Challenges face forest industry
Journal survey wees bright spots in biomass conversion

The forest industry continues to face challenging times, with a reduced housing market, national unemployment, and recession conditions in the general economy. Yet, there are some bright spots, according to a Piney Woods Journal survey of a cross-section of industry professionals, taken during December.

On the following pages, public and private industry executives including loggers, foresters, educators, manufacturers, and others involved in the forest economy give their views in their own words, detailing what they see as outlook for the coming year.

Ed Smith Timberland Regional Manager, Weyerhaeuser Company

As a company with three of its four businesses closely tied to the housing market, we are encouraged by some of the improvement we've seen in the economy over the past several quarters. The extension of the housing tax credit is beneficial and we've seen it help with the sale of homes. However, it's been a gradual improvement and as long as unemployment rates are high, or people are concerned about their current employment status, they will stay on the sidelines and we will be operating in challenged market conditions. A key indicator will be the first quarter, which generally is the heavier season for home sales. If there is a sustained improvement in home sales in the first quarter and beyond, we could see an increased demand for wood products and, by extension, increased demand for timber. In the meantime, we will continue to operate at levels that allow us to match our production with customer demand.

Mike Dunn Professor of Forest Economics, LSU AgCenter

Forestry is a industry limping toward recovery. Until the unemployment numbers improve significantly, it is hard to imagine a serious economic turnaround. In fact, when we crashed this time we crashed particularly hard because we as Americans carry so much debt. We are not a nation of savings. We are a nation of spending.

There are some signs of life. Total housing starts were up 9% in November. Permits are up, as are sales to first time homebuyers, although this is largely due to the first time homebuyer tax credit. The tax credit has been extended to June 30, 2010. It will be interesting to see what happens when or if the tax credit expires.

I don't see solid wood timber markets improving to any great degree in 2010. Most experts are prognosticating 2012 before a recovery really takes place. However, Louisiana never follows the national trend. Recent income numbers for Louisiana are down and unemployment is up. The forestry sector is the hardest hit in our local economy because of its dependence on construction. When unemployment declines and incomes increase, when debt is paid down, and when banks are finally out of the woods, the general economy will improve and so will the forest economy.

Steve Templin, President, Templin Forestry, Boyce LA

Pulpwood markets have been the bright spot in the last quarter 2009 for plantation thinnings that can be worked in moderately wet weather. These high prices may last into the first quarter 2010. I expect prices for pulpwood will decline into the summer of 2010, especially around Pineville and areas south.

There is lots of uncertainty regarding pine sawtimber markets in 2010. Lumber and plywood production has been significantly lowered in the state and throughout the South. Supplies of lumber and plywood have been warehoused, but a significant uptick in housing would quickly deplete them from the supply chain, and raise prices. The weakest link in the supply chain is the purchase of the raw materials (trees). I think that generally, we will see a slight improvement in pine sawtimber stumpage prices near the end of 2010. There may be some spotty, higher demand in 2010 for certain high quality timber because the prices for higher quality wood products maintain a relatively higher price (and profit margin).

My advice to landowners is to stay steady to your forest management plan. If you have only one tract of mature timber, you may want to wait another year or two before you sell. If you have larger acreage and sell timber regularly in the market, then a good strategy is to sell your higher quality trees or specialty products, and thereby minimize the adverse effects of the markets. You can sell your poorer quality trees best when markets are healthy and expanding.

I encourage landowners to be aware of the Biomass Crop Assistance Program (BCAP). IP in Campti and Mansfield and Smurfit-Stone in Hodge have signed up as energy producers and may qualify for help from the government in the cost of raw materials used for energy production. This program may act to support stumpage rates for small timber.

Travis Taylor Travis Taylor Logging and Chipping, Secretary American Logging Council

Over the past two years I have seen forestry and the timber industry go through a time that I have never seen in over 40 years in the business. To be quite honest, I never thought I would see out industry go through a time this rough.

As the market situation and the economy go hand in hand, we find ourselves in times of uncertainty and feelings of fear in an industry that has always thrived and continued to grow. The most frightening part of the situation to me is the number of loggers that have gone out of business. Without loggers there is no way for the industry to move forward and I see NO new loggers wanting to take the huge risk of investment to start new logging jobs.

As the rain came early this year, we have seen some stumpage prices increase. However, the markets that typically drive the stumpage have not moved as rapidly. This causes me to feel that the increased stumpage prices are short-lived. With that being said, I do not see much of a change over the next year from what we have experienced the last two years.

However, the one bright spot that I do see out there in the near future is the use of biomass as an alternative fuel. In an area that has as much biomass as anywhere in the country, it is essential that we capitalize on the resource that we have and become a major player in the biomass market.

Scott Terry, President, CEO, Ruston-Lincoln Chamber of Commerce

With forest covering about 48% of Louisiana's land area, Louisiana's forest industry remains one of the state's largest employment sectors.

However the national economy has taken a toll on this renewable industry. Housing starts are down to about a third of what they were in 2006, and it has affected all areas of our state, including the piney hills of Lincoln Parish and surrounding wooded parishes. We have experienced downsizing by sawmills, paper and pulp mills, chip meals, treating facilities, as well as millwork and cabinet manufacturing.

