An ongoing squabble between the U.S. and British Columbia with regard to the softwood lumber agreement (SLA) could lead to good or bad news for the Canadian forest industry as a whole.

NorSask Forest Products president Trevor Reid said he is keeping an eye on the U.S. claim against Canada for alleged subsidies on B.C. timber stumpage rates, noting, however, “we don’t have a lot of control over it.”

Recent reports indicate the claim has been reduced from $499 million to $303.6 million U.S. in response to Canada’s defence, which states low-quality beetle-kill timber was not mis-graded (as alleged) because, if that were the case, timber buyers would have bid more for stands with a significant proportion of low quality trees.

“It’s my understanding a ruling in this matter will be made in the next year or so,” Reid said.

The SLA, which ended years of trade battles, was signed in 2006 and revoked U.S. countervailing measures. The deal returned to Canadian exporters more than $4.5 billion in tariffs collected by the U.S. and also set export charges for Canadian companies when the lumber price dropped below a certain amount.

While Saskatchewan falls under a different category than B.C. and Alberta in terms of the SLA (B.C. and Alberta chose to not have a quota placed on the volume of softwood it exports resulting in higher taxes while Saskatchewan does have a volume quota resulting in lower export taxes), Reid believes the ongoing issue between B.C. and the U.S. could shake things up considerably.

“Certainly it has an effect on us,” he said. “It could be good news from a Saskatchewan producer’s standpoint because, if the U.S. claim is successful in penalizing B.C., the province will likely have to pay an increased export tax until the full amount is paid off. This could result in the shut down of most B.C. exports to the U.S. making the price for lumber go up because of basic supply and demand.”

Reid added, however, the bad news could see an entire breakdown of the SLA. The agreement is due to expire in 2013 and while there has been talks of extending it to 2015, Reid believes the B.C.-U.S. issue could play a factor.

“They are at that junction right now,” he said. “I’d like to see the agreement continue because it provides stability to the industry. You can look at it from both sides, however. If it is not renewed, we’ll be back to square one again. I don’t like to see any Canadian producer punished, but at the same time it could prove beneficial for the industry in Saskatchewan.”

Oil prices have plummeted the past two days which is also great news for us.  I realize the price of diesel and gas will not drop for a while, probably at least the end of the month for us, nonetheless it is good news!  I find it interesting that gas prices usually are the highest in the summer months, and this year that will not be the case.  Speculation drives the price of oil like nothing else…

One piece of negative news would have to be the continually lagging price of lumber.  All forecasters point to 2011 being another year of slow growth in the market, but the next few years certainly look promising…I hope they are correct!