Friday, October 08, 2021

State of the Industry, Fall 2021 (BC Tree Planting)

Here we go again.  Viewing season has started in western Canada, with companies looking at contracts for 2022, and submitting bids.  What better time than now to comment on the state of the Canadian reforestation industry?

There are half a dozen main issues that I should comment upon:  Safety, inflation, industry volumes for 2022, tree prices, Covid, forest fires, and the 2021 Heat Wave.


Health & Safety

I could write an entire essay just about health & safety, but in the interests of keeping things short, I’ll summarize.  And I’ll address Covid separately.

Fatigue continues to be a problem for the industry.  This is especially apparent at the management level.  While a planter’s day is usually done at dinner, this is rarely the case for management at any level.  Company owners and upper-level managers need to continue trying to avoid letting camp and crew leaders work themselves to exhaustion.

Bear safety has been a regular tailgate topic for many years, but the issue really came into the spotlight at the end of July when a support staff working with a helicopter crew near Whitecourt was killed by a black bear who dragged her away from the staging area during planting operations.  Even though some types of accidents are incredibly rare (such as those relating to danger trees, wildlife attacks, and lightning), the risks cannot be ignored.

New OH&S reg are about to be released in British Columbia.  This may increase the number of OFA3’s that are required in the workplace.  However, this hasn’t been finalized.  If more OFA3's are required, this course will become an increasingly valuable addition to one's resume.

It appears that many companies are putting an increased emphasis on acknowledging mental health issues in the workplace.  Psychological first aid training courses are becoming more common, as is access to professional counselling.  I hope that such resources and initiatives continue to become more common.



If you hadn’t paid attention, inflation is running hot these days.  You’re probably noticing this at the gas pumps if you’re a driver.  I was seeing prices of over $1.60 per liter in southern BC this week.  Imagine what prices will be next summer, considering that oil prices are expected to continue to rise.  Compare the price per liter with what fuel cost in the 2020 planting season, and you’ll see that fuel costs are going to have jumped by as much as 50% to 80% in a two-year period (admittedly, the prices in 2020 were a bit low due to Covid).  We certainly may see gasoline and diesel at $2/liter or more by the time next year’s planting season rolls around.  The global energy crisis is just starting to be felt in Canada.

Look at food costs.  The global food price indices are up around 30% year-over-year right now, based upon basic food commodity pricing.  But what does that translate to at the grocery store?  Well, various sources are suggesting that grocery prices in Canada are up by about 4-7% overall in 2021, compared to 2020.  And that upward trend is expected to continue.

Supply chain issues are also becoming more of a problem by the month, thanks to dozens of industries either underestimating or overestimating global consumption patterns when Covid was ramping up in 2020.  Right now, it’s almost impossible to buy new ATV’s, side-by-sides, or full-sized pickups.  I bought a new Jeep Wrangler (base model) in 2017 for $26k.  It now has forty thousand kilometers on it, and I could currently sell it for $35k.  One major truck rental agency recently sold all of it’s 2019 trucks.  Why?  Because after renting them in 2019, 2020, and 2021, they were able to sell them for fifteen percent more than they paid for them originally.  A lot of truck parts are also becoming very hard to find, including basics like air filters.  If a truck develops mechanical problems in 2022, it might be stuck at a repair shop for the remainder of the season.  Will planting companies have spare trucks to keep their fleets running?  Anything short of a 350 doesn’t have enough power to carry anything more than crew and a quad.  This is a flashback to the 90’s, but some planters may end up losing days of work due to vehicle downtime.  Vehicle costs (above and beyond fuel costs) are going to rise dramatically in 2022.

Real estate prices are up (not that many planters can afford to buy houses).  Tuition prices are up.  Retail prices are up.  If you’re an Amazon customer, go into your past orders and look at something that you bought 12-24 months ago, and check the current selling price.  Three-quarters of the things that I bought on Amazon in 2019 and 2020 have increased in price by 20-30%.

