Some good news comes for Louisiana’s forestry community

Without a doubt, 2020 and the first half of 2021 were extremely tough for Louisiana’s forestry community. Challenges ranged from one end of the spectrum to the other. They were multifaceted and extremely difficult to manage or mitigate.

On one end of the spectrum, forest landowners, the forest industry and logging contractors were forced to deal with unprecedented issues surrounding the COVID-19 pandemic, including the effects of COVID-19 on personal health, personal finances, business operations and the related economic shutdown, to name a few. Attempts to manage essential businesses were additionally hampered by the availability of a “healthy” workforce, safety protocols, health and safety equipment, and government mandates or shutdowns.

Just when we thought that things couldn’t get worse, the infamous and ever-changing Louisiana weather showed us that the COVID-19 pandemic was just the beginning. The Louisiana forestry community had to deal with the unfathomable destruction of personal property and timber caused by not one, but two major hurricanes named Laura and Delta. The estimated value of timber losses from both hurricanes totaled $1.467 billion, but that number doesn’t begin to reflect the damages to personal property or businesses.

To further complicate matters, the landfall of Hurricane Laura ushered in a lengthy period of wet weather, which rendered most timber salvage operations useless and complicated repairs and reconstruction. Then, in February of 2021, a historic winter weather event placed most of Louisiana on lockdown as an Arctic front kept the temperature below 32 degrees Fahrenheit and the roads frozen and unpassable for an unprecedented length of time.

This may sound like the same old sad story of 2020, but we’re midway through 2021 and the narrative has begun to change for Louisiana’s foresters. The proverb of “April showers bring May flowers” comes to mind, and it might apply to Louisiana’s forestry community these days because despite the continuing wet and rainy weather, “green shoots” are showing up by way of good macroeconomic news and important announcements about the future of forestry in our state.

On the macroeconomic front, the United States economy continues to recover rapidly from the COVID-19 shutdowns as measured by two historically important metrics for forestry. These measures are the gross domestic product (GDP) and privately owned housing starts.

First, the GDP continues to increase at impressive rates. For the noneconomists in the group — including myself — please let me attempt to explain GDP and how to interpret the numbers: U.S. GDP numbers are a measure of the percent change in several of the leading economic indicators. This rate of change can be either positive or negative. As you would expect, positive GDP is a positive economic indicator, and negative GDP is a negative indicator. GDP numbers can be calculated by comparing economic indicators from either the previous quarter (quarterly basis) or the indicators from the previous year (annual basis). It is also important to know that even if the comparison is between the numbers on a quarterly basis, the percent of change is adjusted and reported as an annualized rate.

Now the good news about U.S. GDP. For the first quarter of 2021, real GDP increased at an annualized rate of 6.3%. Estimates for the second quarter of 2021 show that GDP increased at an annualized rate of 6.5%. This is very good news for the forestry community and the United States in general because historically GDP has been one of the ways used to measure the health and direction of a country’s economy. Although the estimated second quarter 2021 6.5% GDP growth may be considered more than ideal by some economists, in my opinion, a 6.5% GDP is a “green shoot” the size of a mature longleaf pine compared to the second quarter 2020 GDP which declined by -31.2%.

Second, the U.S. housing market remains very robust according to the June 2021 housing starts. You may be wondering why the number of housing starts is such an important macroeconomic indicator. As foresters, we understand that the more houses are built each year, the more wood is needed, so demand for our products remains high. But it goes much deeper than that for the U.S. economy. Approximately one-sixth of the U.S. GDP numbers are directly connected to housing starts, so that means that housing starts are a major driver of the U.S. economy.Housing starts, especially for single-family homes, provide a reliable real-time measure of consumer confidence in the overall economy because people generally only build a home if they have the confidence that their job is reliable enough to allow them to pay their mortgage. Housing starts have been an extremely reliable indicator of future economic activity in certain business segments that specialize in “making a house a home,” such as retail stores that specialize in furniture and home decor or with service providers, such as interior decorators or landscape contractors.

Now for the numbers. According to the U.S. government’s report for June 2021, U.S. privately owned housing starts were at a seasonally adjusted annualized rate of 1.643 million homes for 2021. In the same report, private single-family home starts were estimated to be 1.160 million homes for 2021 on a seasonally adjusted annualized rate. For reference, in 2020 U.S. privately owned housing starts were 1.38 million homes, with 991,000 of those being private single-family homes. If the estimated numbers for 2021 are even remotely close to the actual numbers, this represents a nice improvement over the 2020 numbers, which I consider to be another important “green shoot” for forestry.

Next, some outstanding news and “green shoots” focused specifically on the Louisiana forestry community that will benefit landowners, forest industry and logging contractors alike.

First, on May 27, 2021, the Interfor Corporation announced an agreement with Georgia Pacific (GP) to purchase four sawmills in the U.S. One of the GP sawmills purchased by Interfor is the sawmill located between Ragley and DeQuincy in Beauregard Parish, which was idled in May 2020 during the COVID-19 pandemic. Interfor is currently evaluating strategies and equipment for the site and is formulating plans to safely and efficiently restart the DeQuincy mill.

Second, on June 8, 2021, the Canfor Corporation announced that it plans to build a $160 million state-of-the-art sawmill just west of DeRidder in Beauregard Parish. Canfor expects that construction on the mill to begin in late third quarter of 2022.

Third, Hunt Forest Products and Tolko Industries announced a joint venture and plans to construct a $240 million sawmill near Taylor in Bienville Parish. Construction on the new state of the art mill is scheduled to begin in early 2022. Commercial operations are expected to begin in early 2023.

What do these “green shoots” mean for Louisiana? If you are a forest landowner, a logger, in the forest industry or a citizen of the state, these announcements should give all of us all hope: hope for good, high-paying jobs; hope that higher demand for our timber will positively affect stumpage prices; hope that people will need our services to manage, buy and sell timber; and hope that consumers will continue to need and purchase the products produced in our mills — the very hope and motivation we need to rebuild our lives and replant our forests.

Robbie Hutchins is an associate area agent specializing in forestry for the LSU AgCenter in the Central Region.

10/4/2021 7:40:03 PM
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