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Forecasting Pacific Northwest Sawlog Prices

This post contains an excerpt from the Q1 2019 Forisk Research Quarterly feature article. This is the fourth in a series related to Forisk’s Q1 2019 forest industry analysis and timber price forecasts for the United States. Amanda Lang, Jack Lutz, and Brooks Mendell contributed to this research. 

Forecasting compares a set of alternative futures and assumed conditions based on our present understanding of key drivers and relationships. Could we get by without forecasts and forecasting? Yes. However, we would compromise our own potential for seeing what is possible, providing context for risks and identifying the best opportunities to improve and profit. In forestry, for example, we have at our disposal hard facts and accumulated experience, and the process of building forecasts and scenarios levers these assets to gain insights for improving our businesses and optimizing portfolios.

In the Forisk Research Quarterly this quarter, we evaluate key drivers of softwood log prices in the Coastal markets of Oregon and Washington, backtest previous Forisk log price models, and summarize updates to Forisk’s Pacific Northwest Softwood price models for #2 domestic and export Douglas-fir and Hemlock logs. The updated FRQ PNW price models incorporate state-specific supply projections and improved accounting for the implications of export activity.

Demand for logs in the Pacific Northwest has two key drivers: (1) domestic housing construction, repair and remodeling, and (2) exports of logs and lumber. Combined lumber and plywood production correlates strongly with log prices (Figure). We forecast production locally based on announced and expected investments in facilities and forecasts for GDP and housing. Export volumes also correlate with log prices, though less reliably. As 2018 showed, forecasting exports is challenging, so we use scenarios for insight. Evaluating the effect of rising, flat, and declining exports provides context to frame expected sawlog pricing.

Correlation between PNW Softwood Sawlog Prices, Lumber/Plywood Production, and Log Exports

Sawlog Price Drivers

Data sources: ODF, WA DNR, WRI, Log Market Report, WWPA, U.S. Census

To learn more about the Forisk Research Quarterly (FRQ), click here or call Forisk at 770.725.8447.

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