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Forest Industry Positioned to Survive Housing Downturn
The lumber industry is down 20 percent from normal production levels as many mills reduce shifts, take downtime, or permanently shut down, but loaded log trucks are still moving down the highway — delivering raw materials unique to the Pacific Northwest, says Gordon Culbertson, Pacific Northwest region manager for price information provider Forest2Market. “Our forests have many unique attributes that cannot be found anywhere else.”

Forest2Market analyzes the prices of logs specific to species, grade, length, and diameter as they are delivered to mills. The information allows the company to track log and wood values and identify trends. Below are some of the trends they’re finding:

• The resurgence of exports to Asian markets such as Japan and Korea. The dollar has weakened against foreign currencies, encouraging sales to offshore customers. • Export grade Douglas fir and hemlock logs cut to special lengths can command a premium of 20 percent more than domestic logs.

• Pulp mills are driving demand for small logs and wood chips — a byproduct of lumber production with a supply crisis related to the housing market. The lack of available chips has produced a big demand for small, lower quality logs. Pulp mills are using twice as many logs as they normally would to satisfy production levels.

• Larger logs are also in demand for certain specialty products. Electric utilities have been grabbing up logs that are up to 120 feet long. A common price for Douglas fir is $500 per 1,000 board feet. “These are examples of healthy segments of the Pacific Northwest’s forest industry,” Culbertson said. “Lumber mills are struggling, but the forest industry is positioned to weather the economic downturn that the country is facing.”

A Possible Move for the Forest Service There’s talk of a move for the U. S. Forest Service. Some in Washington have made the argument that moving the Forest Service from the Department of Ag to the Interior Department would help solve some bureaucratic issues and assist in money management. The Forest Service, which manages 193 million acres, would be combined with the National Park Service, the U.S. Fish and Wildlife Service, and the Bureau of Land Management, in the Interior Department.                       

Because many of these agencies have overlapping missions — fire prevention and suppression, natural resource conservation, fostering recreational uses, and regulating commercial activities — the House Appropriations subcommittee on interior, environment, and related agencies, and the Government Accountability Office have begun looking to see whether it would make sense to move the Forest Service.                       

“The public perceives them as being very similar,” said Robin M. Nazzaro, director of the Natural Resources and Environment group at GAO, which is conducting the study. “They’ve just asked us to look at, could any money be saved, and would it result in a more efficient, effective, and coordinated management of federal lands and the natural resources?”           

One argument in favor of such a move is that the Forest Service is no longer chiefly devoted to managing the harvesting of timber.                       

“You have more recreational campground areas in the Forest Service than you do even in the Park Service,” Behan said. “So there’s a logical reason for considering it. However, the question has to be asked, ‘Is it the best thing for each agency and for land management?’”                       

Transforming the Forest Service would be difficult to say the least. Just suggesting the change creates anxiety, especially for the timber industry. For many, it’s a sign that forests will be preserved, not harvested.                       

Mark E. Rey, USDA’s undersecretary for natural resources and environment, said the department will cooperate with the study, “and when we see what the results are, we’ll take a position on it.”

$54 million in Grants On March 31, Forest Service Chief, Abigail Kimbell, announced the award of $54 million in grants to permanently protect thirty-five working forests across thirty-two states.                       

“The Forest Legacy Program conserves open space, which allows us to respond to climate change, improves water quality and flows, and connects children to nature,” said Kimbell. “The strength of the Forest Legacy Program is the cooperation between States, partners, and private landowners — all working together to protect environmentally and economically important forests that are threatened by conversion.”                                   

The Forest Legacy Program is the only Federal grant program focused on the permanent protection of important private forestland. The Forest Legacy Program promotes voluntary land conservation by operating on the principle of “willing buyer, willing seller.”

Potlatch to Evaluate Spin-Off of Pulp-Based Businesses Potlatch Corporation announced today that it is evaluating a potential tax-free spin-off of the Company’s pulp-based businesses.                 

If pursued, a spin-off would create two stand-alone, publicly traded entities: a timber REIT, with 1.65 million acres of forestland in Arkansas, Idaho, Minnesota, and Wisconsin; and a pulpbased manufacturing company that would include Potlatch’s Consumer Products facilities in Lewiston, Idaho, Las Vegas, Nevada, and Elwood, Illinois, and its Pulp & Paperboard facilities in Lewiston and Cypress Bend, Ark. The businesses to be evaluated for spin-off had revenues of approximately $1.2 billion in 2007.                 

Potlatch Chairman, President, and CEO, Michael J. Covey, said, “If the Board decides to pursue the spinoff of our pulp-based businesses, it would, among other things, enable management to focus more intently on Potlatch’s core Timber and Real Estate businesses, drive more predictable cash flows, limit volatility from future earnings, and deliver long-term growth. At the same time, the spin-off company would be able to increase focus on managing and growing its manufacturing businesses without the restrictions imposed under REIT rules.”