June 2, 2021 - By Christine Souza - Low inventories and skyrocketing demand for lumber products for home improvement projects and new home construction have led to a doubling and, in some cases, tripling of lumber prices.
To fill the demand, California timber operators remain busy processing logs into lumber for the home improvement market and housing starts, the main end-use market for lumber.
(Left) At the Mendocino Forest Products Co. sawmill in Ukiah, log scaler Michael Cornell measures and examines logs for processing. A representative of sister company Mendocino Redwood Co. says its redwood and Douglas fir lumber products are in short supply and great demand.
Photo/Christine Souza
Family-owned Mendocino Redwood Co. specializes in redwood and Douglas fir lumber products sold at home improvement retailers. To bolster inventories, its sawmill in Ukiah is operating 10-hour days, six days a week, milling green timber and salvage logs harvested after recent wildfires.
John Andersen, forest policy director and a registered professional forester for Humboldt and Mendocino Redwood Cos., said the company closed both of its sawmills for six weeks at the start of the pandemic last year.
"We started getting rid of our inventory of lumber and, after about week five and six of the shutdowns, the lumber was flying off of the shelves," Andersen said. "We didn't see that coming, and it's still going on."
Andersen said demand remains higher than inventory.
"As soon as we make something, it goes out the door," he said. "We just have a severe shortage of lumber, and of course that creates a spike in price."
People who remained at home for months due to the COVID-19 pandemic took on neglected home repair and remodeling projects—a trend that benefits California timber producers.
"I expect that demand will continue for the rest of 2021 and maybe the early part of 2022, but as people get back to their normal lives and are not doing housing projects as much, I see that tailing off," Andersen said. "Until we can get these inventories back to where they were, we'll probably still see some higher prices."
Lumber market analyst Paul Jannke of Massachusetts-based Forest Economic Advisors said he expects that "there's going to be a little bit of fatigue" in terms of people's interest in home improvement projects as pandemic restrictions relax.
"People have spent a lot of money on their homes because they had no other place to spend their time and their money, but as COVID restrictions start to ease, they are going to have other things to spend their time and money on, so I think you will see additions, improvements and alterations come back to normal levels," Jannke said.
But for now, strong demand for lumber products at home improvement retailers has continued into 2021, he said, adding that "prices are actually even higher now than they were a year ago."
The species of wood and where it was harvested also affect price, said Shaun Crook, who runs a family timber business in Tuolumne County.
"Usually, a redwood log is worth more than a pine log, and it's because of their uses and their longevity, and supply and demand factor into that," said Crook, who serves as second vice president of the California Farm Bureau. "California prices are different than those of Idaho and Oregon, because you've got distance from where the tree is actually growing to the mill, and cost of fuel and transportation."
There has also been a shortage of lower-grade industrial lumber used to make pallets, crates, furniture and for other applications.
In 2020, the U.S. consumed about 51 billion board-feet of lumber, up from 47 billion board-feet in 2019. The figure includes end-use markets, from housing starts to residential improvements, nonresidential construction and industry markets. California consumption in 2020 totaled 4.6 billion board-feet, down 4% from 2019.
Jannke said demand for housing in much of 2020 and into this year has been really strong, with increasing home prices. He said he expects this will stabilize. Shortly after the COVID-19 pandemic began, state and federal governments identified the wood products and construction sectors as essential. But concerns about the uncertain economy and rising unemployment brought a short-lived slowdown in home construction.
California wildfires also contribute to lumber prices. The fires significantly increased the amount of salvage timber, which takes priority over green timber because it must be harvested within a year to maximize its value.
"The private landowner that owns timber isn't benefiting from that high demand in lumber and lumber prices right now," Crook said. "There's really no demand for his logs, because there's so much of the burned that has to take the place of the green. Now that some sawmill-owned property has burned, they've got to salvage it, so it fills up the mill and it doesn't need logs."
Jannke agreed the demand-supply imbalance is on the lumber capacity side, adding, "Typically, you get timber prices moving up at the same time lumber prices are moving up, but that's not happening this time around. If you are a timber person, your markets haven't changed, even though the lumber markets have."
With limited sawmill capacity and a lot of salvage timber that burned in Plumas and Butte counties, Crook said that's "too much for the local mill to handle, so logs are being trucked past multiple other mills to mills in other areas because that (burned wood) is a higher priority."
The U.S. Forest Service has more than 300 million board-feet of burned wood in the southern Sierra, he said, adding, "if the Forest Service actually gets that to market, you're going to have that influx."
Drought conditions in California point to the possibility of another challenging wildfire season, which typically affects access to forests to harvest logs and even to operate mills, Jannke said, and could further increase log prices.
(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com)
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Source: California Farm Bureau Federation
