The world might seem on hold during a COVID-plagued 2021, but in forestry, the economic news is very good. Brooks Mendell, CEO of a leading forestry research firm, said that several improvements are heading our way.
“We’ve been waiting a long time for things to happen,” Mendell said during a phone interview. “It’s finally happening.”
Mendell, who is president and CEO of Forisk Consulting in Athens, Georgia, listed three positive markers for the state:
• New or reopened lumber and biomass facilities and improvements to paper mills;
• A more balanced growth to drain ratio of Louisiana forestland, which will move the needle from the current oversupply levels;
• A push by the public to create more and better carbon markets.
“As of July, Forisk projects U.S. housing starts of 1.59 million for 2021, up 15 percent from 2020 actual,” he said. “Sawmill capacity is catching up with demand,” he continued. “As demand for lumber surged above capacity in 2021, prices drove higher into June.”
Now the capacity has caught up and lumber prices have eased.
Among the new projects for the state are the Hunt-Tolko sawmill in Bienville Parish, a Canfor sawmill in Beauregard, and the revival of a Georgia Pacific sawmill by Interfor in Calcasieu Parish. Weyerhaeuser also is upgrading its Holden sawmill.
Industry figures from those announcements show an extra 870 million board feet manufacturing capacity when all are completed.
“Louisiana got all these new sawmills, which tells us they like operating in Louisiana,” he said.
A strong factor in the state’s favor over Mississippi or Alabama, which also have good wood supplies, is Louisiana’s proximity to strong housing markets like Texas, he pointed out.
An oversupply of logs in the state also has meant lower prices for landowners but that could be changing.
“We have been accumulating a lot of wood,” he said.
Statistics show that Louisiana forests have a 1-to-3 growth to drain ratio, which means 31 percent more wood is on the stump than can be used. Mendell predicts that the numbers will be rolling to be more balanced in the coming years.
The forest carbon market also has been resuscitated, he said, with potential earnings for forest landowners. The pressure comes not from the forestry community but from the businesses that want to buy those credits.
“There is a demand for carbon credits for the Microsofts of this world,” Mendell said. To decide on participation in a carbon credit program, analysts look at the money lost from one year to the next when harvesting is deferred by a year. This offers potential additional revenue for forest owners.
“For a mature forest it is a legitimate option,” said Mendell.
The market is just developing and the carbon market globally is massive, Mendell pointed out.
“Forestry is just a sliver,” he said.
The businesses will be looking at mechanisms other than forestry to provide environmental credits to these businesses in the future.
On a negative but expected development, Forisk’s research shows that trucking costs are going up.
“Driver wages are the largest component of trucking costs and they have grown steadily for years,” he said. “All operating costs are increasing, in fact, with used heavy truck prices up 30 percent and diesel costs up 27 percent in 2021.”
COVID has also affected the trucking side of forestry. Finding drivers is now harder and just as new and used passenger cars and trucks are in short supply, so too are heavy trucks. Parts are another problem for their fleets.
“Insurance rates are also going up,” said Mendell. “Insurance companies are still losing money on a lot of the policies.”
People across the industry are paying attention to this problem and training programs are growing.
“We should all be grateful to be in forestry,” he said. “Forestry did okay in COVID.”
The U.S. South is the leader in the business. “It is, by far, the largest producer of forest products in the country.”
(Mendell is president and CEO of Forisk Consulting. He can be reached at email@example.com)
(Janet Tompkins is the former editor of Forests & People magazine. She retired in 2016.)