At the start of April, Forest2Market’s composite lumber prices reached the highest point of the year thus far at $434/MBF (Week 14). Prices steadily decreased in subsequent weeks, ending the month six percent lower at $407/MBF. Still, prices remain well above their levels of just one year ago.

Is 2013 shaping up as predicted? When we last wrote about southern pine lumber prices in A Perfect Storm?, we predicted the seasonal price drop seen in recent weeks. Increased mill capacity has met demand - allowing shipments to catch up with orders - and lumber buyers have reached satisfactory inventory levels for the first time since the sharp upturn in housing construction surprised the market during 4Q2012. As a result, lumber prices have fallen over recent weeks.

The cold, wet spring experienced throughout much of the Northeast and Upper Midwest exacerbated the current weakness seen in the market. As the days become warmer and drier in late spring and summer and construction activity picks back up, lumber prices are expected to level off.

Over the past several weeks, a 38 percent decline in multifamily starts has alleviated price pressure on 2x4s and 2x6s. Though single-family home starts also fell (by 2 percent) last month, building permit activity for these homes remains strong. Upward price pressure on the wides could follow if single family starts gain momentum. The long-term picture is still developing; it looks like prices are on a path to return to the historic trend line, though they will still remain above seasonal historical values.

The above figure summarizes pricing data gathered for Forest2Market’s weekly lumber market report, Mill2Market. For this report, Forest2Market aggregates sales order data submitted directly by report subscribers. This figure charts weekly sales order prices from January 2011 through year to date 2013 and compares sales order data, FOB Mill on a volume weighted $/MBF basis. The prices in the figure are composite prices; they include dimension lumber, timbers and boards.
For more information, visit the Mill2Market page of our website, or call Bob Bratton at 980-233-4034.

In an effort to once-and-for-all define forest roads as non-point sources of pollution, Senator Ron Wyden (D-OR) and Representative Jaime Herrera Beutler (R-WA) introduced the Silviculture Regulatory Consistency Act in their respective Houses late last week. The Act would add legal precedence to a recent Supreme Court decision and long-standing EPA policy that stormwater discharge permits are not required for forest roads.

Last March, the Supreme Court ruled forest roads used during timber harvests do not require stormwater discharge permits. The decision overturned a 2011 U.S. Court of Appeals Ninth Circuit Court ruling (NEDC v. Brown) that defined the use of commercial logging roads as an industrial activity, similar to factories and other facilities, and thereby subject to permitting requirements set forth by the Clean Water Act. If passed, the new legislation would circumvent litigation opponents to the Supreme Court’s rule intend to bring forth.

Bill co-sponsor Senator Mike Crapo (R-ID) and Representative Herrera Beutler sponsored previous versions of the Silviculture Regulatory Consistency Act shortly after the Court of Appeals ruled that forest roads used for timber harvests require mandatory industrial stormwater discharge permits. Neither of those versions made it to the floor for a vote.

The current bills have been referred to the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure. Should you wish to express your support for the Act, contact information for Senators and Representative in each state is available through Contacting the Congress.

International Forest Products Limited, also known as Interfor, has acquired four sawmills in Georgia as part of what President and CEO Duncan Davies called, “our strategy of adding capacity in attractive regional markets.”

International Forest Products Limited, also known as Interfor, has acquired four sawmills in Georgia as part of what President and CEO Duncan Davies called, “our strategy of adding capacity in attractive regional markets.”

On May 15, 2013, Interfor announced that it had reached an agreement with Keadle Lumber Enterprises in Thomaston, Georgia. The Keadle mill current produces 80 million board feet operating one shift. Plans for the mill include increasing kiln capacity and adding a second shift, thereby doubling output at the mill to 160 million board feet. The purchase is expected to close in the second quarter once the Board has approved the decision.

Interfor’s first foray into the southern yellow pine market occurred in March 2013, with the purchase of three mills in Georgia from Rayonier for $80 million. One of these, Eatonton, is 75 miles northeast of the Keadle mill and has a capacity of 75 million board feet annually.

Swainsboro, 130 miles southeast of Eatonton, currently has a production capacity of 125 million board feet. Recently, in a meeting with Emanuel County officials, Davies said that they would install a kiln at the mill by August and that the company’s goal was to add a second shift at the mill. The Baxley mill, which is 60 miles to the south of Swainsboro, has a production capacity of 160 million board feet.

Together, these purchases will give Interfor a solid footprint in the US South. With the planned expansions at all four of these locations, Interfor will increase its annual production capacity to more than 2 billion board feet.

Agriculture committees in both the Senate and the House marked up respective versions of the 2013 Farm Bill this week. The $955 billion Senate bill is estimated to save $23 billion through program cuts and consolidations, while the House version - ringing in at $940 billion - saves nearly $40 billion. Provisions for most bioenergy programs remain in each bill.

Energy Legislation

Biomass Crop Assistance Program: Provides financial assistance to owners and operators of agricultural and non-industrial private forest land who wish to cultivate biomass feedstock for energy producers to use for biofuels or bioenergy. The program will receive approximately $193 billion in mandatory funding.

Biorefinery Assistance Program: Offers loan guarantees for renewable energy projects such as the construction and retrofitting of refineries to develop and produce advanced biofuels. The 2013 bill expands the program to include assistance for renewable chemicals and biobased manufacturing. Mandatory funding amounts to $216 million.

Biomass Research and Development Initiative: Supplies grants, contracts and other financial assistance to fund the research and development of biofuels and biomass energy. The legislation will support the initiative through $130 million in mandatory funding.

Rural Energy for America Program: Encourages agriculture producers and business owners located in rural areas to invest in energy efficiency and renewable energy. The retooled bill streamlines the application process for small- and medium-sized projects and provides $241 million in mandatory funding.

Biobased Markets Program (BioPreferred Program): Amended to include forest products as biobased products. According to House Agriculture Committee information, the change will allow some domestic forest products in mature markets (pulp, paper and wood pellets) to quality as renewable products under federal procurement guidelines.

In addition, the legislation reauthorizes the Bioenergy Program for Advanced Biofuels to deliver production payments for advanced bioenergy sources including biofuels and biopower. The Biosiesel Fuel Education Program and the Community Wood Energy Program, which provide grants to share the benefits of biodiesel fuels through outreach efforts and supply public buildings with sustainable, locally-sourced wood, respectively, also received funding. Both versions of the bill call for the repeal of the Forest Biomass for Energy provision.

Next Steps

The full Senate is scheduled to begin debate on the bill on Monday, May 20. A date has not yet been set for the House to hear the bill, though debate is expected to begin sometime in June. Ranking Agriculture Committee Member Collin Peterson (D-MN) expects a new farm will be in place by the time Congress recesses at the beginning of August.

On January 1 of this year, Congress extended the 2008 Farm Bill through September 30, 2013 as the bill expired at the end of the 2012 calendar year. The temporary measure was necessary after the House failed to bring its version of the 2012 Farm Bill to the floor last summer. Congress is responsible for passing a new farm bill that sets a number of policies, including those for energy and forestry programs, every five years.