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Betsy Bates

Driving Down Production Costs Key To Surviving Poor Timber Markets

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With timber prices roughly the same as they were in the mid-1980s, how are tree growers surviving in today’s markets?

That’s the issue Marshall Thomas, president of F&W Forestry Services, one of the nation’s largest forestry consulting firms, tackles in his firm’s fall newsletter, the F&W Forestry Report.

Comparing tree growers to computer manufacturers, Thomas says forest landowners are making it today because they have driven production costs down.

“Given that we can’t control timber prices, perhaps we need to recognize where our success has been and focus on that in the future,” Thomas writes.

Thomas notes that landowners have reduced costs related to site prep and herbicides but have also been utilizing more advanced silvicultural practices and genetically-advanced tree seedlings, resulting in a significant increase in overall timber productivity.

“So we may need to recognize that success in the face of low prices could be based on continuing to spend money in the right places, and by increasing expenditures in some cases—as long as the additional expenditures increase yields enough to drive down overall cost per unit,” Thomas concludes.

TO SEE THE FULL ARTICLE IN THE FALL 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

GOP Releases Tax Reform Blueprint, Impact on Forest Owners Uncertain

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In late September, President Trump and Congressional Republicans unveiled a “unified framework” for reforming the tax system with goals to simplify the tax code, boost economic growth, create jobs, and promote investment.

The framework proposal lacks crucial details so it’s difficult to predict how forest landowners will fare under it.  The proposal does contain several elements favorable to private timberland owners, including the repeal of the estate tax, allowing businesses to immediately expense the cost of new investments, and cutting tax rates for pass-through businesses.  However, it also proposes to eliminate most itemized deductions, such as the current write-offs for state and local income, property, and sales taxes.  The elimination of the property tax deduction could potentially have a huge impact on the taxes paid by landowners, particularly those living in high-tax states.

Also unknown at this point is the future of the federal timber tax provisions that are currently part of the tax code.

With the tax blueprint in hand, Congressional lawmakers will now spend the next several months hammering out specifics and negotiating critical details of a tax overhaul bill, which may or may not make it to a vote before the clock runs out at the end of the year.

TO SEE THE FULL ARTICLE IN THE FALL 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Agricultural Land Values Hit New High in 2017

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Agricultural land values, a measurement of the value of all land and buildings on farms, hit a new high in 2017, according to the annual survey conducted by the U.S. Department of Agriculture.

The United States farm real estate value averaged $3,080 per acre in 2017, up $70 per acre or 2.3 percent from 2016.  The USDA said regional changes in the average agricultural land value ranged from an 8.7 percent increase in the Pacific region to a 1.8 percent decrease in the Northern Plains region.

In the F&W 25-state service region, which encompasses the eastern U.S. from the Texas Plains across the Southern Pine Belt to the Northeast and New England, the average agricultural land value was $3,568 per acre in 2017, $488 above the overall national average.

Drilling down further, farm land values in the nine states comprising the Southeast, Delta and Southern Plains regions were up 4.1 percent to an average of $2,943 per acre.  In the Appalachian region, farm real estate values increased by 1.1 percent to an average of $3,800 per acre, and in the Northeast, agricultural land values increased 0.8 percent to an average of $5,050 per acre.

TO SEE THE FULL ARTICLE IN THE FALL 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Mediocre Demand And Aging Forests Weigh On Timber Markets

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Despite the steady rise in housing starts, a primary driver of demand for wood products, timber markets are muddling, the head of one of the nation’s largest forest management firms writes in his firm’s quarterly newsletter.

Marshall Thomas, president of F&W Forestry Services, which operates across the major forested regions of the Eastern U.S., said in his firm’s summer newsletter that the current state of timber markets can be explained by the theory of supply and demand.

“Demand, in my opinion, still remains an issue,” Thomas said. “While housing starts have increased, they haven’t reached the magic level of 1.3 million units per year, which seems to be the accepted level at which demand begins to impact [timber] prices at normal supply levels.”

But Thomas also said there is an oversupply of softwood sawtimber, caused by the aging forest and the drop in the demand for wood during the recent recession.

“The aging forest means that we have a disproportionate amount of large trees, and the reduction in harvests has resulted in a buildup of supply,” Thomas added. “Prices will improve when all those factors balance.”

TO SEE THE FULL ARTICLE IN THE SUMMER 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Softwood Lumber Dispute Heats Up As U.S. Imposes Tariffs

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The dispute over Canadian softwood lumber entering the U.S. heated up this spring and summer when the U.S. Commerce Department announced preliminary countervailing duties on Canadian lumber imports in April, and followed up two months later with the announcement of antidumping duties.  This brings the total combined tariffs to be levied on Canadian softwood lumber imports to between 17.41 percent and 30.88 percent.

While the Canadian government denies it subsidizes the industry, it also acted quickly to provide more than $641 million in financial aid to Canadian softwood lumber producers to mitigate the new duties.

