Knowledge Exchange

Ag Economy

Timber

Lumber

  • Overall consumer demand continued to be strong for both existing home sales and new home construction in the first quarter of 2022, but there is increasing uncertainty that could temper demand during the balance of year. Rising interest rates, the war in Ukraine and an increased risk of recession in 2023 will all have an impact on consumer confidence and new home construction demand in the second half of 2022. Despite this uncertainty, most forest products economists are still predicting housing starts to increase to 1.67 million units for 2022 which is up form 1.60 million units in 2021.
  • Due to strong demand and very low inventories, Spruce/Pine/Fir (SPF) 2X4 prices increased to over $1,500/MBF in Q1, but since mid-March, prices have declined by $400/MBF as previously mentioned headwinds, and increased supplies are starting to impact prices. Despite the recent decline it is anticipated that prices will remain well above breakeven for most sawmills in the Northeast.
  • In Eastern White Pine lumber markets, strong demand, low inventory, and limited surge capacity on the supply side continues to support high prices.
  • Hardwood lumber prices climbed higher in the first quarter of 2022, benefitting all major Northeastern species (e.g., Red Oak, Hard Maple, White Ash and Yellow Birch). Demand levels remained elevated compared to prior periods due to both export and domestic markets. White Ash pricing has held firm, surprising some given the impact of the Emerald Ash Borer.
  • Emerging technologies for wood products and construction are showing potential for the future of the industry. Cross-Laminated Timber, wood-based insulation, and other structural wood applications are generating increasing interest from entrepreneurial and established businesses alike.

Pulp and Paper

  • As with most commodities, pulp prices increased in some categories during the first quarter of 2022 while most tissue producers anticipated pulp price declines during 2022. As a result, tissue manufacturers have gone back to their retail customers, renegotiating for price increases to compensate for the unexpected pulp price increases. There appears to be inconsistency in pulp markets, however, with some reporting that pine roundwood pricing has remained soft. Rising natural gas prices may improve markets for energy biomass looking forward.

Logging

  • Demand has been strong for SPF, EWP and some Northern Hardwood logs supporting logger demand in turn. Rising fuel and labor costs have impacted truckers and loggers. The 21-22 Winter season brought wild swings in weather, which also challenged loggers and hampered production in the Northern region.

Timberland

  • Northeast commercial timberland sales remained strong over the last six months. Numerous large commercial transactions closed throughout Northeast (30,000-90,000-acre tracts) at values within $350-$500/acre range.
  • Competition for well-stocked small and medium sized timberlands (up to 1,000 acres) has been strong, putting pressure on buyers that would typically buy, manage and hold this property type to change their strategy to buy, cut and sell. There have been a number of sales of larger parcels (over 1,000 ac) to recreational or conservation buyers which has assisted investors in cashing out of low-stocked timberland for prices above what would typically be considered “bare land” pricing. The impact of conservation easements on timberland remains relatively stable with sales data showing eased land selling for 15%-25% below fee-simple land with similar timber stocking and inventory values.
  • Improved consumer balance sheets and competitive credit conditions sustained the recreational timberland sales trend. Elevated recreational land sales have bolstered profitability and liquidity for timberland owners throughout the Northeast, partially offsetting weakness driven by the low grade markets.