If we focus solely on politics or geo-political issues, then we enter 2024 with a strong sense of foreboding. The Russia-Ukraine conflict continues with an end hardly in sight, reignition of conflict in the Middle East has brought protest onto the streets of America, the border crisis has reached an all-time high of illegal immigrants entering the U.S., and amid this 2024 is welcoming us to a presidential election year with some of the most divisive rhetoric ever displayed in politics. With this as a backdrop, it is difficult to see how anyone can be looking for a silver lining in 2024.
On main street, we all pull ourselves up by the bootstraps, go to work, and appreciate our families and our communities. The last year and a half of economic tightening has been difficult for us as our markets have adjusted from the heady highs of 2022. It seems that American prosperity continues in spite of those in charge, not because of them. We are starting to see American resilience in our markets right now. We are seeing stability return, consistent current order files, and customers looking to lock-up long-term business through this next year.
The Oregon Office of Economic Analysis just released their Economic Outlook for 2024. The summarized version is that we have achieved a soft-landing for the economy, inflation is nearing the Fed’s 2% target, and economic models indicate four to six consecutive rate drops in 2024 to a Fed target rate of 3%. Wow, that is an incredible turnaround from the dire state of inflation we have seen over the last couple of years. A cynic might question whether the government could continue to service its debt level at 6% for an extended period of time or ponder the timing of Fed rate drops prior to a Presidential election.
These are positive developments for our markets, however. Lower interest rates encourage investment in housing and commercial construction, whether single-family, multi-family, or larger mass timber structures.
Our plywood order file is strong as we enter the New Year. We weathered a typical holiday slow-down in sales with a strong order file, and immediately started building order files again as the year started. LVL producers have been stronger for the last two months and are still looking for quality engineered veneers.
The veneer market has been stronger the last two months than any other period we experienced in 2023 and we are now running our dryers at capacity. We are restarting a veneer shift that we curtailed at the beginning of 2023 due to increasing demand and improving prices. We have been fortunate to pick up decent timber sale volumes to support additional production, but there has been little improvement in log costs. Atypical of most wood products market corrections, log prices are persistently high even though they are unsupported by finished product prices. It has been a dangerous pinch for most of the year.
Labor is still our biggest obstacle. With sales starting to increase, our production levels at all plants will need to increase, which means we need more employees and fully staffed shifts to attain higher levels of sales and return to profitability. If you know somebody currently holding down a couch that needs a place to work, please have them reach out to us. Wood products jobs aren’t easy, so we are looking for hard-working people. If you have a little grit and determination, and maybe a little sawdust in your veins, this is a good place for you.
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