This quarterly forecast includes our analysis of current economic conditions and our objective projections of future revenue for state trust funds and their beneficiaries.

 

 

Lumber and Log Prices. Lumber prices have been exceptionally volatile throughout the past three years. In 2021, prices peaked at around $1,600/mbf in May, then plummeted to a low of $414/mbf in August (West Coast standard or better 2x4, Douglas-fir/Hemlock). Prices rebounded over the next several months to peak at $1,400/mbf in March 2022, but again fell dramatically to $640/mbf in August. Prices continued to decrease until December, but have stayed between $370/mbf and $440/mbf since. For the last five months, prices have averaged $405/mbf, slightly above the $400/mbf average for several years prior to 2019. Prices are expected to slowly increase starting in the latter half of the year.

 

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. Since December, prices have averaged $655/mbf, still meaningfully higher than the $580/mbf average from 2015-19.

 

Timber Sales Volume. DNR plans to offer 465 mmbf in FY 23— a significant drop from the 530 mmbf previously planned. Consequently, our sales volume forecast is reduced to 465 mmbf for FY 23, but remains at 500 mmbf in outlying years.

 

Timber Sales Prices. The forecast timber sales prices are held at $380/mbf for FY 23. Sales prices averaged $412/mbf through the January auction, but prices from February to May were only $372/mbf, pulling down the average price for the year to $395. A $380/mbf forecast is still likely on the lower end of a reasonable middle ground. The FY 24 average price is increased to $360, on the back of continued strong auction prices. Outlying years’ forecast prices are unchanged at the long-term average of $350/mbf.

 

Timber Removal Volume and Prices. The removal volume forecast for FY 23 is held at 500 mmbf. Given harvests to-date, this appears to be on the higher end of the probable range of the total harvest. Actual harvests have been consistently lower than expected to-date. Outlying years’ forecast volume removal is unchanged.

 

Removal prices are increased in FY 23 due to increased removal of high-value timber. However, removal prices in FY 24 are decreased substantially due to difficulties in estimating remaining timber prices and volumes on the Eastside. New data management tools have been created that will hopefully ensure that these estimation problems don’t continue. Removal prices in outlying years are reduced slightly.

 

Timber Revenue. Timber revenue in FY 23 is increased slightly due to higher removal prices, while outlying years’ revenue is decreased.

Timber revenues for the 2021-23 biennium are $362 million — around $4.0 million higher than previously forecast. Forecast revenues for the 2023-25 biennium are decreased to $372 million — around $10.3 million lower than the previous forecast.

 

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.

 

Forecast uplands revenue for FY 23 is increased by a substantial $2.8 million due to surprisingly high irrigated agriculture, orchard and vineyard, and dryland revenue. These all had surprisingly high revenue in the last three months and it is currently unclear why our previous expectations were so far off. Forecast revenue in FY 24 is increased slightly and unchanged in outlying years.

 

The aquatic lease forecast for FY 23 is unchanged in all years.

 

The geoduck forecast revenue for FY 23 is increased to $21.1 million. Prices from the March auction were higher than expected, but the majority of the change is due to a change of when the revenue is expected to come in. Previously, the bonus bid revenue was forecast to be applied in FY 24, but that instead it will be applied in FY 23. However, the movement of this revenue isn’t decreasing the FY 24 forecast because the change in revenue timing is happening in the outlying years as well.

 

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 ongoing concerns about the 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.

 

Total Revenues. The forecast revenue for the 2021-23 biennium is increased to $524 million, and the forecast revenue for the 2023-25 biennium is decreased to $526 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:

Timber sales volume estimates are based on the best available internal planning data, but they are always subject to adjustments as the year progresses.

 

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 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.

 

---

1. https://www.washingtonpost.com/climate-environment/2022/06/16/summer-climate-disasters/
2. 2020 Labor Day Fires: Economic Impacts to Oregon’s Forest Sector, Oregon Forest Resources Institute ''https://oregonforests.org/node/840''

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

1. https://www.washingtonpost.com/climate-environment/2022/06/16/summer-climate-disasters/
2. 2020 Labor Day Fires: Economic Impacts to Oregon’s Forest Sector, Oregon Forest Resources Institute ''https://oregonforests.org/node/840''