Wages need to rise to follow inflation.  Will planting companies bid higher this fall?  It’s hard to say.  Many companies that I’ve spoken to hope to factor 5% price increases into bids.  But will they have the resolve to do that?  I guess we’ll know in two months.


Industry Volumes for 2022

The Western Forestry Contractors’ Association recently held on online Market Summit.  I was flying at the time, and didn’t have the opportunity to watch the presentations in real time.  However, some of the presentations are online now.  Visit this page to find them:

British Columbia is allegedly going to have a slight drop in overall planting numbers for 2022, with the total number of trees decreasing by about twenty million seedlings.  This isn’t entirely a bad thing.  It will let the industry catch its breath compared to two back-to-back record years in 2019 and 2020 (which were slightly more than 300 million trees each year).

A decrease of twenty million trees seems like a lot.  However, that’s only a decrease of about 7% from the levels of the past two years.  And considering that there were a number of significant contract extensions this year, and some non-completions, it’s obvious that the industry is still running very much near capacity.  On top of this, the numbers above don’t reflect additional planting that is coming on-stream from other non-traditional sources, such as oil&gas and environmental projects.

I don't want to appear to contradict the WFCA's analysis of future volumes, but they are obliged to rely on solid verifiable data, and that's a weakness.  Their analysis shows a slow decline in volumes for the next several years.  This is understandable, considering the data that they have to work with.  However, I think they're currently forced to neglect two major factors in their analysis:  2021 Wildfires, and the 2021 Heat Wave.  More on these subjects below.

I expect the industry drop in volume for 2022 to be temporary.  Demand will be pushing the limits again in 2023.

Tree Prices

What can planters expect for tree prices in 2022?  Well, in theory, we’d like to see slight increases, to counter the effects of general price inflation.  Unfortunately though, I think we’ll see that pricing will remain stagnant.  I’d like to think otherwise, but I’m being realistic here.

Most of the industry participants (planting company owners and upper management) understand the need to increase bid prices due to inflation.  Most participants know that Covid costs are not included in this year’s numbers, and unlike last year, needed to be added on top of bid prices.  Most participants are involved in broad discussions (such as the recent WFCA Market Summit), and know that they as a group are responsible for the fiscal health of the entire planting industry.

In 2021, the average bid price on all of the “easy” northern Interior government contracts last year was 48.73 cents per tree.  But there was also an automatic 8.6% added onto these [camp-based] contracts for Covid costs, so the true bid price was around 52.92 cents per tree.  If 5% inflation (and a component for Covid) is added this year, then one would hope that the winning bids for northern Interior work average out to around 55.4 cents.  If bids are lower than this, the bottom line at the planting companies will be what suffers the most.  The ball is in the contractors' court here.  If a company tries to low-ball a few bids then drop planter prices to maintain profitability, they will lose planters to competitors.  The labour market is very tight these days.



I can say with complete certainty that we’re all getting pretty sick of hearing about Covid by now.  And yet, people are still dying, so we can’t ignore it.  In the coming months, company owners will have to make tough decisions about operating parameters for 2022.  For the past two seasons, the camp-based companies made the decision to keep planters in camp on days off, but also to provide meals and laundry services on those days.  Will companies continue to absorb those costs if bid prices don’t support the cost?  Or will planters be free to go to town again?  And if that’s the case, how many cases of Covid will come back to the camps with them?  At least three major companies started to let their planters travel into the local communities in July of this year, and subsequently had to deal with Covid cases among their crews (this was in addition to the two other companies that had Covid outbreaks in the spring).  We want our freedom, but we also want safety.  Where is the balance?

Vaccinations will also be a hot topic in the coming months.  Company owners have also been discussing this issue.  My belief is that a lot of companies will require all employees to be double-vaccinated in 2022 as a condition of employment.  The vast majority of planters are already vaccinated anyway, so this mandate wouldn’t bother most people in that subset of the workforce.  Many planters have said that they’d prefer for their workforces to be 100% vaccinated, because that will presumably grant greater freedoms.

