Pennsylvania Timber Market Report - 4th Quarter, 2020

October-December 2020 Stumpage Prices

$ per MBF International 1/4"

Northeast

Southeast

Northwest

Southwest

Dr. Ray's Comments

Based on the composite data submitted this quarter, the price trendlines overall remain relatively flat. Without diving deeper into the data, we would conclude that the markets remain soft at roughly the same prices as the third quarter.

However, one interesting fact I noticed while entering the data was that the small sawmills that participate in the survey had definitely increased the prices they were paying, presumably for gatewood, across all species.

Averages (Five independent reports, three different regions of the state).

Red Oak +30% White Oak +47% Mixed Oak +50% Black Cherry +10% White Ash +29% Hard Maple +33% Soft Maple +31%

Yellow Poplar + 17% Misc. Hardwood +10% White Pine +0% Hemlock +13%

These increases come after several quarters of relatively flat prices from these survey participants. While these numbers represent less than ten percent of the data points in the survey, the fact that they all show the same trends tell a story that the smaller mills are either seeing hotter markets for their lumber, especially oak and maple, or that they are having a harder time getting logs...or both.

These trends were confirmed by the larger analysis in the southeast region, as you can see on the Southeast graph where all species trended upwards. However, the larger analysis in the other regions shows no such consistent increases, and in fact the Northwest region larger data set reveals downward trends in all species except for ash, which remained flat.

Under normal economic conditions, we might conclude that the smaller mill price increases are signaling that a general warming of the economy is finally reaching the smaller producers. However, these are not normal economic times.

The flat and negative price trends from the entire data set for the Northeast, Northwest, and Southwest, which have far more lumber production than the Southeast, and 90% or so of the cumulative data, hint that the sawmill price increase is despite the fact that stumpage prices in the state, in general, remain soft.

I've spoken with dozens of private landowners in the last two quarters, all calling to ask the same basic question...why are the bids for their timber still relatively low when they are reading that timber prices in other parts of the country are booming?

I explain to them that the booming timber prices in other parts of the country are primarily for softwood timber, which is in high demand because the huge softwood sawmills are pumping out lumber as fast as possible to supply the hot housing markets in most of the country. In theory, and traditionally, hardwood markets lag behind softwood markets, so we would be expecting our stumpage markets to be turning upward in the near future.

However, the economy we're currently in has prompted many private landowners to consider tapping into their "timber bank" for various reasons, and that has apparently created a very large supply of timber available for bidding, thus keeping prices in most of the state soft.

As I mentioned to a caller just yesterday, who was asking about government impact on the market, the policies practiced from 2009-2016, which had such a negative impact on our hardwood industry are now apparently in the process of being put back into effect. If so, we can assume that any upward momentum in our timber markets created by the improving general economy may well be blunted going forward.

So, timber prices will probably remain soft in the near future, unless some fundamental change in the economy occurs. We'll watch for any signs of that in coming quarters.

cdr