Planning for what’s next: Strategies for forestry businesses in uncertainty

There’s no question the forestry sector is navigating a tough stretch. After a post-pandemic boom, lumber prices have dropped, trade tensions with the U.S. remain unresolved, and investment in Canadian operations is slowing. Add in inflation and shifting global demand, and many forestry business owners are asking the same thing — where do we go from here?

While the headlines paint a murky picture, there are ways to stay steady, and even find opportunity. The businesses that will emerge strongest are those that understand the cycles, focus on long-term value, and take action early to adapt.

Trade pressure is raising the stakes

For years, the absence of a renewed softwood lumber agreement has meant Canadian producers are paying significant duties to export into their biggest market, the U.S. With talk of additional tariffs, the cost burden could now reach up to half the value of lumber shipments.

That uncertainty is making it harder for producers to plan — and it’s already led to mill closures and delayed investment. With more companies shifting operations south to take advantage of cheaper log and labour costs, the impact on rural Canadian communities could be long-lasting.

However, even with these challenges, Canada still holds a key advantage: resource supply. The U.S. continues to face a housing shortage and lacks the domestic fibre to meet demand. In the short term, that reliance on Canadian lumber remains, but at what price?

Smart businesses are trimming fat and tightening focus

When times are uncertain, fundamentals matter more than ever. For many forestry operations, that means taking a hard look at costs, efficiency, and overall health of the business.

A common issue is overstaffing. During the boom, employers rushed to hire. However, now some are finding they have more workers than necessary. Right-sizing your team and aligning roles with real operational needs is key to staying agile.

The same goes for overhead. Unused subscriptions, supplier contracts that haven’t been revisited, or legacy expenses can quietly eat into margins. Re-establishing relationships with suppliers and renegotiating terms can create quick wins without major disruption.

And while it might feel counterintuitive during a downturn, thoughtful investment can still lead to future opportunities. Strategic upgrades and maintenance now can prevent much larger costs later, especially when the next demand spike arrives.

Plan for scenarios, not surprises

No one can predict the market with certainty. Yet forestry operators who map out what if scenarios such as pricing shifts, raw material delays, labour cost fluctuations, are in a better place to respond quickly and avoid being caught off guard.

For sawmills and logging outfits, this mean projecting customer demand, estimating fibre supply, planning workforce levels, and aligning all of that with available capital. Keeping an eye on economic trends and working with advisors who understand the forestry market can help sharpen those projections.

One of the most common mistakes? Waiting too long to reduce costs. Businesses that hold on to the full staff levels or carry unnecessary overhead too far into a downturn may struggle to recover.       

Strengthen your financial base

A strong balance sheet gives you room to manoeuvre. Healthy working capital, manageable debt, and reliable access to credit provide the flexibility businesses need to navigate tighter markets.

This is a good time to look at your financial position and make proactive moves. Waiting until cash is tight leaves fewer options and tougher negotiations.

Key steps to stay ahead include:       

• Monitor your liquidity and debt ratios regularly to spot early warning signs.
• Work with lenders before you need capital, not after. Set up revolving credit or negotiate terms during stable periods.
• Align your debt structure with seasonal cashflow patterns to avoid shortfalls when expenses peak.
• Prioritize needs-based investments that strengthen your operations without overextending your balance sheet.
• Build a financial buffer during strong market periods to create resilience for the next downturn.    

Even if your balance sheet looks good today, it’s important to review it actively, especially when facing uncertainty. By doing so, you protect your financial flexibility before you ever need it.  

Look beyond the usual markets, and lead with what makes us different  

Canadian forestry has long relied on the U.S. as its primary export destination — partly because our mills are set up for imperial measurements. But there’s a wider world out there, and with it, growing opportunity. Markets like Australia, Asia, and parts of Europe that use the metric system, increasingly seek renewable materials. Retooling to serve those markets won’t be quick but may be worth the investment in the long run.   

Canada also has a powerful underleveraged advantage in the natural species it produces. Take the western red cedar, for example, a high-demand product globally, prized for its durability and appearance. It’s not something many other regions can grow or supply in quantity. By focusing on these distinct assets and transforming them into high-value products, we can strengthen Canada’s role in both export and domestic markets.     

Closer to home, proposed changes to building codes and a growing appetite for low-carbon construction materials are beginning to open doors. As more projects consider wood as a sustainable alternative, Canadian forestry has a chance to do more than meet demand: it can help shape the future of building. And one that is renewable, efficient and proudly homegrown.

Get more from what you already produce     

Innovation doesn’t always mean new equipment. Sometimes, it’s about looking at your existing outputs differently. What else can be done with sawdust, chips, and fibre residuals?

From wood-based insulation to medical-grade products, there are emerging markets for forestry by-products that could add new revenue streams. Exploring partnerships or small-scale trials in these areas may help businesses stay ahead of industry shifts.

Automation is another area to watch. Many mills have already reduced headcounts thanks to robotics and system upgrades, and the next step is maximizing the value of every log that comes through the door. Whether it’s optimizing cuts or exploring higher-value product lines, squeezing more from less will be key.

Building a stronger future for Canadian forestry

The sector is rich in resources, knowledge, and potential. What it needs now is a shift in mindset, from reacting to markets to reshaping them.

By investing in new products, exploring global markets, and maximizing the unique strengths of Canadian species, the industry can move beyond simply supplying demand. It can lead innovation in sustainable building, renewable materials, and value-added forestry products.

Forestry is going to change — what really matters is who’s ready to shape that change and step up when the next cycle starts.