Knowledge Exchange

Ag Economy



  • In the early stages of the COVID-19 outbreak spruce/fir prices declined by about $75/mbf. During April, as a result of mill capacity reductions and shutdowns for maintenance both in the U.S. and Canada, supply and demand found a new equilibrium for East Coast random length Spruce/Fir 2x4’s. Since then, as a result of a better than expected summer home building season, which started in May and further mill curtailments, prices started a steady climb to the current level of $590/mbf FOB Boston. Since SPF lumber inventory is still very low and many idled mills will take a few months to come back online it is expected that these record prices will continue for a few months.
  • Eastern White Pine markets have remained solid with less volatility than Spruce/Fir. During the early stages of the COVID-19 outbreak, many Northeast Pine mills experienced a temporary spike in demand, however, prices have since fallen 10% and demand is down compared to 2019.
  • Hardwood markets continue to struggle, partly impacted by trade disputes and a slowing economy in China (the largest export market for U.S. hardwood lumber), and partly due to softening domestic demand related to a slowdown in housing and furniture, as well as new substitute engineered wood products. We view this segment of the lumber market as the most challenged from a profit standpoint and expect that many hardwood mills will struggle with profitability in 2020.
  • Housing starts rallied late in 2019, reaching a rate of 1.6 million (annualized) for December. However, with the impact of coronavirus, starts declined to 930,000 units. Since their low point in April, housing starts have grown steadily and are expected to continue to increase during the second half of 2020. Even though the housing start decline has been significant it isn’t as dramatic as declines that were experienced during the great recession when housing starts declined from 2.5 million units to 575,000 units. Historically low interest rates and pent up demand for new homes has spurred growth over the last few months.

Pulp and Paper

  • Pulp prices have softened from their 2-year rally but are still solid compared with historical levels. There is little change in the overall paper markets, with free sheet, super calendar and newsprint remaining under pressure and declining, while tissue, container board and packaging have been returning positive margins. An explosion and fire at a mill in Jay, Maine has put that facility out of operation, and shifted traffic to other mills in Maine, resulting in capacity constraints. Due to the coronavirus, some facilities have had trouble maintaining adequate staff, resulting in reduced shifts and operations in some locations.


  • Despite good demand for SPF logs, it has been a slow start for many logging contractors as a result of the loss of a low-grade mill in Jay and reduced capacity of a few other low-grade markets. The availability of skilled labor and increased work absences is constraining production as well.
  • As with other industries, the extent and duration of COVID-19 shutdowns and economic disruption in general will have a major impact on the economic outlook for this sector.