three turkeys Over the past few months, PFLA has been involved in a number of public and industry forums with both the business community and the forest industry—actively engaged and advocating on behalf of private forest owners.

In late October, we were invited to participate in a forestry seminar “Trends, Issues & Opportunities for Wood in the 21st Century“ at the Vancouver Island Economic Alliance’s annual summit. Other panel speakers included Tim Caldecott from FP Innovations and Peter Moonen from WoodWORKS! BC.

The session examined the market, social, technical and regulatory trends impacting wood products, and asked the question “What does the future hold for forests and wood in the 21st Century?”

We also participated in the inaugural “Workshop of Wood Fibre Availability Forum” hosted by UBC in mid-September and attended by a wide range of stakeholders from the coastal forest industry, government, First Nations, and academia.

Throughout this process we’ve noticed some recurring themes:

  1. Getting the coastal log processing industry together and asking them to think about changing what they’re doing to better face the global market is a lot like getting the turkeys together and asking them to plan Thanksgiving dinner — nobody wants to put turkey on the menu.
  1. The coastal processing sector chose to build subsidized logs into their business model and lumber, veneer, pulp, paper and bioenergy sectors are unwilling to consider paying international prices for logs or wood fibre.
  1. This is an economic problem, not a fibre supply problem, but nobody in the room is willing to talk about economics. The 2013 harvest was 20.8 million m3 and coastal mills processed 12 million m3, which means there is a huge log surplus. Participants want to blame the government, stumpage rates, other licencees, the tenure system, the stumpage system and log exports, but nobody wants to address economics.
  1. As long as our governments continue to create the situation where mills can acquire wood below the international price, mills are going to continue to drive the price down and distort the market rather than focus on running globally competitive businesses.
  1. If you’re serious about reducing log exports you need to create a competitive processing sector — the inability to compete is why mills have closed and why they will continue to close.

What does it mean for private forest owners?

Private forest owners face major challenges when it comes to getting international prices for our wood:

  • The costs associated with the surplus test process
  • The economic impact if we’re forced to sell our logs domestically
  • For every log we’re able to export we incur significant administrative, delay and handling costs

The sad thing is low stumpage rates and cheap log policies don’t actually work — mills continue to close. There hasn’t been any real investment or innovation in coastal mills for decades, despite access to the cheapest logs on earth.

The processing sectors’ inability, or reluctance, to pay competitive log prices indicates the lack of modern, world-class, globally competitive, large-scale log processing plants on the B.C. coast. This is bad for everyone. If B.C.’s tree growers were offered competitive log prices from local mills we wouldn’t need to export any logs.

What does is mean for the Canadian lumber industry?

As we approach the next round of Softwood Lumber Agreement (SLA) negotiations, American interests are looking closely at policies and practices in B.C. that reduce domestic log costs. A review of the US Pacific North West price data illustrates how dramatically low B.C. log prices and stumpage rates are in comparison.

B.C.’s failure to embrace international pricing and meaningful competition for logs directly subsidizes domestic mills and puts the entire Canadian lumber industry in a vulnerable position at the negotiating table.

The risk in continuing to allow market manipulations to occur is that it leaves no time period for industry to adjust when the government of Canada is eventually forced to make changes (by the courts, an international body or an international trade agreement); the consequences, in terms of mill closures, could be dramatic.

A sign of strong leadership and vision, to the benefit of all Canadians, is for government and industry to start making changes now to build a healthy, globally competitive business based on international pricing.