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Betsy Bates

Making Sense Of Lumber Prices

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It seems the spike in lumber prices over the summer and early fall would have had a positive impact on timber stumpage prices paid to landowners for large pine sawtimber, but the correlation is not there, explains Marshall Thomas, president of F&W Forestry Services, in his company’s fall newsletter.

While sawmills cut back production at the start of the coronavirus pandemic in anticipation of greatly reduced demand, they did not foresee the huge demand for lumber from people sheltering at home and embarking on home improvement projects.  Furthermore, after a significant drop in new home construction at the beginning of the pandemic, the industry rebounded quickly, and this one-two punch had the effect of creating a huge lumber supply/demand imbalance. 

“Unfortunately, the supply/demand imbalance that exists with lumber doesn’t exist for the raw material:  trees,” Thomas writes.  “In the South, we are still suffering a supply hangover from the Conservation Reserve Program (CRP) trees planted in the late 1980s and early 1990s.”

Thomas also cautions policy makers to be careful about implementing new incentive programs that pay people to plant trees, such as the Trillion Trees Act.  Without qualifications and limitations, such programs could result in another oversupply of trees and harm private forest landowners already doing what they want to encourage them to do.

Betsy Bates

Recent Natural Disasters Bring Important Tax Issue For Landowners To The Forefront

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The severe natural disasters devastating timberlands over the past few years have drawn attention to a huge flaw in our nation’s tax laws and the Forest Recovery Act aims to fix it.

Currently, landowners whose timber stands are destroyed by a natural disaster are dealt an unintended blow because they can only deduct the lesser amount of the fair market value (FMV), or adjusted cost basis, which is often $0 after the 84-month amortization period or only a fraction of the fair market value of the destroyed timber.  This means most private forest landowners impacted by catastrophic events are left to absorb the cost of the timber losses. 

A recent briefing paper by the U.S. Forest Service found that American family forest owners suffered an estimated average of “$266.3 million each year in fair market timber value losses due to tree mortality caused by events that could be considered casualty losses for tax purposes.”

The Forest Recovery Act has been introduced in Congress to resolve this issue, and landowners are encouraged to contact their representatives in Congress to express their support for the measure.

Betsy Bates

Guest Workers Can Assist With This Year’s Tree Planting

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This year’s tree planting season was almost upended, but swift and coordinated advocacy efforts by forestry associations made certain that it will continue unabated after the Trump administration issued exemptions following their appeals.

President Trump signed a series of proclamations this spring, suspending entry of most temporary seasonal workers into this country for the remainder of 2020.  The suspension included  H-2B guest workers, who are critical to the forest sector, planting the bulk of U.S. trees each year, along with other forestry operations that are necessary to maintain healthy and productive forests.

Research by Forest Landowners Association (FLA), Forest Resources Association (FRA), and National Alliance of Forest Owners (NAFO), among others, demonstrated to the administration the importance of allowing this program to continue.  Most significantly, these organizations showed that a ban on these workers would impact the forestry sector and rural communities by $725 million.

Betsy Bates

Florida Prepares To Distribute Disaster Relief Funds

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The state of Florida has reached an agreement with the U.S. Department of Agriculture (USDA) on the distribution of $380.7 million in block grant funding to Florida timber growers for the damage caused by Hurricane Michael.  The agreement covers all types of timber producers as well as farmers who have damaged irrigation systems.

The October 2018 Category 5 hurricane tore through the Florida Panhandle, Southeast Georgia, and Southwest Alabama.  According to the Florida Department of Agriculture and Consumer Services, the timber industry lost $1.3 billion when more than 550 million trees, weighing 72 million tons, were damaged.  Timber is the leading industry in the region.

A $3 billion federal disaster assistance package signed into law in 2019 made the grants available to counties impacted by natural disasters.  In March, Georgia began accepting applications from eligible landowners and farmers for its $347 million block grant program.  However, a dispute between Florida officials and the USDA over payment limits caused a delay in implementing the program in the Sunshine State.

State officials will work with the USDA to create a plan to distribute the funds.  Florida forest landowners impacted by Hurricane Michael are advised to gather documentation and evidence of damage for submission and apply to the USDA Emergency Forest Restoration Program.  The Florida Department of Agriculture and Consumer Services, the Florida Forest Service and the Florida Division of Emergency Management will together administer the funds.  Funds may be distributed as soon as this fall.

Betsy Bates

Covid-19’s Certain—and Uncertain—Effects on Forestry Sector

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It is too soon to know the full impact of the COVID-19 pandemic on the forest products sector, but data is beginning to reveal mixed results.

“There were 700,000 tons of tissue manufactured in March, the highest monthly figure since pre-recession 2007.  But commercial and writing paper were down,” writes Marshall Thomas, president of F&W Forestry Services, Inc., in his company’s summer newsletter.  “Lumber production nosedived in March but is now recovering.”

Thomas noted that after starting off the year on a strong note, housing starts plummeted in April but then rose in May.  Sales of newly built homes followed a similar trend, with May numbers 12.7 percent above the same month a year ago.

“What we all need to know—and won’t until it’s over—is whether we will see a V-, U-, L-, or W-shaped recovery,” Thomas writes.  “Of course, we all want to see a V, meaning the drop will be fast and the recovery as fast, and there are some signs that may be the case, but we won’t know for a couple of years.”

