This quarterly forecast includes our analysis of current economic conditions and our objective projections of future revenue for state trust funds and their beneficiaries.

 

Since the beginning of 2023, lumber prices have remained relatively stable and lower than the prior years, staying in between $370/mbf and $490/mbf (with one exception in December 2024, when it jumped above $500/mbf), with an average of $436/mbf.

 

Log prices generally trend with lumber prices, but the relationship is not one-to-one. Since the beginning of 2023, log prices have remained in a relatively narrow range - from around $610/mbf to $660/mbf. This is higher than most periods in the last 20 years in nominal terms, though not in real terms.

 

The outlook for both log and lumber prices is uncertain, even in the relatively short term. As discussed at the end of this forecast summary, there are multiple policies that have been enacted or proposed that could have meaningful effects on both lumber and log prices. While this policy uncertainty exists, we expect there to be meaningful volatility in lumber prices in particular. However, log prices are typically bounded on the low end because timberland owners can usually wait to harvest until prices get better. To that end, if nothing changes, we expect log prices to remain in their current range for the remainder of the calendar year.

 

The FY 25 timber sales volume forecast is reduced from 480 mmbf to 430 mmbf. This is due to a pause on timber sales with certain forest characteristics. The pause covers around 80 mmbf of sales, but the reduction in forecast volume is 50 mmbf because previous forecasts had built in risks from no-bid and legal challenges, so those forecasts were well below the planned sales volumes.

 

Historically, a buffer of around 10 percent of planned sales volume has been adequate to account for the typical risks to sales. However, for the last several years there has been increased opposition to DNR timber sales, both through challenges to sale approval and through lawsuits. Given these continued challenges, the FY 26 sales volume forecast is reduced to 470 mmbf. This volume does not include any of the FY 25 sales that have been paused — there is no assumption that they will be moved into FY 26 or any of the outlying years.

 

The forecast timber sales price for FYs 25 is increased from $340/mbf to $375/mbf. This substantial increase is due to the very high prices from sales from November 2024 through January 2025. The sales in those three months were heavily weighted toward high value tracts, while those in the rest of the year were comparatively lower value. The previous forecast price was unchanged, assuming that those higher and lower prices would balance each other out. However, the sales value for Nov-Jan sales was much higher than expected, bringing the average price of sales for the year up from around $340/mbf to over $410/mbf.

 

It is likely that this increase is still too small. To reach this new forecast price, the remaining auctions would need to average around $310/mbf. While writing this forecast document, the February timber auction occurred, with an average price of $346/mbf.

 

The FY 26 sales price forecast is unchanged at $340/mbf. This is lower than the outlying years because the reduced sales volume forecast is from sales that are typically higher value. Fewer high value sales will tend to reduce the average sales price.

 

Outlying years’ prices are unchanged at the long-term average of $350/mbf. This is based on the assumption that current opposition to DNR sales will resolve in such a way that prices will return to their long term average. This may be optimistic.

 

Harvests on DNR lands were slower than expected throughout FY 24. This was apparently largely due to readily available private logs, though weather issues likely contributed as well.

 

This has continued in FY 25, where harvests to-date are much lower than we expected — totaling only 207 mmbf through January. For context, this is the lowest volume harvested through January since at least FY 15, and possibly even longer. Because of this, the FY 25 harvest volume forecast is reduced substantially, to 435 mmbf. To be clear, this is entirely unconnected to the pause on some types of timber sales.

 

Forecast removal volumes in FY 26 and 27 are also reduced, to 450 mmbf and 475 mmbf respectively. We have updated the outlying years’ harvest forecast to be based on sales in the previous three years.

 

Forecast timber removal prices are increased in FYs 25 through 27, due to both an increase in the value of timber harvested in FY 25 and due to the increase in sales price in that year.

 

The timber revenue forecast is reduced for FY 25 through 27 due to the decrease in harvest volumes outweighing the increase in harvest prices.

 

In addition to revenue from timber removals on state-managed lands, DNR generates sizable revenues from managing leases on other uplands.

 

Overall, non-timber uplands revenue is accruing in line with expectations and revenues are on track to meet the forecast for the fiscal year. There have been no significant fluctuations during the last quarter in non-timber uplands revenue accruals. Only two minor adjustments have been made: a small decrease for communications and for minerals and hydrocarbons.

 

Communications revenue is expected to be $5.9 million, slightly below the previously forecasted $6 million for FY 25. While the revenue accrual to date is on track with the forecast, staffing challenges have led to a slight slowdown in the implementation of lease escalations and execution of new lease contracts. This is expected to resolve by FY 26.

 

Minerals and Hydrocarbons revenue forecast for FY 25 is reduced by $0.1 million from the previous optimistic $2.2 million forecast. In FY 28, two contracts are winding down which will result in about $0.4 million revenue reduction until new contracts come online. The lead time for executing new contracts in this industry is typically lengthy and uncertain, and we are conservatively forecasting a gap period in FY 28.

 

Non-water dependent rent forecast is increased by $0.3 million. Revenue accruals have been above expectations to date and we are tracking to generate significantly more than the $5.8 million that was previously forecasted.

 

The revenue forecast for water dependent rents is also increased by $0.3 million for FY 25. Revenues have accrued about $0.3 million over what is expected at this point in the year. This is largely due to a back-payment on rent and is a one-time increase for FY 25 only.

 

Revenue forecasts for aquaculture, easements, and other rents remain unchanged.

 

The geoduck revenue for FY 24 is notably higher than the surrounding years because bonus bid revenue that had been expected in FY 23 was shifted into FY 24.

