NR Market Watch

Timber Industry Report

September 28, 2009

Lumber prices fell 15%, housing starts and building permits are up only slightly, and unsold inventory actually rose after falling for months.  Perhaps the brightest spot this month is the historically low mortgage interest rate.   See the 3-year price tracking for lumber, logs, housing starts, permits, unsold home inventories, and mortgage rates below.

____Prices in Dollars per Thousand Board Feet____

______ Thousands of  Housing units_____

____ Months of  Inventory of Unsold Homes_

______ Percentage interest rate         ___

What the numbers mean.

Seasonally, housing activity slows down in the fall, as people get settled in for school.   This slowdown was reflected in a rise of unsold home inventory in August after a steady 7-month fall.  Yet, mortgage rates remained at historically attractive rates, improving just slightly.  Of course, the rate of foreclosures continues to stoke the inventory pipeline as well.  Households foreclosed upon may eventually want to own a home again, increasing the pent-up demand sometime in the future.  But when?  As the fall progresses, the statistics should continue to drop, and we can only hope for a spring 2010 recovery.  One other factor that could influence these trends would be an extension of the $8,000 first-time homebuyer tax credit into 2010.

The wood products market took a major hit, as Studs dropped 15% since August, reflecting the reality that housing starts and wood demand simply could not support the lumber supply in the pipeline. Actually, the price had dropped to $165 by September 4, and has stayed at that level for 3 weeks.   The bump up in log prices to $390 is not likely supportable.  The main factor holding up log prices is the shortness of supply, caused by a reluctance of log owners to sell logs, due mainly to such low prices.  This is all very bad news locally, but not unexpected, given the anemic increases in housing starts and building permits.

Data reports used with permission of:

¹Random Lengths.  2”x4”x8’ precision end trimmed hem-fir studs from southern Oregon mills.  Price reported is Dollars per Thousand Board Feet  for the most recent week.  One “board foot” of product measures 12 inches by 12 inches by one inch thick.

²RISI, Log Lines.   Douglas-fir #2 Sawmill Log Average Region 5 price.  Current report is for the prior month.  Dollars per Thousand Board Feet of logs are reported using standardized  log measurements from the “Scribner log table.”

³ Dept. of Commerce, US Census Bureau.   New Residential Housing Starts and New Residential Construction Permits, annually adjusted.  Current report is for the prior month.   Recent reports are often revised in bold from the prior month.

⁴Regional Multiple Listing Service RMLS^TM data, courtesy of Janet Johnston, Prudential Real Estate Broker, Roseburg, OR.  Inventory of Unsold Homes (Ratio of Active Listings to Closed Sales) in Portland Oregon, for most recent month available.

⁵Freddie Mac.  Primary Mortgage Market Survey.  30-year Fixed Rate Mortgages Since 1971, national averages.  Updated weekly, current report is for the prior full month.

© Copyright Rick Sohn, #2-9 Umpqua Coquille LLC.   Email  rsohn@umpquacoquille.com

Commentary on 60 Minutes “Megafires” program.

September 28, 2009

CBS’s 60 Minutes on September 6, 2009 carried a special report, rerun with updates from 2007 on “MegaFires”  in the forest.  Why, they asked, are fires so big and intense, with a significant increase in 100,000+ acre fires in the last 15-20 years?

With 20 minutes, and several blogs pointing out omissions in the first report 2 years ago, surely 60 Minutes could have covered the main causes this time.  Unfortunately not, and they blamed the change in fire behavior and size on – maybe you guessed it —  global warming climate change, and ignored most other factors.  Reference was made to drier vegetation, especially at higher elevations, as a result of warmer weather, longer burning seasons, and early snowmelt.  The focus was on hand-crews.  Reference also was made to Smokey Bear, and how successful he as been at encouraging the public to put fires out.  And that was it.  Basically, 60 Minutes said that global warming and fire prevention have caused these wildfires, and the fires are so bad, we almost cannot put them out.

Is that it?  No, it isn’t.  This year, forest industry personnel had the unfortunate opportunity to work side-by-side with the US Forest Service and to see how they fight fire.  The Williams Fire, just east of Glide, Oregon, burned very close to the Forest Service boundary, and was defended by nearby private forest landowners as well, not entirely successfully.  While information about how the Forest Service fights fire is common knowledge, this fire gave an additional opportunity to learn how “they” do it.

Many other factors have influenced fire growth in the Pacific Northwest but were NOT MENTIONED by 60 Minutes.

