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April 18, 2016

Money Minute: Some Observations and Challenges for the Timber Industry in 2016

The U.S. timber industry is as complex and as varied as a forest in Alaska is from a forest in Georgia. There are so many different sectors, products, and regional regulations that it can be an intricate subject when addressing the timber industry as a whole.

We looked at expert predictions—mainly from Forest2Market’s President and CEO, Pete Stewartand current trends to get a handle on what’s in store for the U.S. timber industry in 2016.

  1. U.S. pulp and paper producers will see demand lessen as exports wane. A strong U.S. dollar will make U.S. wood products more expensive and less attractive to western importers, though other oversees imports could increase. At the end of March, the dollar was low, but it’s expected to increase in strength once again.
  2. Supplies of domestic long fiber (conifer) will remain tight, keeping prices high. Demand for pine fiber will grow due to factors such as growth in OSB production, pulp and paper production and industrial wood pellet production. Supplies will remain low due to reduction in sawtimber harvests. Rules of supply and demand apply.
  3. In the South, high softwood sawtimber inventories will keep log prices low. Low demand and high supplies from a slow housing industry will continue until the housing industry really heats up.
  4. In the Northwest, closures and a sawlog price reset could be seen. High prices and low Asian demand seem to indicate further challenges for Northwestern sawmills. Stewart maintained a price reset will be in order for sawmills to stay competitive.
  5. Demand for domestic lumber will remain capped as the housing market remains slow. Stewart believes we are on the cusp of a recovery of the economy and the housing market as indicators such as low unemployment, rising wages, and an increase in interest rates pile up, but we’re not there yet.
  6. New products and innovations—especially green innovations— will continue to help revive the timber industry. New products like cross-laminated timber (CLT)—made by gluing hundreds of pieces of wood together—and with the ability to replace steel and concrete in construction—are creating new opportunities for U.S. wood markets. Another such innovation is the use of wood waste for biofuel, which is just getting underway and also satisfies the environmental concerns of many groups.

While the U.S. timber industry will experience many hurdles, it looks as if a brighter future is on the horizon. As the premier agricultural lenders in the U.S., AgAmerica Lending is there to assist the timber industry and others in agriculture grow and prosper with our low interest rates, long amortizations, and outstanding 10-year line of credit.

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