TO SEE THE FULL ARTICLE IN THE SUMMER 2020 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Housing Numbers Offer Reason For Optimism As Economy Reopens

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Housing was poised to make a comeback in 2020 but, like everything else following the start of the coronavirus pandemic, home construction plummeted.  With unemployment reaching record highs and consumer spending low, a rebound in housing was not expected to be imminent.  But according to recent data, we might be pleasantly surprised.

The year began with the highest level of housing starts since December 2006, but tumbled moving into April as a result of the shutdowns.  But as states began easing restrictions, housing starts and building permits rose from April to May, yet remained below May 2019 levels.  However, May sales of newly built, single-family homes are 12.7 percent above where they were a year prior.

“We are seeing many positive economic indicators that point to a recovery, including low interest rates, rising demand, and an increase in mortgage applications,” said Dean Mon, immediate past chairman of the National Association of Home Builders.

TO SEE THE FULL ARTICLE IN THE SUMMER 2020 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Report Shows Role Of Forests In Offsetting GHG Emissions

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A new U.S. Forest Service report finds that American forest ecosystems account for more than 95 percent of all land-based carbon sequestration in the U.S., removing the equivalent of 11 percent of greenhouse gas (GHG) emissions annually from the atmosphere.  The report provides an overview of the status and trends of GHG emissions and removals from forest land, woodlands, harvested wood products, and urban trees.

Forest land remaining forest land makes up the largest “land carbon sink,” or stores the most carbon.  Wood products in use and in landfills are also important contributors to the carbon sink, representing 15 percent of total removals.

While data has been recorded since 1990, this is the first year the report includes data on individual states, showing that in 2018, Mississippi had the greatest removal of carbon while Montana had the highest rate of emissions.

TO SEE THE FULL ARTICLE IN THE SUMMER 2020 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Forest Industry Operating During Pandemic; Forestry Leader Urges Caution On Planting Trillion Trees

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It’s too soon to know what kind of impact the COVID-19 pandemic will have on U.S. timber markets, but the forestry sector has been designated as an essential industry and is therefore allowed to operate during the crisis, the head of one of the nation’s largest forest management firms writes in his company’s quarterly newsletter.

“Pulp mills for the most part are still operating with some forgoing planned downtime to continue production.  There have been some production curtailments at sawmills in the South due to the virus, while hardwood sawmills in the North are responding favorably to tariff relief on hardwood lumber,” reports Marshall Thomas, president of F&W Forestry Services, Inc.

Despite the coronavirus disruption, the first quarter of the year was a busy one for forestry, with significant attention focused on the global trillion trees tree-planting scheme and the introduction of the Trillion Trees Act in Congress.

Thomas lauded provisions of the federal legislation, particularly those that aim to improve timber markets and incentivize innovative building practices that utilize wood, which would result in increased carbon storage.  But he cautioned legislators against subsidizing commercial tree planting without restricting future harvest.

“The private sector can handle reforestation—what we need are markets,” Thomas writes.  “Let’s hope that planting incentives come with strings that prevent subsidized trees from being dumped into and ruining our Southern pine markets like the Conservation Reserve Program (CRP) did for pulpwood-sized trees in the early 2000’s and is currently doing to sawtimber-sized trees today.”

TO SEE THE FULL ARTICLE IN THE SPRING 2020 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

F&W Managers Assess Recent Tree Planting Season

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The latest survey of F&W managers on reforestation activity in their areas during the recent 2019/20 tree planting season was mixed but almost all managers said tree planting was above or the same as five years ago.

A common theme voiced by F&W managers was that timber markets were the principal driver of tree planting, with improving markets in some areas bumping up reforestation activity while a lack of markets in other areas caused a decline.

The predominate tree species planted by F&W offices is loblolly pine and more managers reported planting container seedlings.  Managers said they decided to use container seedlings because of higher survival rates, increased early growth, planting flexibility, and difficult terrain that requires sites to be hand-planted.  Most managers report that planting densities are down compared to five years ago, citing improved genetics, better growth, more use of container seedlings, and research supporting a trend towards planting fewer trees per acre.

The survey was based on data and observations from 13 managers in 11 states.  The responses came primarily from managers in the Southern Pine Belt region, where widespread tree planting is a common practice.  The Northeast and hardwood regions of the U.S. rely mostly on natural regeneration so there is little in the way of tree planting.

TO SEE THE FULL ARTICLE IN THE SPRING 2020 F&W FORESTRY REPORT, SUBSCRIBE NOW

Betsy Bates

Positive Signs For Wood Sector With Signing Of Trade Agreement

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The trade agreement signed by President Trump and Chinese Vice Premier Liu He in January included a commitment by China to purchase a substantial amount of goods from the U.S. over the next two years.  Specifically, hardwood lumber was included in a list of manufactured goods altogether of which China will purchase no less than $120 billion this year and $131.9 billion in 2021.

Additionally, the two countries reduced some tariffs and cancelled others not yet in place.

China also released lists of products for which they will exempt certain eligible Chinese companies from having to pay higher tariffs for one year.  Hardwood logs and lumber and some softwood lumber products are included on these lists, with hardwoods also eligible for tariff refunds.

TO SEE THE FULL ARTICLE IN THE SPRING 2020 F&W FORESTRY REPORT, SUBSCRIBE NOW