Despite the forecasting of state budget shortfalls, many state politicians say they will work hard to define new incentives during the 2010 legislative session. From Weyerhauser (Simsboro) to Stowe-Woodward (Ruston), and DuraFlake (Grambling) to the Hogan Hardwoods shop just outside Ruston, companies and employees are feeling the pinch of an industry struggling from a lack of work and sales, and hoping state incentives, tax breaks, and home mortgage lending programs can rejuvenate this ailing industry.

Lincoln Parish and her contiguous parishes are abundant with natural resources. Now our plants, haulers, loggers, and growers are hoping the new year will bring an upturn to housing construction... bringing a renewed prosperity to an industry that is vitally important to our state.

Cornelis F. de Hoop Associate Professor; Technical Editor, International Journal of Forest Engineering, Louisiana Forest Products Development Center, School of Renewable Natural Resources\par }{\plain Louisiana State University AgCenter

The forest products industry (especially building products) will not recover significantly until the mortgage industry problems are fixed. It appears that no one is doing anything to fix these problems. Those who create the mortgages sell them to investors (remember the investment banks that are "too big to fail"?), so there is no accountability to assure that mortgagees can really pay their loans. This problem could have been fixed by the industry itself, but neither the industry nor the government seems willing to address the problem. In addition, no one seems to address the corruption problems in Fannie Mae and Freddie Mac, which problems extend all the way into the Senate and represent a significant portion of the home mortgage sector. Until both of these problems are solved, and until the Feds stop trying to bail out investment banks that made risky investments (in effect, bolstering inflated real estate prices), expect a painfully s-l-o-w recovery. Also, I expect massive inflation to start creeping up in a couple of years as it becomes time to pay for Washington's fiscal irresponsibility.

The good news is that the economy in Louisiana, especially the Baton Rouge area, remains stronger than most of the country. The other good news is that a few of the leading economic indicators seem to be improving, although it is too early to know whether these changes are permanent or just a bouncing effect.

E. Scott Poole, Senior Vice President, COO, Roy O. Martin Lumber Co.; member, Louisiana Forestry Commission

The close of 2009 brings an end to a challenging year for our industry in total. Many of our colleagues and competitors have either scaled back tremendously or shuttered their plants for economic reasons. While we have all experienced a lack of markets to some degree, our commitment to shareholders, employees and customers has enabled RoyOMartin to sustain production and sales through a host of new opportunities. In fact, we have worked very hard to expand our capacity during this downturn. I have been asked on many occasions how RoyOMartin is doing this. The answers are pretty simple and time-tested:
1. We still believe in the long-term ownership and professional management of timberland. Timber will enable one to overcome the bumpy ride through the seasons and markets with a sustainable source of raw material and a normalized cash flow for operations.
2. We keep giving back to our employees. Even in troubled markets our employees are more dedicated than ever. We communicate and share information around strategy and direction that paints a clear picture of where we're headed. We continually improve our safety systems, insurance plans, profit sharing and retirement programs to be second to none. Over the long term, a safe, committed and dedicated employee will be the catalyst for our organization's success...much more so than cycles in a finished goods market.
3. Adding value for our customers is an ongoing obligation. We must remember that our customers are facing the same challenges that we are...and in even worse local economies. Giving the customer world-class quality on schedule enables them to build a reputation through and with our products. Each day we look for new and innovative ways to enhance this relationship.
4. Maintaining a healthy logging force is critical to our regional economy. Let's face it, without our loggers none of this material gets to market. Loggers contracting with RoyOMartin have made the economic, personal and professional investment to survive through the good and bad. I know this as fact, as I take the time to meet with them regularly to share openly and forthright where we are in this economy and where RoyOMartin is headed. I truly believe our logging contractors have confidence in our communications and have contributed jointly in this TEAM effort. We cannot and will not stumble in our dedication to this association.

In general, we at RoyOMartin see a world of opportunity coming in the wood products industry. We know that, by adhering to the above commitments, we will be positioned to capitalize on these markets while enhancing value to all our shareholders. RoyOMartin is ready and GROWING !!!

Wade Dubea Louisiana State Forester, Louisiana Department of Agriculture and Forestry

In looking to the upcoming year, it's necessary to mention some of the changes that were implemented during 2009. The Office of Forestry restructured its District system changing from eight to six districts statewide. The new District system is based on wildfire occurrence and land management demands. The internal District structure also changed to allow available personnel to better serve forest landowners. While wildfire suppression will remain everyone's primary responsibility, foresters and crews have been tasked with emphasizing either management or fire as part of their daily routine. In addition to these changes, the air fleet was reduced from eighteen to twelve planes. The reduction was part of an effort to streamline operation and improve efficiency. With these changes in place, the Office of Forestry is preparing for the coming year.

One of the goals set for next year is to continue the transformation of the Forestry Districts while providing uninterrupted service to the state. As you may be aware, budget issues have mandated that we revisit how we are able to meet the requirements of Louisiana forestry. We are committed to safety and continue to support sustainable land management.

We have witnessed a number of changes within the forest industry this past year. Unfortunately, many had a negative impact. Facility closures, decline in timber prices and unemployment are only a few of the setbacks following us into next year. There were, however some encouraging issues as well. New opportunities in carbon credits and biofuels are gaining ground and provide additional avenues for forest landowners.

For 2010, the Office of Forestry will strive to provide the best service possible for Louisiana. Our goals include evaluation of current practices and adding or modifying these as required. We are continually being asked to do more with less and each time we manage to meet the challenge. I have called upon our employees to do this time and again. Each time I remind them to work safely and provide a quality product. With this New Year also come new opportunities.