Inland Wood Markets 2012 Economics & Issues for the Metrically Inclined

Transcription

1 Inland Wood Markets 2012 Economics & Issues for the Metrically Inclined Charley McKetta PhD, CF Economics Enthusiast & UI professor emeritus Forest Econ Inc. Moscow, ID Timber Measurements Society Coeur d Alene, Idaho 4/11/2012

2 2011 A Painful Reminder Anemic recovery as over-stimulus deflates Housing disappointments Excess single-family housing Record low single-family starts Renters boost multi-family starts Wood Prices Lumber index up 30% anyway But log prices inch up only 10% Biomass potential floundered Expected 2012 Q4 recovery pushed back Regional mills concentrate buying power

3 The Recession is Behind Us Honest! It Just Doesn t Feel Like it Yet! Economic Indicators % Global Insights 1/2012, base year = Gross Domestic Product % Change Rate %/year Per Capita Income % -8.0

4 National Jobs Recovering On Schedule-- Wood Sector Has Resturctured Employment: US Non-farm & Wood Products Global Insights 1/ Non-farm (mil) Total (m) Wood (k) Wood (thous)

5 Housing Market Remains Tepid False hopes 2010 Single Family Housing Stats NAR 3/2012, Census 3/20/2012 Still Excess Housing But starts are up Sales are up 550 starts permits 5.50 Foreclosures: 1.9 x 10 6 homes lost in likely higher annual starts-permits x sale exist annual sales x million Nevada, Arizona & California lead Idaho now in top 10 foreclosures

6 Housing Recovery in the Wrong Place Housing Start Type History US Census 3/20/ Single 1000's Single Family Multi-Family Multi 1000's

7 Future Housing Recovery Looking Slow Starts Millions/Yr Single Family House Starts & Mortgage Rates Mortgage Bank Assn 3/18/12 Mortgage Rate Single Starts Mortgage Rate Percent

8 Demographic Fundamentals in Place Longer run Total Housing Starts Global insights 12/ Total Starts millions But Multi-family becomes increasing proportion

9 Long & Short of Wood Price Trends $$/MBF & $/MSF Long Cycle Wood Prices Random Lengths 1/2012 Panels $/MSF 2010 price spike was misplaced expectations, but Lumber $/MBF Lumber Index prices are up 53% from the bottom & almost to pre-boom levels $/M (MBF or MSF) Recent Lumber Index Prices Random Lengths 4/6/12 Lumber

10 Lumber Futures Soft in Short Run Lumber Futures Forward Prices Chicago Merc Feb 2011 to Mar $$/MBF /18/11 09/16/11 04/09/ Contract Maturity Date 170

11 International Markets a Mixed Bag Canada Canada Lumber Exports to US US Census 12/2011, Random Lengths 1/2012 Loonies at par all 2011 Still lots of dead pine Little response to US lumber prices China lumber 2011 Canada $1.2 billion US $900 million Chinese chips 96% hardwood MMBF/Month $/MBF Volume MBF tariff trigger = $ $/MBF Europe Importing biomass

12 But Log Prices Have Stalled Idaho Palouse Post Boom Median Sawlog Prices NW Management region 2 3/2012 DF / WL $$/MBF HemFir LPP 200.0

13 Mills & NIPF Have Disengaged N. Idaho Pvt Timber Harvest MMBF IDL 3/2012: $/MBF NW Mgmt 1/ Inland Lumber Price vs Production Random Lengths 1/ MMBF cut /YR INDUST NIPF $/MBF DF $$/MBF Composite Lumber Index LUMBER $/M PROD MMBF MMBF/month

14 Sawlogs: Low Competition & Expectations Bulkwood: Headed Back to Normal Biomass?: Don t Bother Yet Inland Log Value Group Price History & Projection Forest Econ Inc 1/20/2012 N. Idaho Bulkwood Prices NW Mgmt 1/2012, FEI 1/20/ DF / WL Hem/ Fir LPP $$/MBF Roundwood $/ton LWS pulplog NI tonwood

15 Long log shift 40 flexibility MBF problem Cubic shift Accuracy gain Tonnage shift Lower cost EPA Focus MMBF/year Is pollution not logs Jobs in runoff 0.0 monitoring Outlook for Measurement N. Idaho NIPF Harvest by Measurement Type IDL annual harvest reports MBF eqivalent MBF meas

16 forest roads & stormwater runoff systems are point sources of pollution. Ninth Circuit Court of Appeals, May 2011 Point sources can only be discharged with a Clean Water Act permit (applies to AK, OR, WA, ID MT, AZ, & NV) Forest owners need Clean Water Act permits for new & existing road activities EPA, states, & private citizens can sue individual landowners Permit guidelines have yet to be determined

17 PNW ~ 1.4x10 6 crossings Permit & monitor Functionally redundant Under most FPA s Unknown fees & permit requirements Permit per forest owner Upfront & annual fees SWPP outfall inventory Quarterly monitoring Expected Effects Vary by FPA type Nominal industrial costs Inefficiencies of NIPF scale Theoretical confiscation Land use change incentives Forest Land Value $$/acre Point Source Runoff Permitting $600 Pre reg land value $400 Post Permitting Land Value $200 $ $200 NPV of EPA permit costs -$400 -$600 -$ $1,000 Forest Ownership Size--Acres

18 Negative policy influences: Federal Reserve stimulation ending Mortgage rates will start to rise Ineffective foreclosure rescue mechanisms Bush tax extension unlikely so for 2013 Low 15% capital gains rate expires Estate tax 5x10 6 exclusion, 35% top rate Mortgage interest deduction targeted Home sale income exclusion targeted Exemption of foreclosure losses expires Higher FICA income levels Fewer deductions for high earners New transportation taxes Much lower section 179 deduction limit Idaho land exchanges derailed Positive changes? It IS an election year! Other Government & Political Changes

19 You Aren t the Only Ones With Measurement Problems Any questions?