Once the election results were in, the emails started pinging at 3 a.m. with questions that can be summarized as, “How will a Trump presidency affect timber prices and the US forest products industry?” While the commentary in these messages include some gnashing of teeth and rolling of eyes, the real world implications for our wooded slice of the economy and timber price models are specific and depend on explicit changes in known variables. Let’s review what we know and what we need to watch moving forward.

• Forest supplies: trees grow, regardless election outcomes. The physical facts on the ground affirm that, for North America, the United States, and the South in particular, continues to support a vibrant, sustainable wood basket…
• Capital investment: the iron goes to the resource. Capital investment in wood using mills flow to healthy timber baskets, and timberland investors do likewise. Elections do not affect this equation in wood demand projections; rather, demand for housing and wood products matter more…
• Economic growth and housing markets: this is the first place where worry lines form. We have a proxy in our assessment of the Brexit vote regarding overwrought hand wringing. Brexit concerns were overblown, as short-term market losses in the EU have largely recovered. Will the election or a Trump Administration somehow lead to uncertainty, slower economic growth, and fewer housing starts? For now, this is simply an unsubstantiated story with speculative implications.
• Trade and legislation: this has the most direct potential impact on wood markets and timber prices in the near term, depending on trade policy with China and negotiations with Canada over the Softwood Lumber Agreement. China, an election-season whipping boy (along with the Trans-Pacific Partnership (TPP)), is the number one market for US log exports and a top three market for softwood lumber exports. China is Canada’s number two softwood lumber export market, behind the US. The context is this: trade with China (via Canada or the US) and Canada are key, measurable levers to US wood demand and softwood lumber production, and thus future timber prices. If flows to China fall from the US or Canada, it leads to more supplies and less production in the United States, and the potential for lower timber prices.

 

Stronger timber prices in our models depend on growing demand, through increased housing starts and a growing population, and robust trade with a range of countries across a variety of products, from logs to pellets to panels. To the extent that these variables align with US economic policy, we have no expectation for negative implications for US timberland markets. So let the wild rumpus start.