The Trump administration continues to advance its domestic agenda and private landowners stand to benefit from two new rules finalized over the summer.

The Waters of the U.S. (WOTUS) rule, a contentious Obama-era regulation that extended federal jurisdiction over which waters are regulated under the Clean Water Act, was repealed, bringing much-needed regulatory certainty.

The Obama rule had been mired with legal challenges that resulted in a regulatory patchwork of where the rule applied.  A new WOTUS definition has been proposed that covers traditional navigable waters and tributaries to those waters but excludes features that only contain water during or in response to rainfall, groundwater, ditches, storm water control and waste treatment systems.

Separately, changes to the Endangered Species Act (ESA) were finalized by the U.S. Fish and Wildlife Service and National Oceanic and Atmospheric Administration.  The new rule changes affect how future assessments will be made, including ending the “blanket rule” that automatically gave threatened species the same protections as endangered, placing limits on the designation of critical habitat, and allowing information regarding economic impact of a listing to be shared with the public (but not used in making determinations).

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Housing starts have remained steady at a level that isn’t enough to put any real pressure on prices for sawtimber-sized trees, while China has been a wild card for just about everyone in the forest industry, particularly the hardwood sector.

Marshall Thomas, president of F&W Forestry Services, Inc., discusses these challenges in his firm’s summer newsletter, along with the dropping lumber prices.

He notes that the effects that the retaliatory tariffs imposed by China are having on the wood products industry “emphasizes the fact that we are operating in a global economy and illustrates the impact that trade policy can have on local mills and markets.”

However, he also points out that the disconnect between lumber prices and pine sawtimber stumpage prices is now working in the favor of tree growers.

“The Random Lengths Framing Lumber Index went above $575 in June of last year, and then dropped as low as $319 last quarter,” Thomas writes. “Fortunately, Southern stumpage stayed true to its recent patterns, and has only dropped slightly—the lack of linkage between lumber prices and stumpage prices looked bad last year, but it looks better now.”

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The ongoing trade/tariff war between the U.S. and China is having a significant negative impact on American wood product exports.

The hardwood sector, which is heavily reliant on exports to China, has been particularly hard hit.

“Over the last three quarters, hardwood exporters lost $153 million per quarter, as a result of the 10 percent tariffs imposed by China.  When the current tariffs increase to 25 percent, a steep acceleration of losses is expected,” the Hardwood Federation reports.

Softwood logs and lumber have been adversely affected as well.  In the first quarter of 2019, softwood lumber exports to China were down 66 percent compared to the same period last year, with softwood log exports to China down 28 percent during that same time, according to data published by Lumber Track.

Although negotiations regarding trade with China stalled between the two countries earlier this year, talks look to be back on track following a meeting between President Trump and Chinese President Xi in June.

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A survey of F&W managers across the Southern Pine Belt finds reforestation activity was on the rise in most regions during the recent 2018-19 planting season and more landowners are using genetically-improved seedlings and planting fewer seedlings per acre.

As timber markets become steadier and slightly stronger, landowners are beginning to sell timber, resulting in more reforestation activity.

“Landowners have become content with the current timber market and they are willing to final harvest stands at current prices,” reports Brent Williamson, manager of the El Dorado, Ark., office.  “There was a time period following the recession when landowners seemed to be in a ‘hold and wait’ pattern; this does not seem to be the case now.”

The trend of increased reforestation activity is in-line with the most recent U.S. Forest Service report on reforestation activity.  Tree Planters’ Notes, which looks at data collected during the 2016-17 planting season, estimates that more than 2.46 million acres of trees were planted, an increase of 2 percent over the 2015-16 season.

The F&W survey was based on data and observations of F&W managers in 10 states.

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