on reducing carbon emissions by coal-fired electric generating plants has attracted cautious reviews from the forestry community that has an  important stake in seeing  greater use of biomass fuels by the power industry.

Under the Clean Air Act, the Environmental Protection Agency (EPA) is proposing to regulate carbon emissions from existing coal-fired power plants by mandating they be reduced by 30 percent from 2005 levels by 2030.

EPA has not yet taken a firm position on how emissions from power generating plants and other carbon emitting industries using biomass fuels will be treated in measuring carbon emissions.  This is an issue that presumably will be addressed as EPA moves to implement the carbon emission rules and regulations.

TO SEE THE FULL ARTICLE IN THE SUMMER 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

U.S. Senate Finance Committee Begins Process Looking Into Revision Of U.S. Tax Code

The Finance Committee of the U.S. Senate, which has jurisdiction over tax laws, has announced the first hearings in a comprehensive effort to reform and reorganize the federal tax code for the first time since 1986.

In a joint statement, Committee Chairman Ron Wyden (D-Ore.) and Ranking Minority Orrin Hatch (R-Utah), said the hearings will be first in a series this summer to examine several issues that are essential to overhauling “the nation’s broken tax code through comprehensive reform.”

“This summer, the Senate Finance Committee will forge ahead with hearings that examine reforming the broken, dysfunctional tax code in areas ranging from taxpayer privacy protection to education to corporate taxation,” the senators said.

The prospect of a wide-ranging overhaul of the tax code as it applies to timber and timberland owners is generating concern in forestry circles.  Key tax provisions in existing law affecting timberland owners include capital gain treatment of most timber sales and deductibility of some forest management expenses, including reforestation. 

TO SEE THE FULL ARTICLE IN THE SUMMER 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

Prospects for El Niño Event Brighten Outlook for Timber Markets

Timber prices in the second quarter were stronger than a year ago and with the National Oceanic and Atmospheric Administration forecasting a high probability of an El Niño event this fall and winter, the outlook appears encouraging for tree growers.

Marshall Thomas, president of F&W Forestry Services that operates across the southern pine belt as well as the central and northeast forested regions of the U.S., said this climatic condition could mean wetter than normal conditions in the South.

“Wetter than normal conditions have the potential to limit the supply of trees that can be logged due to wet ground conditions and impassable dirt roads. Constant demand and reduced supply typically results in an increase in price,” Thomas writes in the summer edition of his firm’s newsletter, The F&W Forestry Report.

“Throw in the likelihood that demand will actually increase during this period—albeit slowly—and we have the makings of a very Merry Christmas for timber growers,” Thomas said.  

TO SEE THE FULL ARTICLE IN THE SUMMER 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW

Two Canadian Lumber Producers Buy U.S. Sawmills In Georgia And Arkansas

Two Vancouver-based Canadian lumber giants have announced the purchase of large sawmill operations in the U.S.: two in Georgia and one in Arkansas in the southern pine region.

International Forest Products Limited—which operates under the name Interfor—announced it had purchased two large sawmills at Perry and Lumpkin, Ga., from the Russian forest products company, Ilim Timber.  Before their purchase by Ilim a few years ago, the mills had been established and operated for years by the Tolleson family of Perry.

Interfor entered the lumber production business in 2013 with the purchase of three sawmills in Georgia formerly operated by Rayonier as an adjunct to the pulp and specialty fiber operations.  It added a fourth lumber mill in Georgia last year.

In a separate announcement, West Fraser Timber Co., also a Canadian-based lumber manufacturer with U.S. operations in Arkansas, Texas, and Louisiana, said it has purchased Travis Lumber Company’s sawmill in Mansfield, Ark., and plans to increase production by 50 percent.

TO SEE THE FULL ARTICLE IN THE SPRING 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW.

With Forest Roads Win, Forestry Forces Turn Focus On Protecting Timber Tax Provisions

With the forest road issue settled for now in landowners’ favor, the forestry focus in Washington in coming months—or possibly the next couple of years—has turned to three tax provisions that are likely to be in jeopardy from efforts to overhaul the federal tax code.

Those timber tax provisions that have been in the tax code for some years allow for the annual deduction of reforestation costs of up to $10,000 per tract; deduction of most silviculture and management practices such as herbicides to control woody and weedy competition to planted pine stands and fertilization; and capital gains treatment of timber sales.

Whether forestry forces will be as successful with the proposed tax code changes as they were with the forest roads issue remains to be seen.  But many of the same organizations that joined forces to block the efforts by some environmental groups to require EPA permitting of forest road building and maintenance are already lining up for the tax code fight.

TO SEE THE FULL ARTICLE IN THE SPRING 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW.

Wet Weather, Gradually Improving Home Construction Brighten Outlook For Nation’s Timber Growers

With help from wet winter weather that has continued into the spring, a slowly improving home construction industry is finally providing a brighter outlook for timber growers in the South and other timber regions of the nation.

That’s the encouraging outlook for the forest products sector of the U.S. economy from Marshall Thomas, president of F&W Forestry, Inc., one of the largest U.S. forest management and consulting firms based in heart of the nation’s southern pine belt.

“After years of depressing news for timber growers, all of the economic indicators seem to be positive right now— housing starts are up, building permits are up, interest rates are up slightly but still very low, and exchange rates are favorable,” Thomas writes in the spring edition of his firm’s newsletter, the F&W Forestry Report.

“While this recovery, at least in our sector, has been frustratingly slow, it has at least been consistent—which means we should be able to expect slow but steady price increases for trees as we continue through the recovery…” Thomas said.

TO SEE THE FULL ARTICLE IN THE SPRING 2014 F&W FORESTRY REPORT, SUBSCRIBE NOW.