Quarterly Economic and Revenue Forecasts
UPDATED: December 12, 2022
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 email@example.com.
Lumber and Log Prices. Lumber prices have been exceptionally volatile throughout the past two 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, where they’ve remained through October. Prices are expected to continue falling slowly until the beginning of 2023. However, they are still expected to remain above $400/mbf — the average price for several years prior to 2019. However, given the price behavior in recent years, as well as increasing interest rates and a stalling housing market, it is entirely possible that prices will fall further.
The high lumber prices 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. Since then they have fallen to $720/mbf in August 2022. Although the decrease in one month’s prices can’t be taken as a trend, prices are expected to continue to fall through Q4 of 2022.
Timber Sales Volume. DNR currently plans to offer around 530 mmbf for sale in FY 23. Building in likely no-bids and sales falling off for various reasons, our sales volume forecast is unchanged at 500 mmbf for FY 23 and outlying years.
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.
Timber Sales Prices. The forecast timber sales prices are increased to $370/mbf for FY 23. Sales prices have averaged $393/mbf through the November auction — a $370/mbf forecast is a reasonable middle ground, reflecting both the continued strength of prices as well as the likely decline in prices due to slower housing construction. The outlying years’ forecast prices are unchanged at the long-term average of $350/mbf.
Timber Removal Volume and Prices. Removal volumes for FY 22 were much lower than we had anticipated in June. Typically there is a large spike in recognized removals in June, and our forecast takes that into account. Unfortunately, the expected jump in removals didn’t happen in FY 22.
The removal volume forecast for FY 23 and outlying years is unchanged.
Removal prices are decreased slightly in FY 23 due to an error that inflated prices in the June forecast — without that error, the forecast price would actually have increased. Removal prices in outlying years are increased slightly due to both higher sales prices in FY 22 and lower removals in FY 22, which leaves more high value timber to be harvested in later years.
Timber Revenue. Timber revenue in FY 23 is reduced slightly due to a lower-than-expected price of timber harvested to date, while outlying years’ is increased due to the increase in the FY 23 forecast average sales price.
Timber revenues for the 2021-23 biennium are $364 million — around $0.3 million lower than previously forecast. Forecast revenues for the 2023-25 biennium are increased to $372 million — around 1 percent higher ($4.5 million).
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 all years is increased by $0.6 million due to unexpectedly high minerals and hydrocarbon revenue and an increase in Other revenue — specifically revenue associated with clean energy. Forecast revenue in outlying years has increased by $0.3 million due to higher expected revenue from clean energy.
The aquatic lease forecast for FY 23 and outlying years is unchanged.
The geoduck forecast revenue for FY 23 is increased to $19.7 million, and increased to $17.5 million in outlying years. These changes are due to continued strong auction results pushing up the price forecast. There remain a very wide range of possibilities for geoduck prices.
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, with the renminbi-dollar exchange rate dropping substantially since the beginning of the year and large protests in the country over COVID policy. In the poorer, but still possibly, 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 they are still on the books.
Total Revenues. The forecast revenue for the 2021-23 biennium is increased slightly to $523 million, and the forecast revenue for the 2023-25 biennium is increased to $525 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:
legal challenges to the sustainable harvest volume and marbled murrelet conservation strategy;
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;
the Russian invasion of Ukraine, which could further disrupt global wheat and timber markets; and
although it seems as though it is having little effect now, the COVID-19 pandemic is ongoing, with immune-evasive variants appearing roughly every three to six months, and continues to have to potential to create widespread supply and production difficulties.
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.
Finally, climate change has emerged as a meaningful immediate 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 wreaking havoc in Montana and Wyoming, thunderstorms that took out power-grids throughout the Great Lakes, and a record setting heat-wave that killed at least 2,000 cattle in Kansas1.
Climate change affects Washington state’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 do not appear to have seriously affected revenue from DNR timberlands since 2015, they pose a significant risk to both our short-term timber revenue forecast, potentially destroying standing timber under contract, as well as 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 of the fires, suggests an overall economic impact of $5.9 billion2.
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
Fiscal Year 2021
Fiscal Year 2020
September 2019 | November 2019 | February 2020 | June 2020*
*Not completed due to COVID-19 pandemic.
Fiscal Year 2019
Fiscal Year 2018
Fiscal year 2017
Fiscal Year 2016
Fiscal Year 2015
Fiscal Year 2014
Office of Budget & Economics
1111 Washington St. SE
Olympia, WA 98504-7001
1111 Washington St. SE
Olympia, WA 98504-7001