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Maybe The Markets Will Surprise Us Once Again

Article by Rich Donnell, Editor-in-Chief, Timber Processing June 2023

If you didn’t notice it on the cover, your eyes are getting as bad as mine, but yes this is our annual U.S. Sawmill Operations and Capital Expenditure survey report. It doesn’t pretend to be as precise as a presidential election poll, and there’s no figuring for margin of error here, but it is a solid indicator of what U.S. lumbermen are feeling— where in the mill they’ve been spending their money, where they plan to spend it, and how much. Sprinkle in a few comments on markets and mill operations, as many lumbermen did, and one starts to get a clear picture—at this point in time.

That last clarifier—at this point in time—is key. The survey is e-mailed in April, and the reports on the results as shown in this issue were written in the second week of May. Now of course, as you read this, we are into the month of June.

Why do I point this out? Let’s go back to April 2020, when this survey was conducted. The coronavirus was coming on, and there was tremendous uncertainty. As a result, when U.S. softwood and hardwood lumbermen were asked what their forecast was for their lumber business for 2020-2021, only 27% said excellent (2%) or good (25%), while 39% said fair and 34% said poor or very poor.

After a brief standstill, the lumber markets took off and lumber prices went so high that saying they broke all previous records doesn’t do justice to just how high they went. In other words, the majority of lumbermen got it wrong, but who knew?

So it was no surprise that in the following year’s survey, conducted in April 2021, a whopping 92% of lumbermen expected their lumber business for 2021- 2022 to be excellent (46%) or good (46%), while only 5% said fair and only 3% said poor or very poor. This time they got it right.

The enthusiasm waned a tad the following year, as did markets, but still 81% of the lumbermen said 2022-2023 would be excellent (16%) or good (65%), while 15% forecasted fair and 4% said poor or very poor. Again, right on.

So here we are now, and given the expected softening of the markets following the last two years (it couldn’t last forever), along with higher interest rates and inflation, 35% of softwood and hardwood lumbermen combined expected their lumber business to be excellent (1%) or good (34%) in 2023-2024, while 55% said fair and 10% said poor or very poor. The outlook isn’t as muddled as it was as the pandemic came on in spring 2020, but it’s fairly comparable. And really the most striking comparison is with the 2021-2022 outlook, when 92% said excellent or good, of which 46% said excellent, while today it’s only 35% excellent or good for 2023-2024, of which only 1% said excellent.

It will be interesting come next April 2024 to see what transpired in the lumber business the remainder of this year and into next year. As recent history has taught us, who knows?

As usual we present separate reports on the softwood and hardwood survey results in this issue, with the softwood report beginning on page 16 and the hardwood report starting on page 42. To those who completed the survey, thanks for taking the time.

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