Douglas Fir Logs – A Hot Commodity That’s Cooling

Fall 2004

As you may have heard, the log market for most species has been tremendous. In particular, as illustrated by the accompanying graph, Douglas-fir/western larch recently flirted with uncharted territory. However, as we go to print, prices are trending lower.

The strong log market began to build momentum last spring and carried over into the fall. Since log markets usually weaken during late summer, this was somewhat unusual.

There are three main factors responsible for the recent log market utopia. First and foremost is the general high demand for lumber. Housing starts remain very high at a seasonally adjusted rate of approximately 2 million units per year. In addition, the current use of wood products in the repair and remodeling market is unprecedented.

Secondly, due to a shortage of railroad and trucking capabilities, it has been difficult to get wood products from sawmills to consumers. This bottleneck has restricted lumber flow, and consequently, driven up prices.

Thirdly, there has been keen competition among sawmills for logs in our local area. Although we have lost mills over the years, we are still blessed with sufficient log purchasers to maintain a high level of competition.

Although Douglas-fir/western larch prices have been quite strong, are they at an all-time high? If you look at log prices without considering inflation, prices have never been better. However, if adjusted for inflation (Consumer Price Index), a 1994 Douglas-fir/western larch log value of $550/MBF is equivalent to $682/MBF in 2004 dollars. This adjusted value is about $80.00/MBF higher than recent price levels. So even though prices are great, they still lag behind 1994 in “real” value terms.

Regarding the future, a recently weakening lumber market has log prices trending lower. The lumber market is being influenced by many factors including the fact that hurricanes have essentially removed five states from the current lumber market. Also, log demand is less because most area sawmills have built up their log inventories.

To conclude, Douglas-fir/western larch log prices have been wonderful, but not quite as wonderful as 1994. Also, log prices are currently dropping. However, even with these lowering prices, the log market remains strong.

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