For example, 60 Minutes could have included the following:

• In the last 15-20 years, harvest in the National Forest and Bureau of  Land Management has dropped over 80% in the Pacific Northwest. The recent fuel buildups are not just caused by Smokey Bear and the prevention of fire, but by the lack of harvest in the forest.  The US Forest Service puts NO VALUE on the resource being burned up, only on dollars spent on the fire itself.  Not surprisingly, many in the agency think the fires are good. 
• 60 Minutes failed to identify that NO VALUE is placed by the US Forest Service on the Carbon Dioxide contribution to global warming caused by both burning up the trees, and the subsequent rot of dead, unburned material.  Many in the US Forest Service simply prefer to let the fires burn, adding to the problem.   
• The harvest of live, healthy trees is not all that has been reduced in the forest.  There used to be aggressive salvage operations and harvests to remove dead and diseased trees that fuel the fires.  This salvage harvest has also almost stopped.
• Initial attack, the process of aggressively fighting fires when they are small – spending lots of money per acre to keep fires small and put them out almost as soon as they start – can be very effective.  But as one source told me, the US Forest Service tries to “manage fire” as opposed to “fighting fire” with aggressive initial attack.  Because fires escape and grow to thousands of acres, a managed fire strategy is not cost-effective.
• The more frequent use of logging equipment, in the past when there were many more loggers in the woods, helped us “fight fires” when they were small and keep them from growing.  Heavy equipment is still used, but with such constraint by the US Forest Service as to make it impractical in many situations.  Unfortunately that balance between logging, use of heavy equipment, knowledgeable people in the woods, and fuel buildup, has tipped, dramatically in favor of the fires on lands managed by the US Forest Service.
• A very high value is placed on safety, as it should be, but this is enhanced beyond what is reasonable, by putting personal liability on the lead fire fighter (Incident Commander) if anything major goes wrong on the fire.  Related to this, fires are not fought at night by the US Forest Service, when fire behavior is much milder and overall safety is so much greater in some areas of the fire.
• 60 Minutes failed to mention that over the last 20 years, the designation of new wilderness areas and roadless areas has put a major firefighting focus on men and women marching in lines, or parachuting out of airplanes, trying to stop fire with  hand tools, because that is all that is allowed or accessible in many of these areas.  The hand tool strategy of choice seems to be back-lighting areas after the tedious construction of hand built firetrails, far from the fires.  The effect is to burn huge swaths of additional land in front of the fire in an effort to stop it.  But this effort is often not conducted properly, and the fires jump the lines anyway.
• The contrast between managing fire and fighting fire is well illustrated by comparing the US Forest Service, which continues to have a steady stream of large expensive fires, to the Bureau of Land Management – which been very successful in fighting fire by teaming up with private and State landowners in Oregon.  Even though the BLM harvest restrictions are the same as the US Forest Service, and fuels build up on BLM lands as well, the BLM successfully puts their fires out – even in very rugged terrain. BLM lands are interspersed with privately owned lands in a checkerboard pattern in western Oregon.  Why is the BLM more effective at fighting fire?
  • Because of well maintained road systems, BLM lands are more accessible in the early stages when a fire is small and entry is safer.
  • The Forest Protective Associations they employ are empowered to fight fire, while interspersed private landowners control the fuel buildup on their lands through harvest and thinning.
  • The BLM has a culture of working with neighboring landowners. The BLM tends to respect the value that neighbors place on the forests.
  • In contrast, the US Forest Service seems to have lost its connection to the community and its neighbors.  For example, it was considered bad news among fire fighting personnel (including fire suppression contractors) that the Williams Creek fire was the only fire burning in the forest at the time.
• For comparison, here are Douglas County, Oregon’s summer fire statistics.
  • As of September 23, 2009, the Umpqua National Forest Boze fire burned 9,462 ac in 10 days,  costing $3,088,000, and is only 10% contained.  According to the News Review, these costs are going up approximately $200,000 per day.  Add to this the Williams Creek Fire – 8,395 ac, costing $13,739,880 – according to WISE fire tracking.  Total cost  of these two fires alone is $16,700,000 and 17,857 acres burned, for these two fires, TO DATE.  Average cost per acre, $935.
  • As of September 25, The Douglas Forest Protective Association has had a total of 71 fires start on BLM, private and State lands, in Douglas County, Oregon this year, burning 836 acres, with a total firefighting cost of $350,000.   Average cost per acre, $419.
    • These intensive Initial Attack strategies are considered very expensive per acre.  Yet, the US Forest Service fires are more than twice as expensive per acre!!
  • 60 Minutes did not even mention the statewide network of Oregon Forest Protective Associations and their excellent work on BLM, State, and Private lands.

To paraphrase CBS’s often cynical Andy Rooney, you’d think after 2 years, 60 Minutes would have done a more in depth study than this.  And would have uncovered more of the reasons why the Forest Service is burning up valuable natural resources, spending huge dollars, and putting lots of Carbon Dioxide into the air, worsening  global warming at the same time, without tracking costs of the resource or the pollution.

When will “Fighting Fire” become the mantra of the Forest Service?   Something needs to be done at the National level to stop the hemorrhage of money, Carbon Dioxide emissions, and the burning up valuable forest resources and wildlife habitat – on far greater scale than wildlife need.  Unfortunately, with the current leadership in Washington, D.C.  that won’t happen soon, so the waste goes on.

© Copyright Rick Sohn, #2-9 Umpqua Coquille LLC.  Email:rsohn@umpquacoquille.com