Lumber prices were strong last winter and spring, soft over the summer and fall, but from what we read and hear, current lumber markets in the region have shown some signs of improvement. A significant portion of our regional hardwood production goes to the export market, of which China is the largest consumer. Therefore, hardwood lumber markets are closely tied to the Chinese economy. Hardwood exports in 2014 hit record levels and while 2015 numbers are down, 2015 appears to be the second highest year ever for hardwood exports.
Other large consumers of hardwood lumber, especially the lower grade material, are the pallet, railroad tie, construction pad and flooring markets. Over the last few years, with the exception of flooring, these markets have been strong and have provided a welcome base for hardwood lumber prices. With oil and gas prices being very low, drilling activity has declined and these markets have experienced product adjustments and slight price declines. There are however, a number of large gas lines being planned, which will require additional construction timbers for road pads.
The other big user of hardwood lumber is the domestic home and furnishings market. Home construction and remodeling, although still low, continues to climb out of recession levels. As the domestic economy continues to improve this should increase demand for hardwood lumber. In summary, we are cautiously optimistic about future hardwood lumber markets.
For the last few years ash lumber has been in high demand. More recently however ash prices have experienced slight downward pressure. This is potentially because of a large quantity of ash being harvested in advance of the emerald ash borer (EAB). The beetle has been found in pockets throughout the region and when significant populations are present they are quite damaging. There have been some indications that ash prices may have recovered slightly. Black cherry lumber prices have recently declined and although we have heard of some positive signs for cherry timber (especially quality), prices are historically soft and any recovery will be welcome. Red maple prices have remained high with some recent improvement. Although sugar maple prices were strong last spring, the usual price softening that takes place during the summer months and an oversupply caused lumber prices to fall in the third quarter. Sugar maple lumber prices have also improved, and in a nearly similar fashion, red oak lumber prices were strong early last winter and in the spring but fell slightly over the summer and fall. More recently, there are positive signs that red oak prices have started to recover throughout the east. White oak lumber prices have remained strong with some recent improvements.
Stumpage prices, while they generally follow lumber prices, are generally less volatile but heavily dependent on grade and logging conditions. Stumpage prices are also somewhat dependent on log inventories. Logging conditions have generally been wet and unfavorable and log inventories are generally low. Now, with some indication of better lumber prices and lower inventory levels, stumpage prices seem to be improving with quality sales and favorable conditions still bringing a large number of bidders.
Of particular concern is ash and the emerald ash borer. Our region is seeing quite a bit of ash mortality which can ruin a tree very quickly. If you have a merchantable amount of white ash we suggest you monitor your stand for EAB infestation. Many landowners have accelerated sales of ash timber and in spite of this increased flow of timber, ash prices have remained very strong over the last number of years.
On the other side of the current timber market is black cherry timber and logs. Black cherry timber prices have not recovered to pre-recession levels. While most hardwood species have recovered very well, black cherry timber prices remain historically depressed. Many landowners have been hesitant to sell quality cherry at these depressed prices however we continue to see quality cherry being placed on the market.
In summary, hardwood timber prices are heavily dependent on the domestic, export and low grade markets. Although stumpage prices are slightly off from last year, there are indications that some prices are improving. Current lumber price trends appear to be improvements in the maples and oaks and declines in black cherry and poplar.
Director, Appraisal Services