Supported by price gains for lumber and plywood and limited supply, log prices are likely to increase during May as well. Because lumber and plywood prices are the highest they’ve been for five years, domestic log prices will exceed $500/MBF, a level that has not been reached since late 2008.
Despite strengthening prices, log inventories remain quite low across the Northwest region. Increasing prices for logs and timber have attracted the interest of timber owners currently on the sidelines. However, once burned–twice shy operators are content with modest production increases and just-in-time log inventory strategies.
One reason for low inventories is the nature of contracts between operators and public agencies to harvest stumpage. Many timber operators in the Pacific Northwest hold these contracts, which allow a maximum of three years for completion. A significant number of these timber sales were consummated before the deepening recession drove prices into the basement. With the record low prices, operators have held off completing these timber agreements because they would have been economically harmful.
There is now a window of opportunity for completing these timber sales. The window of opportunity is short, however, as much of this timber is subject to time restrictions that limit logging to late spring and summer periods because of environmental and operational requirements.
Now that signs of life are returning to the market, we are likely to be reminded of one of the major casualties of the recession: the logging and trucking infrastructure dedicated to the harvest and delivery of Northwest timber. In Southwest Oregon, many contractors’ expertise is operating under the stringent requirements associated with harvest of government timber sales. Many of these contractors have downsized or simply gone out of business. Even if the costly specialized equipment is available, many skilled loggers have moved on to other careers.
With signs of better times for the forest industry on the horizon, we are to face another immediate challenge. Will there be sufficient logging capacity to meet the needs of public agency and private forest landowner timber harvests? Timber owners should have legitimate concerns on the pending shortage of harvesting capability.