February 2010 Articles

Archives by Months

Forestry Situation

Forestry Situation (Provided by Dr. Mike Dunn)
There are still plenty of reasons to remain pessimistic about the general forest products economy in the southern United States. Timber Mart South, in their second quarter, 2009 summary, reported the following: • The South wide average pine sawtimber price is at its lowest point since 1993. • Pine chip-n-saw prices are at their lowest point since 1991. • The South wide average hardwood sawtimber price is the lowest in five years. • The Forest Business Optimism Survey’s latest indicator was 42 (above 50 is optimistic, below 50 is pessimistic). • According to the Southern Forest Products Association, southern pine lumber production will be at its lowest point since 1985, down more than 40% from its peak year of 2005. • Plywood production is also at 20 to 25 year lows. However, not all the news is bad. According to a recent survey of the nation’s economists, most think the recession will be declared officially over by the end of October, 2009. Even so, it would mark this as the longest recession since the Great Depression. Other bright signs: • Relative to solid wood products, pulpwood and chip prices have remained stronger, although they have been weakening some from stronger prices earlier in 2009 and in 2008. • Although the Forest Business Optimism Survey’s indicator was still “pessimistic” at 42, that is an increase from the previous number of 36. • Some slightly stronger lumber and panel prices were reported toward the end of the second quarter. The forest products industry still has far to go to get out of this tremendous economic crunch and it will take continued improvements for some time before things substantially improve “in the woods.” However, it is possible that we may at least have reached a bottom and better days are ahead. Total US housing starts for July 2009 were down slightly, single family starts rose again for the fifth straight month. There are some hopeful signs that the general economy is rebounding:
• New home prices increased for the first time since the first quarter 2007. • Permits increased almost 6%. This marks the fourth consecutive month of increases. • New home sales volumes are no longer dropping. • Many leading economic indicators are rising. Is this translating into higher timber prices? Not yet. Random Lengths lumber prices are still low and stumpage prices still remain in the doldrums. It will take a while yet for inventories to be depleted. And there are still some construction inventory issues that have to be reduced. There are still a lot of foreclosed homes out there that are not showing up in official market estimates. It has been estimated that here are as many as 600,000 foreclosed units out there across the country. However, the feelings in general have turned from pessimism to very cautious optimism, and psychology is more than half the battle.