Making Sense Of Lumber Prices
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.