Madison’s Monthly Softwood Log Prices and Forestry Data Table: September 2020
The British Columbia government announced in mid-September changes to the Manufactured Forest Products Regulation (MFPR), regarding export requirements for sawn-wood products, and Western Red Cedar and Cypress logs, which went into effect Sept. 30, 2020. These changes were intended to increase the amount of processing of wood products done within British Columbia, leading to more B.C. jobs, rather than having that processing done after export.
Under the previous MFPR, logs that were squared off up to a maximum dimension of 0.2 square meters (17 x 17 inches) were classified as sawn-wood product and could be exported without further manufacture.
Under the amended MFPR, the maximum dimension of lumber to be considered a sawn-wood product is 0.1 square metres (approximately 12 inches by 12 inches). This requires further domestic processing of logs prior to being eligible for export. Additionally, the regulation amendments will require that in the Coast area, Western Red Cedar and Cypress logs must be fully manufactured.
Products that do not meet these new criteria will require a provincial export permit and payment of a fee in lieu of manufacture to be eligible for export.
Earlier last year another big change was announced by the Timber Pricing Branch of the British Columbia Ministry of Forests, about how timber stumpage is calculated. These changes seem to be based on similar changes made to the Coast Appraisal Manual, which took effect March 1, 2020.
Various communities and municipalities on the BC coast petitioned the government through 2019 regarding some difficult economic conditions for local forest operators.
The new Interior Appraisal Manual, effective July 1, 2020, states, “Stumpage Appraisal Parameter (the “parameters”) means the Market Pricing System Lumber Average Market Values (AMVs), BC Consumer Price Index, 12-month Running Total Harvest Level, the Estimated Winning Bid (EWB) Adjustment and the US Dollar Exchange Rate as published each month by Timber Pricing Branch.”
Madison’s Douglas fir Log Prices and Douglas fir green 2×4 #2&Btr Lumber Prices: 2015 – 2020
Madison’s reached out to the media department of British Columbia government for technical details on how lumber prices are benchmarked and how that is applied to stumpage.
The July 1, 2020 changes to the Interior and Coast appraisal systems are independent of each other, despite the many commonalities, said the government spokesperson.
Details of the Coast Appraisal Manual data sources mentioned on Pages 1 and 10 are as follows:
- Log grades for determining High and Mid grade ranges: Timber Cruise
- Cedar lumber prices: Random Lengths
- Fir Lumber prices: Stats Can Industrial Product Price Index (IPPI)
- Fir veneer price: Random Lengths
- Hemlock lumber: StatsCan IPPI
- Cypress Lumber: StatsCan lumber export data
On the Coast “The BC domestic log price variable was replaced with North American lumber and veneer prices.” As for the Interior, “That data comes from Timber Pricing Branch internal survey of BC Interior lumber producers (except for Cedar, as above).”British Columbia government representative
From their point of view, some industry folks replied to Madison’s inquiries about the importance of these changes, that “the only real significant change was that being based on lumber prices means more volatility (for log stumpage rates).” However, it might be a better reflectance on market potentials for BC operators. For now, the jury is still out as to whether this will be an improvement regarding BC coastal industry costs.
Meanwhile, other industry player indicated that this is a critical technical issue, but a larger scope of work and collaboration is needed to ensure the investment climate for BC’s forest sector is improved. There are broader and more structural issues to be dealt with these days than the finesse between lumber versus logs for pricing purposes, detailed these players.
Yet others expressed their belief that it will be beneficial in a couple of ways; First, it more accurately reflects the value-added product of lumber rather than the log, which means product logged is milled here in BC and that translates to jobs and support in the sawmills and to those communities. Second, it reduces costs at this point in time which is sorely needed as industry comes off of uncertainly and layoffs over the last six months. Of course, the incredible rebound in lumber prices over the last four months will impact that once it’s due for review, but hopefully the move is a more accurate representation of the state of the market, “rather than lagging behind these wicked swings we’ve been seeing in the market”, these industry participants said.
Madison’s Current Lumber Prices Compared to Historical Highs and Lows
Most demand for Canadian softwood lumber, and consequently logs, is for US home building projects. As 2019 ended with indications of improving US housing activity, 2020 began really strong.
The BC government is well aware of lumber price movement, and several departments study the seasonal changes carefully.
Madison’s tends to agree with the industry players who like the idea of timber stumpage rates which respond to actual market conditions more quickly. The sawmills are caught between so many cost variables out of their control, not to mention fluctuating exchange rates, duties, labour conditions, weather, fires, and so on.
Having the actual cost of their logs a better reflection of that month’s sales price for their lumber not only increases economic efficiency but brings BC closer to the standards of competitor regions like the Scandinavian countries, Europe, Japan, or the US.
By the time of publication in January, the wait-and-see questions will be answered. Madison’s will update industry on how these new stumpage calculation changes are working out.