 

Geoduck revenue for this forecast is decrease by $1 million based on lower than expected prices in the December 2024 auction. The December auction was much lower than we had expected. During that auction, there was discussion of both arsenic issues on some tracts and the possibility of reciprocal tariffs with China, which had caused a significant drop in geoduck prices in 2019. On consultation with the program it appeared that the arsenic issues were the actual driver of lower prices. As a result, we left the price forecast unchanged.

 

However, it appears that may not have been correct. The average price in the March auction, which occurred as this report was being drafted, was only slightly higher than the December auction. From the beginning of FY 22 to the auction in September 2024 (the first auction of FY 25) the average geoduck auction price was $11.32/lb — with some lone auctions being significantly higher or lower, as is normal for geoduck. Geoduck prices can vary significantly between auctions, but when there are auctions with a big change, the next auction often shows a change in the other direction. While it’s certainly not conclusive, lower prices two auctions in a row suggests that there is a new, lower average price that purchasers are targeting.

 

As usual, geoduck revenue faces a number of risks that can cause it to vary wildly. In addition to what is discussed above, these include

The forecast revenue for the 2023-25 biennium is decreased by $10.4 million to $500.5 million, while the 2025-27 biennium is decreased by $10.2 million to $489.4 million.

 

Since the last forecast, there is a new Commissioner for Public Lands (CPL) and a new President of the United States. The change in policies with these new administrations will likely affect revenue.

 

First, the new Commissioner, Dave Upthegrove, implemented a six-month pause on timber sales on select mature forests which has impacted 23 sales initially planned for FY 25. While the impact of this pause is relatively clear for FY 25, and is discussed earlier, there is still uncertainty about what will happen in FY 26 and beyond when the pause period is over. While we assume that none of the paused sales will be brought to auction in the forecast horizon, it is possible that some of the paused sales will be restructured and brought to auction in FY 26. This represents a potential upside to the FY 26 volume forecast. However, there is also the possibility that the Product Sales and Leasing team will have difficulty finding enough sales without the paused forest types, creating a downside risk for the FY 26 volume. There will be more clarity on the revenue impacts of this pause in the next quarter.

 

Second, at the federal level, there have been a number of sudden, meaningful changes to policy. This first major change has been the introduction of 25 percent tariffs on both Canada and Mexico. These were announced at the beginning of February, but were delayed until the beginning of March. After the tariffs were initially announced, CINTRAFOR, the Center for International Trade in Forest Products, produced a quick modeling exercise that estimated the effects. They found that lumber and log prices were likely increased in the US.

 

As of the writing of this forecast, all or parts of these tariff’s have been delayed for an indeterminant period of time.

 

More recently, on March 1st, there were two executive orders signed that are focused on increasing timber harvest from federal lands and decreasing timber and lumber imports. Increasing the harvests off federal lands would increase the supply of logs on the market and likely suppress prices. However, it is unclear how readily these harvests will be increased, given the legal constraints and the lack of available labor to prepare sales — at this point, around 3,400 USFS foresters have been fired and news reports suggest that there will be more USFS positions eliminated soon.

 

The final policy change of the new U.S. Presidential administration has been a "mass" deportation program. Lumber prices are largely driven by demand - primarily from homebuilding. By one estimate, around 14 percent of the construction workforce is undocumented immigrants, so large scale deportations could seriously limit labor supply for the industry - which would also limit homebuilding, and lumber demand, which would tend to push prices down. Additionally, a large portion of the agricultural labor force are undocumented immigrants as well.

 

To date, these policy changes do not appear to have directly impacted timber, geoduck, or Washington’s agriculture sector in a broad way — though the cash lumber prices on the CBOE have increased markedly. Even so, the uncertainty surrounding federal policies, regulations, and the role of federal agencies still looms over the forecast both in the short and long term.

 

Given the uncertainties around the policy environment, previous forecasts were made based on the most likely scenarios with a reasonable degree of certainty, with a bias toward the status-quo where there is significant uncertainty.

 

There are, as always, a number of other sources of uncertainty around DNR revenue specifically, and the overall economy more broadly. These include:

Finally, climate change has emerged as a meaningful short- and long-term risk as opposed to an amorphous risk in the far future, as previously rare extreme weather events become more common. In 2021, drought in Washington decreased wheat production on DNR lands by about 40 percent. In September and October 2021, extraordinary rainfall in British Columbia destroyed roads and railways, essentially halting timber harvests, lumber production, and timber exports through the Port of Vancouver. In mid-June 2022, there was concurrently: massive flooding in Montana and Wyoming, thunderstorms that took out power-grids in the Great Lakes, and a record setting heat-wave that killed over 2,000 cattle in Kansas.

 

Climate change will increasingly affect Washington’s fire seasons — drought and rising temperatures dry out fuels fast, leaving conditions ripe for wildfires to begin earlier in the year, burn longer, and spread more unpredictably than in the past. Although these haven’t seriously affected DNR timberland revenue since 2015, they pose a significant risk to both our short-term timber revenue forecast — potentially destroying standing timber under contract — and long-term revenue by destroying younger stands that would be harvested in future decades. Research suggests that the massive fires in Oregon around Labor Day 2020 caused not only immediate damage, but will reduce future Oregon harvests by 115 to 365 mmbf per year for the next 40 years. That, with the more immediate damage from the fires, suggests an overall economic impact of $5.9 billion on Oregon’s Forest Sector.

 

 

 

 

 

 

 

 

 

 

 

 

Office of Budget & Economics
1111 Washington St. SE 
MS 47001
Olympia, WA 98504-7001
360-902-1730
Fax 360-902-1775
obe@dnr.wa.gov
 

1. https://www.washingtonpost.com/climate-environment/2022/06/16/summer-cli...
2. 2020 Labor Day Fires: Economic Impacts to Oregon’s Forest Sector, Oregon Forest Resources Institute ''https://oregonforests.org/node/840''