Wildfires & record setting temps effect on log prices

By Rick Sohn, PhD
Umqua Coquille LLC

Like last winter, extreme weather has hit again, this time in the form of a hot weather and serious localized forest fires. Markets and demand for wood products are continuing to improve. Trends of lumber, home construction, and housing markets, are compared to 2006.


Interpretation and Looking Ahead.
As I write this letter, various bombers and helicopters are flying overhead carrying water to fight human-caused wildfires in Douglas County, Oregon. Yesterday was the hottest day in Roseburg, Oregon, in 69 years, at 108 degrees. Apparently, it was 109 degrees once, in July 1946. The fires yesterday matched the temperature. The Cable Crossing fire, reached 830 acres. The Stouts fire, behaving more like an Eastern Oregon brush fire, grew to 6,000 acres on its first day. Plumes of smoke rose several miles into the air. While the forest firefighting agencies do heroic work, it’s difficult to fight temperatures in triple digits, winds in double digits, and humidities as low as single digits.

Our forests are not resilient to fire. The public and wildlife are the losers on public lands. And private timberland companies lose big-time when their forest investments go up in smoke, especially due to public carelessness. Firefighting costs are a burden that is shared by both the public and the private timberland owners. More on this after the rains fall and costs are tallied.

These fires and record setting hot weather have raised the fire danger level to Extreme, and the woods are closed for logging operations (and private lands are generally closed to the public). This will have an immediate impact on log prices, which have already started heading back up, from a May price of $622 to $632 in June, per thousand board feet. May could be the low price for logs in 2015, unless inventories for logs fill up near the end of the year.

Home values continue to rise, and 30-year mortgage rates, while rising, are still at a very desirable level, around 4%. Unsold inventories at 1.6 months in Portland, are also down near historically low levels. This low inventory pushes up the demand for new homes. Building Permits have reached a 7-year high of 1,343,000. Housing starts are also gaining, and may show a post-great-recession record next month.

With wood products demand continuing to rise, stud prices might also rise. This is not always good for the mills, since log prices often rise even more when shortages occur. Like housing, which was affected by extreme weather last winter, stay tuned for weather-affected markets in logs and wood products this summer, especially if housing continues to pick up.

Data reports used with permission of: 1Random Lengths. Recent week Kiln Dried 2×4-8′ PET #2/#2&Btr lumber. 2RISI, Log Lines. Douglas-fir #2 Sawmill Log Average, Southern Oregon region. 3 US Dept of Commerce. 4Portland, Oregon Regional Multiple Listing Service, courtesy of Janet Johnston, Prudential Real Estate Professionals, Roseburg, OR. 5Freddie Mac. National monthly average. 6Mortgage-X, National average, most recent week. 7Zillow.com, National Median home value. (http://www.zillow.com/or/) © Copyright Rick Sohn, Umpqua Coquille LLC. Issue #8-7. For more information, questions, or permission to reprint, please e-mail [email protected]

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