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During the spring of 2007, log values began to decline. And they continued to decline. And down a little more. And they kept losing value until bottoming out last June with Douglas fir logs less than $300 per thousand board feet.
Well, we hope that was the bottom of the market. Since historic highs in 1993, the trend line has been a slow, steady decline.
So what's the cause for fir logs worth less today than five, 10 or 15 years ago? And no, it's not because log buyers are ripping off the landowner. Balance sheets of regional mills reveals historic, or near historic, losses the past couple years. The cost of raw materials (logs) to make a product (lumber and plywood) accounts for more than half a mill's expenses, much higher in the timber industry than for other manufacturers.
Looking back at the 1960s and '70s, public timber harvests slightly exceeded those on private lands. The '80s began to see a shift toward industrial lands, but still plenty of wood to satisfy mills in the region. During the early- to mid-1990s, everything came to a crashing halt. The spotted owl was the main culprit in creating a huge jump in log values, much of it psychological, and much higher than could be sustained. The industry was in uncharted waters and didn't know how to react, other than to panic.
Once companies realized there were enough trees to go around, log values began their long, slow descent. Industrial lands picked up the slack for the sharp decline in federal wood. Small woodland owners, who contributed as much as 20 percent of the total harvest volume during the spotted owl debacle, slowly decreased their share until today we see small woodland owners contributing approximately 5 percent and industrial lands accounting for about three-fourths of Oregon's timber harvest.
Currently, Douglas fir is $50 per 1,000 board feet higher than last winter. How 'bout next month? Next year? Will prices rise? During the past two years, so-called experts in the industry have continued to tell us “next year.” Well, the next year resulted in lower prices. The year after that (late last spring) even lower. It seems forecasting is like throwing darts — keep throwing and eventually something sticks. Recently, analysts projected an increase in housing (and the lumber to build them), continued low interest rates, and an increase in consumer spending into 2013.
What's my opinion? Continued borrowing by the feds, unemployment near 10 percent, reluctant consumer spending and housing inventories not appreciably declining all continue to be a drag on the economy. Indicators suggest a slow recovery under way, but a jobless one. No jobs mean no consumer spending and declining tax revenues which means the feds will continue to borrow money.
Looking further down the road, things will get better. They always do. Consumer spending will be intermittent over the next year or two. This means woodland owners might see more market variability than in the past, with mills capturing those little bubbles of spending as they occur. Doug fir values are currently around $450 per 1,000 board feet. Maybe we'll see some bouncing between the mid-$400 to low $500 range when mills capitalize on their niches.
Steve Bowers is an extension forester for OSU Extension Service in Douglas County and will be teaching a class on this subject at Umpqua Community College; visit http://extension.oregonstate.edu/douglas/treeschool. Registration is due by Saturday. He can be reached by e-mail at steve.bowers@oregonstate.edu or by phone at 541-672-4461.
Well, we hope that was the bottom of the market. Since historic highs in 1993, the trend line has been a slow, steady decline.
So what's the cause for fir logs worth less today than five, 10 or 15 years ago? And no, it's not because log buyers are ripping off the landowner. Balance sheets of regional mills reveals historic, or near historic, losses the past couple years. The cost of raw materials (logs) to make a product (lumber and plywood) accounts for more than half a mill's expenses, much higher in the timber industry than for other manufacturers.
Looking back at the 1960s and '70s, public timber harvests slightly exceeded those on private lands. The '80s began to see a shift toward industrial lands, but still plenty of wood to satisfy mills in the region. During the early- to mid-1990s, everything came to a crashing halt. The spotted owl was the main culprit in creating a huge jump in log values, much of it psychological, and much higher than could be sustained. The industry was in uncharted waters and didn't know how to react, other than to panic.
Once companies realized there were enough trees to go around, log values began their long, slow descent. Industrial lands picked up the slack for the sharp decline in federal wood. Small woodland owners, who contributed as much as 20 percent of the total harvest volume during the spotted owl debacle, slowly decreased their share until today we see small woodland owners contributing approximately 5 percent and industrial lands accounting for about three-fourths of Oregon's timber harvest.
Currently, Douglas fir is $50 per 1,000 board feet higher than last winter. How 'bout next month? Next year? Will prices rise? During the past two years, so-called experts in the industry have continued to tell us “next year.” Well, the next year resulted in lower prices. The year after that (late last spring) even lower. It seems forecasting is like throwing darts — keep throwing and eventually something sticks. Recently, analysts projected an increase in housing (and the lumber to build them), continued low interest rates, and an increase in consumer spending into 2013.
What's my opinion? Continued borrowing by the feds, unemployment near 10 percent, reluctant consumer spending and housing inventories not appreciably declining all continue to be a drag on the economy. Indicators suggest a slow recovery under way, but a jobless one. No jobs mean no consumer spending and declining tax revenues which means the feds will continue to borrow money.
Looking further down the road, things will get better. They always do. Consumer spending will be intermittent over the next year or two. This means woodland owners might see more market variability than in the past, with mills capturing those little bubbles of spending as they occur. Doug fir values are currently around $450 per 1,000 board feet. Maybe we'll see some bouncing between the mid-$400 to low $500 range when mills capitalize on their niches.
Steve Bowers is an extension forester for OSU Extension Service in Douglas County and will be teaching a class on this subject at Umpqua Community College; visit http://extension.oregonstate.edu/douglas/treeschool. Registration is due by Saturday. He can be reached by e-mail at steve.bowers@oregonstate.edu or by phone at 541-672-4461.
