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DewDiligence

10/27/12 3:52 PM

#5970 RE: DewDiligence #5890

More on those “bullish” (for PCL) pine beetles.
Please see #msg-47898395 for further details.

http://online.wsj.com/article/SB10001424052970203400604578075161671437812.html

Insect Whittles Down Timber Supply

October 25, 2012, 7:28 p.m. ET
By ROBBIE WHELAN

The tiny mountain pine beetle is creating huge problems for lumber producers in the U.S. and Canada and contributing to the rising cost of new homes.

The tree-killing insect, dendroctonus ponderosae, is only about five millimeters long. But some analysts say the pest poses the most serious threat to the timber industry since the spotted owl, which the federal government named a threatened species 20 years ago. That designation curbed logging on millions of acres of federally owned timberland in the West and resulted in the loss of thousands of timber jobs.

The mountain pine beetle isn't an endangered species. The U.S. Forest Service estimates that in the past dozen years, the beetle, which thrives in the mountain forest areas of the West, has chewed through between 40 million and 45 million acres of timber, or about 12% of the forested land west of the Mississippi [an astonishing statistic]. The infestation, which first became serious in Colorado, has moved to other states, including Montana, Idaho and Wyoming.

That is exacerbating a lumber shortage that is acute in places such as British Columbia, Canada—a major source of wood for U.S. builders.

A recent report by lumber-industry consultant International Wood Markets Group estimates that the beetle will have killed as much as 58% of the pine in the region by the time the infestation has run its course over the next decade.

While it is unclear how much the beetle has caused prices to rise, the cost of framing lumber is up 27.4% in the past two years.

Once beetles get under the bark—they typically target lodgepole pines, a common lumber source—they deposit clusters of eggs that hatch into larvae, which block water flow and cut off nutrients, killing the tree.

"Twenty-four sawmills have shut down in British Columbia because there's just no wood," said Jim Girvan, one of the report's authors.

The infestation means there is less saw timber, or fewer trees suitable to be milled into lumber, said Cynthia West, an ecologist with the U.S. Forest Service. "If you lose your entire inventory in one year, what you have to do is wait for the trees to regrow."

Dead trees pose a higher risk of forest fire and lose their structural integrity as they gradually dry out.

Analysts at U.S. Trust wrote in a research note that the lumber harvest in British Columbia could decline 50% for the next half-century because of the pine beetle. The insect's impact could prove a more significant supply shock than that of the spotted owl in the 1990s, the bank said.

The current infestation, which began in the late 1990s, picked up its pace over the past decade, as a result of a string of mild winters. The freezing temperatures of high-mountain winters usually kill off a large portion of the beetle population.

Although the damage caused by the beetle may expand in Canada, it is starting to decline in the U.S., mainly because the beetles are "running out of things to eat," said Robert Mangold, a geneticist with the U.S. Forest Service.‹