Margules Groome’s Australian Softwood Residual Log Price Index measures domestic softwood plantation residual log prices (excluding exports). The index is a measure of the residual log value to the forest owner once harvest and haulage costs are subtracted from mill door log prices. It is a measure of the forest owners log margins, or the spread between log prices and logistics costs.
The latest edition of the index indicates margins have increased through the first half of 2020. A bit counter-intuitive given the difficult trading conditions brought on by the response to the COVID-19 pandemic, but the key reason comes back to the massive 29% fall in fuel prices over the same period. Both log prices and logistics costs have decreased as a result, but the latter by more leading to a 10% increase in the residual log price spread.
The outlook is very uncertain. Predictions of a collapse in the housing market in the second half of 2020 as telegraphed by a loss of forward orders through the supply chain are still expected despite Government support in the form of HomeBuilder. Such a loss of demand may cause sawnwood prices to fall, and in turn log prices, but the real issue for forest growers will be the deduced volumes sold.
For further information and analysis contact Margules Groome.