Updated April 2, 2013
Economic & Revenue Forecasts
DNR manages a $400 million biennial budget produced by revenues from state trust and public lands. Our economic forecasts help protect Washington’s natural resources and manage of millions of acres of trust lands on behalf of public schools, universities, counties, and other trust beneficiaries. The information and authoritative data we collect about Washington forestry products help policymakers, industry, planners — and you — to stay on top of market trends. Published quarterly, we develop each Forecast by gathering and analyzing accurate data about current economic conditions. Then, we make objective projections of future revenue for trust funds and their beneficiaries.
March 2013 DNR Economic and Revenue Forecast Highlights
U.S. Economy and Housing Market. The U.S. economy continues its slow recovery from the Great Recession. The unemployment rate, which peaked at 10.00 percent in October 2009, is down to 7.74 percent as of February. GDP growth remains modest at below two percent on an annual basis for 2012. The housing market continues to show positive signs: new housing starts in February were at a seasonally adjusted annual rate of 917,000, their highest level since July 2008, and average U.S. housing prices have increased in each of the last 12 months through February. However, the U.S. economy faces significant challenges. There are still too many unemployed workers; the financial crisis in Europe is improving but several European countries are now in recession; China’s economy has slowed; and Congress is now imposing blanket expenditure reductions across most federal programs.
Note: The following volume, price, and revenue changes are summarized in the table that concludes these Forecast
Log and Lumber Prices. Pacific Northwest log prices were fairly flat for most of 2011 and 2012, but picked up from December through February. The price for a “typical” DNR log delivered to the mill averaged $479/mbf in 2012, down from $483/mbf for all of 2011. Log prices have since jumped to $521/mbf and $556/mbf in January and February, respectively. West Coast lumber prices are moving up sharply: the Random Lengths’ Coast Dry Random and Stud composite lumber price averaged $309/mbf in 2012, compared with $270/mbf for all of 2011, and has since risen to $378/mbf in January and to $399/mbf in February.
Timber Sales Volume. Compared to the November Forecast, projected timber sales volumes for FY 2013 are reduced by 25 mmbf, but they are unchanged for FYs 2014-2017. Timber sales volumes are predicted to be 535 mmbf for FY 2013, 562 mmbf for FY 2014, and about 587 mmbf for each of the outlying years.
Timber Sales Prices. Predicted timber sales prices are revised up for each year of the forecast period. The FY 2013 average sales price is now predicted to be about $323/mbf, up from $280/mbf; sales prices have averaged $319/mbf in the first eight months of the fiscal year. Based on plans for the timber mix to be offered for sale and on increasing confidence in a genuine recovery in the U.S. housing market, timber sales prices are raised considerably to about $369/mbf in FY 2014, $405/mbf in FY 2015, $409/mbf in FY 2016, and $418/mbf in FY 2017.
Timber Removal Volume and Prices. DNR timber purchasers’ harvest plans for volume currently under contract suggest that some of the volume formerly slated for harvest in FYs 2014-2015 will be brought forward to FY 2013 and some will be pushed back to FY 2016. Removal volumes for FYs 2013-2017 are forecast to be 511 (+21), 563 (-34), 584 (-33), 600 (+18), and 587 mmbf respectively. Projected timber removal prices are $294 (+$8.7), $326 (+$36.2), $368 (+$57.7), $396 (+$70.3), and $411 (+$91.0) per mbf for each fiscal year in the forecast period. These higher removal prices follow from—and lag behind—the higher projected timber sales prices.
Bottom Line for Timber Revenues. Due to the anticipated drop in FY 2013 sales volume, the change in the timing of removals, and the projected increase in sales prices, predicted timber revenues have increased throughout the forecast period. The timber revenue projection for the 2011-2013 Biennium is revised upward three percent from $307.4 million to $317.9 million. For the 2013-2015 Biennium, the projected revenue from timber removals is revised upwards nine percent from $364.7 million to $398.8 million. Revenues for the 2015-2017 Biennium are predicted to be $478.7 million, up twenty-seven percent from $376.8 million.
Uplands and Aquatic Lands Lease (Non-Timber) Revenues. In addition to revenue from timber removals on state-managed lands, DNR also generates sizable revenues from managing leases on uplands and aquatic lands.
Compared to the previous Forecast, revenues from agricultural and other upland leases are increased eleven percent to $27.4 million in FY 2013, four percent to $24.5 million in FY 2014, five percent to $24.9 million in FY 2015, four percent to $25.2 million in FY 2016, and four percent to $25.4 million in FY 2017.
There is an upward revision of $0.4 million to commercial lease revenues for FY 2014, but no change to any of the other years of the Forecast period. Revenues from these commercial leases are forecast to total $9.5, $10.1, $9.9, $9.9, and $9.9 million respectively.
Due primarily to a downward revision in projected geoduck harvest volumes, aquatic lands revenues in FY 2013 are expected to total $26.9 million, falling short of the previous Forecast by $2.9 million. Revenues from aquatic lands are expected to total about $31.9 million in FY 2014, $32.7 million in FY 2015, $33.2 million in FY 2016, and $33.5 million in FY 2017. These higher prices reflect modest increases in both geoduck price and volume assumptions.
Total Revenues. Total 2011-2013 Biennium revenues are projected to be $458.2 million, up $10.2 million (two percent) from the November Forecast. For the 2013-2015 Biennium total revenues are projected to be $532.7 million, up $39.6 million (eight percent) from the previous projection. Revenues for the 2016-2017 Biennium are expected to total $616.0 million, up $105.1 million (twenty-one percent) from the November estimate.
Risks to the Forecast. The largest risk to the Forecast is falling short of projected timber sales volumes due to potential environmental, operational, forest productivity, and policy issues (e.g., riparian management areas, and continued timber harvest deferrals pending implementation of a long-term marbled murrelet conservation strategy). This risk is particularly heavy for FYs 2015-2017. Also on the downside are the many challenges to U.S. economic recovery cited in the opening paragraph above. On the upside, the nascent recovery in the U.S. housing market may strengthen even sooner than anticipated.
2013 Economic & Revenue Forecasts
2012 Economic & Revenue Forecasts
2011 Economic & Revenue Forecasts
2010 Economic & Revenue Forecasts
2009 Economic & Revenue Forecasts
For Economic & Revenue Forecasts older than 2009
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