This is the second in a series related to Forisk’s Q3 2017 forest industry analysis and timber price forecasts for the United States and Canada.
Each quarter, we look back and evaluate the performance of previous forecasts and earlier models. The process of reviewing assumptions and updating models encourages, if nothing else, humility. Analytically, the process reminds us how some drivers are more important than others. Price to demand and supply relationships are not linear or static; they change over time. For this reason, we allocate most of our resources to confirming knowable facts on the ground related to mill investments, forest supplies, and technological advances.
How have Forisk’s forecasts for 2017 tracked relative to actuals through the first half of the year? Here we summarize the year-to-date results across five measures:
- Housing Starts
- Forecast: Forisk opened 2017 with a U.S. housing starts forecast of 1.25 million.
- H1 2017: Actual U.S. housing starts have been tracking 0.9% below Forisk’s original estimate (within 10,000 starts). Recently, we posted Forisk’s Q3 update of 1.24 million for expected 2017 housing starts by year-end.
- Softwood Lumber Consumption
- Forecast: In Q1 2017, Forisk projected domestic U.S. softwood lumber consumption of 48.7 billion board feet, or 3.3% growth over 2016 actuals.
- H1 2017: According to the Western Wood Products Association, actual U.S. softwood lumber consumption through April was 16.0 billion board feet, which is 48.0 billion board feet on an annualized basis, or 1.4% below the Forisk Forecast.
- Structural Panel Consumption
- Forecast: Forisk projected 30.9 billion square feet of structural panel (OSB and plywood) consumption in the U.S. for 2017, or 6.3% above 2016.
- H1 2017: According to the APA, actual structural panel consumption through Q2 2017 was 15.1 billion square feet, which is 30.2 billion on an annualized basis. This tracks 3.3% below the Forisk Forecast as of Q1 and 1% below our most recent update of 30.5 billion square feet.
- Southern Pine Sawtimber Prices
- Forecast: In Q1 2017, Forisk projected average state-level pine sawtimber price growth of 7.5% for 2017 based on eleven state-level forecasts.
- H1 2017: Through Q2 2017, four-quarter rolling average pine sawtimber prices have declined 3.5% on average across eleven states based on Timber Mart-South. The divergence between rising housing starts and falling timber prices in the South has been a central research theme.
- Pacific Northwest Domestic Sawlog Prices
- Forecast: In Q1, Forisk projected domestic #2 delivered Douglas-fir sawlog price growth of of 1.2% for 2017 for Coastal Oregon and Washington.
- H1 2017: Half-way through 2017, the four-quarter rolling average price for #2 delivered Douglas-fir sawlogs increased 5.1%, or about $23 per MBF higher than Forisk’s Q1 estimate.
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