Forecast Summary
High lumber prices appear to have pulled up log prices, with the price of a "typical" DNR log rising from a low of $500/mbf in April 2020 to peak at $720/mbf in April 2021. Prices then softened to a trough of $600/mbf in October 2021, before increasing again to peak at $790/mbf in July 2022. However, the decline in lumber prices hasn’t pulled log prices down as much. July log prices seem to have been the peak, with prices falling to a range between $690/mbf and $730/mbf from August to December. This is still meaningfully higher than the $580/mbf average from 2015-2019.
Currently, there is no expectation that the timber sales program will be able to recoup the sales delayed in FY22. Additionally, it is possible that future forecast volumes will be reduced due to the Department’s Carbon Project, which will remove 10,000 acres of forest land from the planned harvest schedule and instead generate revenue through carbon offsets. However, the current 500 mmbf forecast in outlying years is typically quite conservative, so it is also possible that the new program will have no meaningful effect on the forecast sales volumes.
Removal prices are increased slightly in FY 23. Removal prices in outlying years are increased more substantially due to both higher sales prices to-date (leading to a higher value inventory) and the increase in the forecast sales price.
Timber revenues for the 2021-23 biennium are $358 million — around $7.0 million lower than previously forecast. Forecast revenues for the 2023-25 biennium are increased to $383 million — around $10.7 million higher than the previous forecast.
Forecast uplands revenue for FY 23 is decreased by $0.4 million due to lower irrigated agriculture revenue expectations more than offsetting an increase in minerals and hydrocarbon revenue. Forecast revenue in outlying years is unchanged.
The aquatic lease forecast for FY 23 is increased slightly, while outlying years’ forecasts are decreased slightly.
The geoduck forecast revenue for FY 23 is decreased to $19.5 million. This is purely due to a decrease in the prices received for the November geoduck auction. The price forecast is typically on the lower end of the likely range of geoduck prices, due to geoducks historical volatility. There were a number of coincident issues that appear to have suppressed the November auction price to below the forecast that do not seem likely to affect upcoming forecasts. Therefore, the price forecast in the future is unchanged for now.
In addition to the normal risks that can swing geoduck revenue wildly — including paralytic shellfish poison closures, compliance vessel availability, and sewage contamination from flooding run-off — there are concerns about the ongoing strength of geoduck demand from China. In the lower revenue, but still possible, scenarios, a drop in geoduck demand will lead to a market more like FY 20 and FY 21, with revenue in the $10-$13 million range.
Additionally, geoduck are still covered by tariffs initiated during the trade war between China and the U.S. from 2018. These have been suspended during the COVID-19 pandemic, but, as far as we can tell, they are still on the books.
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increasingly frequent legal challenges to timber sales;
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uncertainty about the type and quality of stumpage DNR is able to bring to market more than six months out; and
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the ongoing (but apparently dormant) trade war and political tension with China directly affecting timber, agricultural products and geoduck exports and price.
Additionally, although timber sales volume estimates are based on the best available internal planning data, they are subject to adjustments due to operational and policy decisions.
Climate change has emerged as a meaningful short- and long-term risk as opposed to an amorphous risk in the far future, as previously rare extreme weather events become more common. In 2021, drought in Washington decreased wheat production on DNR lands by about 40 percent. In September and October 2021, extraordinary rainfall in British Columbia destroyed roads and railways, essentially halting timber harvests, lumber production, and timber exports through the Port of Vancouver. More recently, in mid-June 2022, there was concurrently: massive flooding in Montana and Wyoming, thunderstorms that took out power-grids in the Great Lakes, and a record setting heat-wave that killed over 2,000 cattle in Kansas1.
Climate change will increasingly affect Washington’s fire seasons — drought and rising temperatures dry out fuels fast, leaving conditions ripe for wildfires to begin earlier in the year, burn longer, and spread more unpredictably than in the past. Although these haven’t seriously affected DNR timberland revenue since 2015, they pose a significant risk to both our short-term timber revenue forecast — potentially destroying standing timber under contract — and long-term revenue by destroying younger stands that would be harvested in future decades. Research suggests that the massive fires in Oregon around Labor Day 2020 caused not only immediate damage, but will reduce future Oregon harvests by 115 to 365 mmbf per year for the next 40 years. That, with the more immediate damage from the fires, suggests an overall economic impact of $5.9 billion on Oregon’s Forest Sector2.
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2020 Labor Day Fires: Economic Impacts to Oregon’s Forest Sector, Oregon Forest Resources Institute https://oregonforests.org/sites/default/files/2021-09/OFRI-LaborDayFiresEconomicReport_Final 2021.pdf
Fiscal Year 2023
September 2022 | November 2022 | February 2023 | June 2023
Fiscal Year 2022
September 2021 | November 2021 | February 2022 | June 2022
Fiscal Year 2021
September 2020 | November 2020 | February 2021 | June 2021
Fiscal Year 2020
September 2019 | November 2019 | February 2020 | June 2020*
Fiscal Year 2019
September 2018 | November 2018 | February 2019 | June 2019
Fiscal Year 2018
September 2017 | November 2017 | February 2018 | June 2018
Fiscal year 2017
September 2016 | November 2016 | February 2017 | June 2017
Fiscal Year 2016
September 2015 | November 2015 | February 2016 | June 2016
Fiscal Year 2015
September 2014 | November 2014 | March 2015 | June 2015
Fiscal Year 2014
September 2013 | November 2013 | February 2014 | June 2014
1111 Washington St. SE
MS 47001
Olympia, WA 98504-7001
360-902-1730
Fax 360-902-1775
obe@dnr.wa.gov