Canada Softwood and US Housing

Calm for buyers, tight for producers

US and Canada goods trade

The United States runs a goods deficit with Canada, but it is small next to its deficits with Mexico, Vietnam, Taiwan and China. A trade balance is an accounting figure. Bilateral balances reflect supply chains and capital flows, and they say little on their own about whether trade is fair.

US Census Bureau and Bureau of Economic Analysis. Not seasonally adjusted except the July line.

Agreements

Free trade agreements have been in force since 1 January 1989, about 37 years. The Canada–US agreement ran from 1989, NAFTA from January 1994 to June 2020, and the USMCA since July 2020. On 1 July 2026 the US declined to extend the USMCA for a new 16-year term. The agreement stays in force, with joint reviews every year through 2036.

Harvest, regrowth and disturbance

• Canada has about 369 million hectares of forest (2023). Less than 0.5% has been deforested since 1990, and about 94% of it is public land.
• Harvest covered about 669,000 hectares in 2023, roughly 0.2% of the forest. Regeneration is a licence condition on public land, through planting or natural regrowth.
• Deforestation means permanent conversion to farms, mines, energy or development. Harvest, fire and insect damage do not count, because the land is expected to regrow.

Area burned compared with area harvested

Fire totals for 2024 are to October and for 2025 to mid-September. Much of the burned area is remote northern forest outside the commercial base. In 2023, 7.9 M of the 17.2 M ha burned was in managed forest. Insects affected 11.6 M ha in 2023 and 13.1 M ha in 2022, and that count includes light defoliation.

The open questions are about standards. Burned or beetle-killed land often has no harvester responsible for replanting, natural regrowth can return a different species mix, and old-growth forest does not come back on a planting timetable.

Mills and lumber prices

• Total North American shipments were about 57.2 bn board feet in 2023 and 57.0 bn in 2024. US mills produced about 37 bn.
• One US Lumber Coalition paper puts Canadian mill utilization at about 70% in 2024. That group is a party to the trade dispute, so the figure is an advocate's estimate.
• British Columbia's production is about half its 2017 level (RBC Economics).

Lumber futures, USD per 1,000 board feet

CME lumber futures are thinly traded, so prices can move sharply on small volumes. Physical framing lumber (NAHB index) was $506.76 on 25 Sep, up 4.5% year over year while futures were down about 10%.

How much forest one mill needsEstimate

Under a steady annual cycle, land needed equals annual volume divided by growth per hectare per year. Equivalently, it is the acres cut each year multiplied by the rotation length. The example below is a mill making 200 million board feet a year, using about 3.6 m³ of logs per 1,000 board feet. These are my own assumptions and arithmetic, and real mills vary widely.

Gross area will be larger once roads, streams, buffers and reserves are removed. A slow growth rate is the reason boreal supply needs five to seven times the land of a plantation.

What a short rotation is worth

A US South pine stand at 26+ years can bring about $2,110 to $2,275 per acre at clearcut, against $200 to $400 per acre to establish. Taking $2,200 at year 28 and $300 at planting, the value of the bare land depends heavily on the discount rate.

US housing

• Starts were 1.275 M at an annual pace in August 2026: 918,000 single-family and 344,000 multifamily. Completions were 1.128 M, down 27.1% from August 2025.
• In 2025, starts were about 1.36 M. Goldman Sachs research, cited in industry coverage, says annual starts near 2 M would be needed to close the gap.
• Homeownership was 65.0% in Q2 2026, unchanged from a year earlier. For under-35s it fell from 36.4% to 35.2%.
• There were 133.8 M households, up from 132.6 M a year earlier, so about 1.2 M net new households against roughly 1.3 M starts.

Estimates of the shortage, in millions of homes

The methods differ. The White House figure counts missing single-family homes against a historical building trend. The others use vacancy, total units or population trends.

Who owns the stock

• Investors made 27% of single-family purchases in Q2 2026 (Cotality), about 273,000 homes and 40,000 fewer than a year earlier. Their share peaked near 30% in late 2025 and was under 20% for much of the 2010s.
• About 17 M of 86 M single-family homes and townhouses are not owner-occupied, and 87% of those belong to owners with one to five properties (BatchData). Large institutions made about 1% of purchases (Realtor.com).

Interest rates and oil

The energy shock comes from the 2026 Iran war and disruption around the Strait of Hormuz. It keeps inflation up and rates high, which weighs on housing starts and so on lumber demand. My own reasoning, not from the sources, is that wood also gains against steel and concrete when energy costs rise, because those take more energy to make.

For scale, from general knowledge and not from the sources below: the Fed funds rate reached about 20% and mortgage rates about 18% around 1981.

How the pieces connect

Where the figures come from