For longtime lumberman Bruce Daucsavage, 2019 has been one of the most challenging years for the timber market in recent memory. The general director of Prineville-based Ochoco Lumber Co. is attempting to ride out a downturn in the timber industry that has battered prices, closed sawmills and slowed tree-thinning projects on federal forestlands.
“Right now lumber is very cheap. In the last year prices have dropped about 30%,” said Daucsavage, head of Ochoco Lumber since 1983. “It’s an unpredictable market, and we’ve seen big swings. You have to stomach those swings.”
The price drops have rattled Oregon’s timber market. In March, Swanson Group closed its mill in Glendale. Then in April, Georgia-Pacific Wood Products announced it would close its lumber mill in Coos Bay. In May, Stimson Lumber Co. announced it would cut 60 jobs at Forest Grove. Even the Deschutes National Forest has been affected, with contracts for timber sales going without bids.
“We’ve stayed in business. Ochoco has never shut down due to market conditions. When the market goes up we want to make sure we are the preferred company, so we ride the highs and lows because we think customer loyalty is extremely important. It’s a difficult thing to do,” said Daucsavage.
Daucsavage said his company, which employs around 100 people, has weathered the storm by lowering prices for its wood and by diversifying into biomass, a product that is turned into wood pellets that can fuel power stations instead of coal. The company also creates wood chips to be used for the production of paper.
“Our margins have definitely decreased in the last six months, but by reducing our log prices we have been able to maintain our employment base — we were prepared for a downward spiral,” he said.
Reasons for the downturn in the market are complex, involving currency exchange rates, competition from foreign markets, tariffs and the construction market.
Jim Geisinger, executive vice president of Associated Oregon Loggers Inc., said the down market for timber is largely a reflection of slower housing starts across the country for most of this year.
“Our markets are driven by the housing market. As the housing market goes so goes the timber market too,” said Geisinger, whose association represents more than 1,000 contract logging companies in Oregon, many of them small, family-run operations that have been around for three or four generations.
Federal agencies such as the U.S. Forest Service are also feeling the pinch of lower lumber prices.
One of the Forest Service’s main roles today is to find ways to mitigate the potential for out-of-control wildfire, which it does by thinning overgrown forests. The thinning is done by private contractors such as Ochoco Lumber.
The service says thinning projects, also known as “forest steward contracts,” provide a healthier ecosystem for trees. By removing smaller trees, the larger trees will have less competition for water and nutrients, which helps them resist drought, tree disease and insect infestations.
“Our forests need to be thinned. We have too much wood there. We make products that people use every day so the lumber is needed. It’s good for the health of the forests too,” said Geisinger.
But the weak lumber market has stalled thinning projects in the Deschutes National Forest, said Brian Tandy, forest products program manager for the Deschutes and Ochoco national forests. The Deschutes National Forest was unable to sell all of its planned timber contracts this year and missed its target by 25%.
“We usually we get one or more bids for each contract offered,” said Tandy. “But the lumber market has been down for three consecutive quarters and isn’t showing any signs of improving.”
The Deschutes National Forest had planned to sell 86,000 cunits of timber during the fiscal year, but sold just 64,300 cunits, said Tandy. One cunit, also termed ccf or centum cubic feet, represents 100 cubic feet of solid wood. The Forest Service’s final timber sale of the fiscal year that just ended received zero bids.
“I have been in my current position since 2013, and we have achieved between 99% to 102% of target in the years 2013-18. This year, 2019, is the first year we haven’t met target,” said Tandy.
Since timber is sold as a commodity to the private sector, the Forest Service must follow basic supply-and-demand economics, said Jean Nelson-Dean, public affairs officer for the Deschutes National Forest. “Currently, demand for supply is reduced,” she said.
The soft timber market did not affect the Ochoco National Forest, which did meet its target timber sale of 26,463 cunits, said Tandy. At the state level, the Forest Service increased its year-on-year sold volume by 6.2% from 2018 to 2019.
The Deschutes National Forest will attempt to reoffer the most recent timber sale in the coming months. If no bids meet the Forest Service’s minimum requirements, a new appraisal could be made that would take into account current market conditions, said Tandy.
The minimum bid to do the job is expected to cover the cost of brush disposal, reforestation efforts and administrative costs, said Tandy.
“We might have to sit on it for a while longer until market conditions improve,” said Tandy.
When timber prices are high enough to clear costs, some of the revenue made by the Forest Service goes to the U.S. Treasury for its general fund, said Tandy. Some of the proceeds are also designated to reforestation, as well as other restoration projects to reduce wildfire hazard and to benefit wildlife and soil health.
But if the timber industry finds itself in financial constraints due to overall market conditions, it can have a domino effect on the Forest Service timber sales.
Daucsavage from Ochoco Lumber said the fluctuations in the market and the uncertainty of external factors are unnerving, but he’s not yet willing to hang up his hard hat.
“I’ve seen some dramatic swings in the wood products industry, with bug infestations, massive forest fires, climate change, water issues and increased recreation in our forests. So we’ve revamped. Either you go forward with it or you get out of the business,” he said.
— Reporter: 541-617-7818, email@example.com