After a strong winter and spring, from what we read and hear, current lumber markets in the region are generally soft with some recent 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 related markets have experienced product adjustments and slight price declines.
The other big user of hardwood lumber is the domestic home and furnishings market. Home construction and remodeling 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 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. Black cherry lumber prices continue along at the same general levels as over the last few years. Although there are some positive signs for cherry lumber, prices are historically soft and any recovery will be welcome. Red maple prices have remained high, however there has been some recent decline. Although sugar maple prices were strong last spring, the usual price softening that takes place during the summer months, and an oversupply, has caused lumber prices to fall. In a similar fashion, red oak lumber prices were strong in the spring, and late last year, but fell slightly over the summer and fall. There are positive signs that red oak prices have started to recover throughout the east.
Stumpage prices, while they generally follow lumber prices, are usually less volatile but heavily dependent on grade and logging conditions. Stumpage prices are also somewhat dependent on log inventories. Logging conditions have been mostly favorable and with strong lumber prices last spring, log and standing timber inventories are generally high. Now with a slump in lumber prices and robust inventory levels, stumpage prices have been weak. However, quality sales and favorable conditions still bring 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 deteriorate a tree very quickly. If you have a significant 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 continued to remain 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 yet 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 spring, there are indications that prices are improving.
For current insight into lumber or stumpage values in your area, call our office nearest you.
Chuck Alexander
Director of Appraisal Services
Certified General Real Estate Appraiser
