Timber Management in a Slumping Market

By Kevin Daugherty

A couple of months ago, we watched as the COVID-19 upended China’s entire economy. At the same time here in the U.S., the Dow Jones Industrial Average was at record levels and economic indicators like unemployment and GDIP suggested we were headed in the right direction. My how things can turn on a dime! As the coronavirus pandemic grips our nation’s economy, the forest industry is feeling the effects. With home building on hiatus for the foreseeable future, the demand for lumber and panel products has been drastically reduced. The demand for fine writing paper and certain types of packaging papers are in decline as well. While the demand for toilet paper and sanitary wipes has gone through the roof, it’s hard to increase pulp and paper production because those machines are already running at full capacity.

As goes the market for forest products, so go the timber markets. With the decrease in demand for lumber and panel products, pine saw-timber and chip-n-saw demand have dropped. The hardwood saw-timber market is still suffering from the trade and tariff situation with China. Though there may be some much-needed light at the end of the tunnel with “Phase 1” of a new trade pact, prices for grade oak remain low. The decrease in demand for the other forest products has forced the logging community to shift to pine pulpwood. Wood yards are full, wood suppliers are on strict quotas at the mills, and prices are dropping. Local timber markets were already saturated, but this has taken it to another level.

In light of this gloomy forecast, timberland owners currently face a couple of very serious questions. “How does all this affect my timber management plan?” “Should I cut any timber now or wait for the market to improve?” On the one hand, each step in a timber management plan is geared toward benefiting the stand and maximizing profit throughout the rotation. Periodical thinning increases growth and promotes a healthy stand by reducing competition for moisture and nutrients and by removing diseased or defective trees. On the other hand, timber is an investment, and, as with liquidating any part of an investment portfolio, timing can be critical. Though it requires some explanation, my advice for private landowners on managing and harvesting timber during poor market conditions is pretty simple and straightforward.

During the growth cycle of timber stand, there are stages at which timing of a thinning is critical to setting the foundation for forest health and profit down the road. Possibly the best example of this is when a pine stand is ready to be thinned for the first time. At this point, tree growth has decreased drastically due to overcrowding, and the stand is most vulnerable to fire, insects, and disease. The stand must be thinned to reduce competition and free the remaining trees to grow. When a harvest is crucial to the future of the stand, I generally recommend going ahead despite a relatively weak market. The sooner this is done after the trees reach a merchantable size, the better. Pulpwood thinnings aren’t the big income producers that saw-timber harvests will be later on, so the profit/loss from market timing is not as great.

There are also stages where the timing of a harvest is not as critical. A good example is when a timber stand has reached maturity, and it’s time to clear-cut and regenerate. At this stage, even though the trees are mature, growth has slowed, and some natural mortality is starting to occur, it may be best to wait for market improvement.

In summary, I recommend the following: 

  • In young pine stands, stay true to your management plan. Proceed with first and second thinnings, if possible.
  • In saw-timber stands, monitor market conditions and consider waiting for improvement before making final harvests. Keep in mind that volatile markets are tough to time, so you need to be ready to strike when the iron gets hot.
  • Do all necessary reforestation and silviculture work and always maintain property boundary lines.
  • As in farming, weather and insects pose a threat to timber crops. Many landowners fear that by waiting to harvest their timber, they are increasing their susceptibility to these threats. These threats are a reality. However, I never recommend that fear of catastrophic mortality be the sole basis for timber management (harvest) decisions. 

Of course, there are special circumstances that may override market consideration. Storm damage, insect infestation, financial need, and clearing property for pasture or development are a few that come to mind. These are circumstances where emergency or opportunity may dictate that the landowner remove the timber immediately.

As stated earlier, local timber markets were already saturated before COVID-19. The saturation of the market not only affects the price of timber but also reduces buyer interest for tracts with marginal volume or challenging logging conditions. Small acreages, poorly stocked stands, and difficult tracts (poor access, steep hills, wet-natured) are most affected by this factor.

The current situation has affected every sector of the forest industry, my business included. As a consultant, I partner with clients to try and relieve them of much of the stress and uncertainty that can come with selling timber. When they make less for their timber, I make less for my services. As we continue to navigate through the uncertainty associated with this pandemic, it’s important to focus on things we can do to prepare ourselves and our timberland for opportunities that await on the other side.

Kevin Daugherty is a forestry and wildlife consultant, real estate agent, and the managing member of ForestLand Associates, LLC. He’s a member of the Association of Consulting Foresters, Louisiana Forestry Association, Society of American Foresters, and is a Land Certification Inspector for the Quality Deer Management Association. He and his wife live in rural Winn Parish. For questions about this article Kevin can be reached at (318) 312-1240 or kevin@forestland.com 

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