GREAT FALLS – The outlook for the forest products industry in Montana is guardedly optimistic — knock on wood, say industry experts.
The national demand for timber, based on slowly increasing U.S. housing starts, is expected to continue its gradual rise since hitting rock bottom during the Great Recession in 2008 and 2009, said Todd Morgan, a certified forester and director of the Montana Bureau of Business and Economic Research.
Timber prices have risen substantially and the number of Montanans working as loggers, mill workers and forestry support roles has increased the last few years, which are promising signs, said Julie Altemus, executive vice president of the Montana Wood Products Association.
But there’s one major catch that makes things more precarious, she said. “The availability of logs continues to be a major challenge to Montana’s forest industry. Without a reliable and affordable supply of logs, mills cannot respond to increasing demands for wood products.”
Worse still, according to Morgan, Altemus and U.S. Sen. Steve Daines, R-Mont., most of the state’s decreasing number of mills are struggling to operate at well under capacity.
While there are some 150 manufacturing facilities providing at least some kind of wood product in Montana, Altemus said, there are only seven remaining sawmills in western Montana that produce more than 2 million board feet a year. That’s down 28 such major mills since 1989.
And most of those remaining large mills are running at less than two-thirds of full capacity, with workers not always working full shifts, officials said.
Some of the mills capable of running two or three shifts a day are running one or two, Altemus said. Some might operate only four days a week or run six hours days.
While the full-time average wages for Montana forestry industry’s approximately 7,000 workers was $49,300 in 2013, or 25 percent above average Montana labor wages, some are not working full time and the jobs could be shaky, she said.
“Some of the mills are just hanging on,” Altemus told the Great Falls Tribune (http://gftrib.com/1KH00Ph). “They’ve been waiting since 2008 for timber demand and log availability to go back to earlier levels, and that’s a long time to hang on.”
Daines, who is holding roundtable discussions in timber towns, has called for the federal Forest Service to budget more forest timber sales and speed up the environmental review process and for Congress to limit lengthy litigation that he says slows logs from reaching mills.
That could take time, and in the meantime Daines has joined U.S. Sen. Jon Tester, D-Mont., in supporting a bill that would revive the Secure Rural Schools Act, which helps counties that used to rely heavily on revenue from federal timber sales, which have fallen substantially. Congress failed to renew the bill last fall, leaving several Montana counties and rural schools hurting. The Montana counties will receive $23 million annually for three years if the bill is approved.
BBER’s Morgan said the national picture is improving for both the home building and forest products industries.
New U.S. home starts gradually have increased since bottoming out at 544,000 in 2009 during the recession, he said. They rose to 924,900 in 2013 and close to 1 million in 2014. But experts are forecasting it will take two or three years — with continued economic growth — for the housing starts to reach the 1.4 to 1.5 million a year rate that had been the national average over 40 to 50 years.
The growth in home starts has been slow for several reasons, Morgan said.
The economic recovery was fairly slow, with a lot of unemployment and underemployed workers to overcome, he said, and the growth in first-time homebuyers has been delayed by tightened lending regulations. Multifamily construction has grown faster than single-family homes, and apartments do not use as much wood per family as single dwellings.
U.S. housing starts are expected to continue growing, Morgan said.
Montana’s lumber production has grown moderately for five straight years since hitting a post-World War II low during 2009 of about 400 million board feet, Morgan said. Montana mills produced as many as 1.5 billion board feet in 1990 and 1.3 billion board feet in 1999 and tapered off gradually even before the Great Recession hit.
But it’s climbed since that nadir, he said, with production rising back close to 600 million board feet last year, a 5 percent increase since 2013. Sales were up about 1 percent to $600 million. Montana’s lumber and paper production was twice that much, $1.2 billion in 2004. Montana no longer has a paper mill.
A BBER survey showed 54 percent of companies in Montana’s forest products industry increased sales last year, but 16 percent had fewer sales. The number of mill workers increased by about 6 percent, with the survey showing 40 percent of the Montana mills increased their workforce, but nearly one-quarter reducing employment.
Worker earnings in Montana’s forest industry were nearly $335 million during 2014, an increase of about 5 percent over 2013. The approximately 7,700 workers employed in the industry represent about one-third of Montana’s manufacturing jobs, Altemus said, and their average full-time wages of $49,300 wages are above the state average of about $40,800 for labor income.
The 7,700 private sector workers include about 4,200 in-forest loggers and foresters and those doing support services such as tree planters and firefighters, Morgan said. Another 3,500 work in primary and secondary wood products manufacturing mills.
There was a slight reduction in the number of “in-woods” workers last year, he said, because of the decline in the Montana timber harvest.
Montana’s total timber harvest volume was about 348 million board feet in 2014, a drop of 8 percent from 2013, and only 7.5 percent higher than the 2009 low, Morgan said.
The availability of logs for harvesting has been an issue for many years for Montana loggers and millers, Morgan and Altemus said.
The federal government has far more control over forests in Montana and other western states than in the Southeast, where there is more private ownership of forest land.
Log prices have increased about 50 percent nationally since 2011, Morgan said, and if Montana mills had more timber available, they would have worked longer shifts, producing and selling more finished wood products.
Montana has about 20 million acres that potentially could be used for forest harvesting. About 62 percent of Montana forest land is under U.S. Forest Service management; private land, including tribal land, makes up about 23 percent; industrial land, including forestry industry, 6 percent, and federal Bureau of Land Management and state land comprise about 4 percent each.
Private landowners are generally most responsive in terms of making timber available for harvesting when prices rise, state-managed lands somewhat so and Forest Service-managed lands least responsive, Morgan said.
He projected that current Montana mills would produce about 630 million board feet if operating at full capacity, but are producing around 350 million board feet, or about 55 percent of capacity. In 2004, when Montana had more mills, its capacity was greater, about 960 million board feet, but the timber harvest also was greater, allowing 78 percent of capacity to be reached.
With a shortage of logs, Montana mill managers compete with each other to buy timber and keep their workforce and small communities going, Altemus said. That drives up the price they pay, called stumpage, and further erodes profit margins, she said.
“None of the Montana mills are operating close to capacity, because Montana relies very heavily on federal lands,” she said.
The Montana Wood Products Association would like to see the Washington, D.C., office of the Forest Service boost its targeted national logging budget substantially from the current 2.8 billion board feet gradually back to 6 billion, still half of what it used to be in the 1980s.
“That would definitely help,” Altemus said, noting that the Forest Service hit its targeted budget by awarding timber contracts of about 270 million feet last year in Montana and Northern Idaho for the first time in several years. It can still take a few years of environmental review and litigation by environmental groups before those trees actually are harvested, she said.
Altemus also would like to see Congress pass legislation to somehow control the lawsuits filed against Forest Service timber awards that she said delay and lower the amount of timber harvested.
Daines has said he hopes to work on a comprehensive, compromise bill with Tester that would include increased timber harvesting on all 10 national forests in Montana.
“Many of these mills would add work shifts tomorrow if they had more logs,” Daines said.