Anemic housing construction – and the resulting impacts on lumber demand – has delayed the expected recovery of pine sawtimber prices this year.  Still, several states show signs of resiliency.  We just completed the mid-year update of our 10-year, state-by-state Forisk Forecasts for pine sawtimber and pulpwood stumpage in the US South.  Comparisons across states reflect the variability across local timber markets as sawmills retool and bioenergy projects come on-line.

South-wide, our update indicates pine sawtimber prices will be 6.4% lower in 2011 than expected six months ago.  Results vary across states, with Alabama, Arkansas, Georgia and South Carolina best positioned to rebound quickly as lumber demand strengthens and increases the demand for pine sawtimber logs.  According to our Forest Economist, Dr. Tim Sydor, “Expectations for key macroeconomic factors – such as growth and housing starts – have, frankly, proven way off-base. GDP grew faster than expected, but housing starts are expected to remain 30% below 2009 projections.  As a result we’ve adjusted our forecast of US softwood lumber consumption downward by 6.3 billion board feet for 2010.  Lower lumber demand means lower stumpage prices, and pine sawtimber prices in the South have been revised downward by nearly $1 per ton for the year.”

With the forest products industry in a holding pattern until housing returns, I describe 2010 as a “bridge” year and emphasize to investors the benefits of patiently following local markets.  From a timberland investment standpoint, markets with attractive price-to-demand relationships feature well-capitalized mills and resilient loggers and wood suppliers.