With NAFTA renegotiations set to begin in August, the new developments make it seem unlikely that a new softwood lumber agreement will be reached between the two countries by then.

TO SEE THE FULL ARTICLE IN THE SUMMER 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Washington Turns Attention To Major Tax Overhaul

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As the new Trump administration settles in, work has begun in earnest on the domestic policy agenda, with tax reform, forest biomass, Waters of the U.S., the federal budget, and softwood lumber imports just a few of the items on the table that will impact the forestry sector.

One of the most significant issues for forestry will be the proposed overhaul of the federal tax code. Any major tax reform initiative will likely impact existing provisions that apply to timber sales, forest management expenses, reforestation costs, and related expenses involved in the business of growing trees commercially.

President Trump and the Congressional GOP leaders have been working together for months to develop a unified tax reform plan, which they hope to roll out later this summer.

While there is no specific information concerning what will be included in the unified tax reform plan, President Trump and GOP leaders are all in agreement on the elimination of the estate tax, also known as the death tax.

TO SEE THE FULL ARTICLE IN THE SUMMER 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Timber Prices Remain Flat Despite Upward Trajectory Of Housing Starts

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Housing starts are finally approaching 1.3 million starts per year, a level that traditionally has led to upward pressure on sawtimber stumpage prices. However, there are factors at work that could undermine this pressure on prices, the head of one of the nation’s largest forest management firms reports.

Marshall Thomas, president of F&W Forestry Services, Inc., reports in his firm’s spring newsletter that while housing starts are approaching this milestone level, there is likely to be a delay in a corresponding increase in timber prices.

“It may be traditional wisdom doesn’t apply for two reasons,” Thomas writes. “First, we have too much standing inventory of pine sawtimber, and second, the houses being built today may not use the same amount of lumber that was used prior to the recent housing crisis.”

TO SEE THE FULL ARTICLE IN THE SPRING 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Trump Sets Aggressive Agenda

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While it may be some time before there are any major changes in forest policy under President Trump, it is very clear that the new administration is taking a sharply different approach on issues than the previous one.

Already President Trump and his new EPA Administrator, Scott Pruitt, have begun the process of rolling back the Waters of the U.S. (WOTUS) rule and the Clean Power Plan (CPP) program, both major environmental policy initiatives of the Obama administration that have a huge impact on forestry.

Trump has also tapped former Georgia Gov. Sonny Perdue to lead the Department of Agriculture. Perdue, a successful agribusiness man, will have oversight of the vast government agency that sets policy on issues ranging from agriculture, forestry, and natural resources to nutrition and rural development. He will also serve as the key liaison for the White House on the reauthorization of the Farm Bill by Congress in 2018.

TO SEE THE FULL ARTICLE IN THE SPRING 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Reforestation Activity Mixed in 2016-17 Planting Season, Expected To Rise In Future Years

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The latest survey of F&W managers on reforestation activity in their areas during the recent 2016-17 tree planting season was mixed, with reports of both increased and decreased planting and the status quo. But almost all managers expect an uptick in reforestation in the future.

Managers who reported increased reforestation activity said it was due primarily to more landowners conducting final harvests.  But those who reported a decrease in reforestation activity indicated that some landowners are still waiting for better timber prices before harvesting. Other managers said that weather, the availability of tree planting contractors, and/or a delay in the completion of harvests led to less tree planting this season.

But most managers believe reforestation will increase in the future due to increased demand for wood. The most recent tree planting statistics published by the U.S. Forest Service, based on the 2014-15 planting season, shows reforestation nationwide continuing to rise at a steady pace, increasing 10 percent overall since the 2011-12 season when the USFS resumed its estimation of tree planting.

TO SEE THE FULL ARTICLE IN THE SPRING 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Timber Prices Flat In 2016; Washington Changes Create Challenges/Opportunities

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Timber markets didn’t have a great year in 2016. A lackluster home building sector, dry weather conditions, and increased Canadian lumber imports into the U.S. combined to hold timber prices in place.

“Housing starts stayed relatively flat and so did our (timber) stumpage prices,” wrote Marshall Thomas, president of F&W Forestry Services, Inc., in the winter edition of his company’s quarterly newsletter.

However, Thomas said the change in weather patterns towards the end of the year will hopefully give a boost to timber prices in the coming months.

Anticipated changes in Washington could also have a big impact on timber markets and the forest industry.

“Changes in taxes and trade positions could have dramatic impacts and we just don’t know which way that will go right now,” Thomas said.

“This election upset may lead to some economic changes that benefit us—let’s hope for the best as the new president sets up his administration and begins to set policy,” said Thomas. “It is a good time to get more involved with your Congressmen and Senators to make sure they are on their toes in terms of our specific forestry issues.”

TO SEE THE FULL ARTICLE IN THE WINTER 2017 F&W FORESTRY REPORT, SUBSCRIBE NOW