Planters who are not and do not wish to be vaccinated will be vocal in their frustration about these policies.  Some planting companies may specifically decide against vaccination policies, in hopes of capturing a larger group of [non-vaccinated] experienced planters who are looking for new homes.  It will be interesting to see what happens.  Considering that the majority of current cases are among unvaccinated people, will any vaccinated planter want to work at a company that doesn’t require vaccinations?  In theory, the risk of Covid outbreaks will be significantly higher at those companies.


Forest Fires

The wildfire season is essentially over.  After two record-breaking fire years in 2017 and 2018, British Columbia saw two very quiet years in 2019 and 2020.  But 2021 was another bad year.  By September 30th, approximately 868,000 hectares had burned throughout the province, which is more than twenty times the wildfire land base of the previous two years put together (2019 and 2020 combined only saw 36,000 Ha burned).

The past few years have seen improvements for tree planters in comparison to historical earnings from the previous decade.  This was solely due to the 2017/2018 wildfire activity.  There was strong demand for planters, as the forest industry and the province tried to fix some of the damage from the massive wildfires of those two years.  That work will continue in 2022 and beyond.

Many people assume that planting of areas burned by wildfires can happen within days or weeks.  That’s not the case.  Post-fire reforestation is very complicated, with complex timelines.  For the next several months, foresters are going to be assessing the damage in their regions.  Long-term planning starts to happen.  Budget decisions need to happen, to figure out where to find money to restore burned forests.  A lot of that funding originates from government, which typically doesn’t move as fast as industry.  However, there is one other significant delay – procurement of seedlings.  Canada’s nurseries are operating near capacity.  Even when nurseries have space to grow trees, seed must be allocated, and then the seedlings need to be grown.  All of this takes a lot of time.  Although a bit of 2021’s burned ground will undoubtedly be planted in 2022, most of the planting really won’t start in earnest until the spring of 2023.  I expect to see record-breaking volumes in 2023, if the nurseries can supply enough seedlings.


Heat Wave

This is a story that hasn't been discussed widely as of late, perhaps because it's such a sad story.  The heat wave appears to have caused widespread seedling mortality.  Actually, "widespread mortality" is a strong understatement.  The western Canadian heat wave in late June and early July killed an incredible number of seedlings throughout BC and Alberta.  I've visited several plantations this week where not a single [2021] seedling survived, not even the trees hidden in the shade.  There was nothing wrong with the stock or with the planting quality.  The heat (and several weeks without appreciable moisture in the soil) just toasted them.  I'll post a photo at the bottom of this essay to show an example of a fir seedling that was perfectly planted behind a large obstacle (northeast side), and perfectly protected from the hot southwest afternoon sun.  However, it didn't survive.  Nor did any of the hundreds of thousands of other trees (multiple species) on the same block.

I'm hearing similar reports from several parts of BC and even into northern Alberta.  I've never seen anything like this.  It's incredibly disheartening.  I don't think the industry has ever experienced anything like this.  I hope I'm overestimating, but it may be that more than 25% of the trees planted this year have experienced cataclysmic failure.  With over 400 million seedlings planted in Western Canada this year, more than a hundred million may have died in the heat wave.  It's going to take years for some regions to recover from this.  And again, depending on funding, this is one more reason why the industry will need to run at full speed in 2023 and beyond.



After two record-setting years, it probably wouldn’t be such a bad thing to have a “normal” busy year.  Fatigue continues to be an issue for the industry (especially on the management side), and a lot of owners and camp supervisors would be happy to have a less challenging season in 2022.  Despite this, the number of trees to be planted is still very high by historical standards.  Let’s hope that everyone gets a lot of rest this winter.

I'll update this post in February 2022, to reflect upon the results of the fall 2021 bidding season.

- Scooter

Links to Previous "State Of The Industry" Posts:

Spring 2021:

Fall 2019:

Fall 2018: