The price of the benchmark random length spruce-pine-fir two-by-four climbed to $286 US this week, a 25-per-cent increase from five weeks ago, according to Madison's Canadian Lumber Reporter.

However, the loonie is at a record 30-year high, topping 94 cents US recently, which erodes the bottom line of lumber producers.

"Any increase in price has been more than offset by a 94-cent Canadian dollar," said Madison's publisher Laurie Cater. "It's a disaster," he said.

Many lumber producers in north-central B.C. have announced temporary closures in reaction to the poor lumber markets and rising dollar.

Cater said the curtailments -- which also included others in Eastern Canada -- have tightened up supply slightly and that has put some upward pressure on prices.

However, while prices appear they will firm up, Cater said he's not sure there's a lot of upward potential for prices.

The biggest factor in the lumber price drop has been a slumping U.S. housing market. Starts peaked at 2.1 million in 2005, but are expected to finish below 1.5 million this year.

Forest industry analyst Daryl Swetlishoff had a similarly grim view of the market. While lumber prices are moving up, they are a long way from break-even, he said.

"I think your average Interior mill would have break-even costs at a 94-cent dollar at $50 higher than these levels," said Swetlishoff, a analyst with Raymond James. "So, it's better, but it's still pretty darn ugly," he said.

Swetlishoff noted that for firms like Canfor or West Fraser, each one-cent change in the loonie translates to about $20 to $25 million in annual EBIDA, which is a measure of a company's earnings before interest, taxes, depreciation and amortization. It's a figure used to approximately measure large companies' operating cash flow.

Swetlishoff, noted that with an almost 10-cent increase in the Canadian dollar since the last quarter, companies the size of Canfor and West Fraser would take an estimated $250-million hit to EBIDA.

B.C. Lumber Trade Council president and CEO John Allan also pointed the finger at the rise in the Canadian dollar, saying it's having a huge impact on forest sector results.

He pointed out that in 2001 the dollar was in the low 60-cent level, which means there has been a 50-per-cent appreciation in less than a decade.

That appreciation has huge financial implications.

Allan noted that PricewaterhouseCoopers has estimated that for every one-cent rise in the loonie, the B.C. forest sector loses $160 million in sales value. That impact is felt not only by lumber producers, but by pulp and paper producers.

However, Allan said there is little that companies or the provincial government can do to offset the pain of the poor prices, the rising dollar and the 15-per-cent export tax.

He noted that B.C. Interior firms are also dealing with fallout from the mountain pine beetle epidemic, which includes lower lumber recovery and a hit to lumber grade output. "These are all negatives, adding up to one big negative, and frankly I don't think there is any end in sight for this year," said Allan.

Allan said the province's policy moves are constrained by the seven-year softwood lumber agreement with the U.S. which prohibits changes that would circumvent the deal.

The agreement sets export taxes -- collected by the federal government -- that increase as the price of lumber drops.

Allan expected that stumpage -- the fee the province charges for harvesting Crown timber -- will drop on July 1 because lumber prices are lower and the deterioration of beetle-killed timber, but he didn't know by how much.

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