Quarterly Economic and Revenue Forecasts
   

UPDATED: December 22, 2023
 
This quarterly forecast includes our analysis of current economic conditions and our objective projections of future revenue for state trust funds and their beneficiaries.
 
For Economic and Revenue Forecasts from 2013 and prior years, contact the Office of Budget and Economics by phone at 360-902-1730 or by email at obe@dnr.wa.gov.
 

Forecast Summary

Lumber and Log Prices. Lumber prices were exceptionally volatile from 2020 to 2022, repeatedly doubling or tripling within months and then crashing back down sometime later. For example, in 2021, prices peaked at around $1,600/mbf in May, then plummeted to a low of $414/mbf in August1. However, since the beginning of 2023, prices have remained relatively stable and lower than recent years, staying in between $370/mbf and $490/mbf, with an average of $427/mbf. Prices are expected to remain in this range until late 2024.
 
High lumber prices appear to have pulled up log prices, over the last three years, but it seems that the sustained lower lumber prices in 2023 haven’t yet translated into commensurately lower log prices. For instance, the average log price in from Jan-Oct 2019 was $550/mbf, but was $640/mbf for the same period in 2023. Log prices are certainly down from their high of $790/mbf in July 2022, but are still stronger than would be expected from the effects of lumber prices alone. Like lumber prices, log prices are expected to remain in a fairly narrow range until they start to increase in late 2024.
 
Timber Sales Volume. DNR plans to offer between 550-575 mmbf in FY 24. However, the sales volume is unchanged at 500 mmbf. This is to take into account the likelihood of some contracts remaining unsold at auction and others being delayed or canceled for some reason.
 
Historically, a buffer of around 10 percent of volume has been adequate for these risks, however, there appears to be an increase in community opposition to more DNR timber sales that appears to have driven administrative decisions in the last couple of years that dropped the volume offered well below what had been expected. These decisions have been problematic for volume delivery because they have occurred on sales that have already been fully prepared - the work that went into them is a sunk cost and is gone, and the program often doesn’t have enough time or resources to bring new, alternative sales to auction. It is not clear yet how this type of risk will change in the future, though it seems likely that the risk of actual sales volume being below our forecast is higher than it was in the past.
 
Timber Sales Prices. Timber sales prices for FY 23 ended the year at $390/mbf, slightly higher than our June forecast of $380/mbf.
 
The forecast timber sales price for FY 24 is unchanged at $360/mbf. While this is well below the FY 23 price, it is in line with the average sales price from January-June 2023. The July-October average sales price was only $319/mbf, however, those sales had significant amounts of timber from the Eastside of the state, which is typically lower value. The November average price was $370/mbf, so there is still a reasonable possibility that the average price for the year will be $360/mbf.
 
Outlying years’ prices are unchanged at the long-term average of $350/mbf.
 
Timber Removal Volume and Prices. The 508 mmbf removal volume in FY 23 was slightly higher than the 500 mmbf forecast. The FY 24 removal forecast is unchanged at 510 mmbf, while the outlying years’ forecast remains 500 mmbf.
The removal price forecast is unchanged for all years.
 
Timber Revenue. The timber revenue forecast is unchanged for all years.
 
Non-Timber Revenues. In addition to revenue from timber removals on state-managed lands, DNR generates sizable revenues from managing leases on uplands and aquatic lands.
 
Uplands revenue for FY 23 was slightly above expectations, with higher orchard/vineyard and other revenue. It is notable that the forecast FY 24 and outlying years’ revenue is around $2 million lower than the FY 23 revenue. This is largely because of lower expected revenue and risks to orchard/vineyard. Wine grape demand has fallen substantially, with at least one major buyer reducing their purchasing contracts — equivalent to around 1/6 of the total wine grape acres in production in the state.
 
Aquatic lease revenue for FY 23 was $2 million higher than we had expected in the June forecast. This was primarily due to much higher, and unexpected, revenue in water-dependent and non-water-dependent leases. It is unclear why the revenue increased so much, but it appears likely that it is due to increases from both lease reassessments and from high inflation, leading to larger-than-normal rent escalation. The aquatic lease revenue forecast is unchanged for all years. The geoduck forecast revenue for FY 23 was increased to $21.1 million in June, but ended up at $18 million. This was simply because the bonus bids from the March auction were expected to become revenue in FY 23, but didn’t. This bonus bid revenue is shifted to FY 24, which is why the that fiscal year’s revenue is high than the surrounding years’. The geoduck revenue forecast is unchanged for all years.
 
As usual, geoduck revenue faces a number of risks that can cause it to vary wildly. These include:
  • paralytic shellfish poison closures
  • compliance vessel and labor availability
  • weather issues - such as sewage contamination from flooding run-off
  • China’s policies around geoduck, including their stance on arsenic detection and tariffs still on the books from the "trade-war" from 2018-2019
 
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.
 
Total Revenues. Total revenue for the 2021-23 biennium was $537 million, $7 million higher than forecast in June. The forecast revenue for the 2023-25 biennium is unchanged at $531 million.
 
Other notes to the Forecast. There are, as always, a number of sources of uncertainty around DNR revenue specifically, and the overall economy more broadly. These include:
  • increasingly frequent legal challenges to timber sales as well as policy uncertainty about what prepared sales will actually be brought to auction;
  • uncertainty about the type and quality of stumpage DNR is able to bring to market more than six months out; and
  • the ongoing (but apparently dormant) trade war and political tension with China directly affecting timber, agricultural products and geoduck exports and price.
 
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. 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 Kansas2. 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 Sector3.
 
  1. The prices used here are for West Coast standard or better 2x4 Douglas-fir/Hemlock boards. 
  2. 2020 Labor Day Fires: Economic Impacts to Oregon’s Forest Sector, Oregon Forest Resources Institute ''https://oregonforests.org/node/840''

 

Fiscal Year 2024

September 2023  |  November 2023  |  February 2024  |  June 2024

 

 

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*

 
*Not completed due to COVID-19 pandemic.
 

 

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

 

 
 
Office of Budget & Economics
1111 Washington St. SE 
MS 47001
Olympia, WA 98504-7001
360-902-1730
Fax 360-902-1775
obe@dnr.wa.gov
 
  1. 2020 Labor Day Fires: Economic Impacts to Oregon’s Forest Sector, Oregon Forest Resources Institute ''https://oregonforests.org/node/840''