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Natural Disasters and Risk: Notes and Resources for Forest Industry and Timberland Investors

This post consolidates links to previous Forisk research on risk in the forest industry, a major theme highlighted by timber investors and wood buyers in the recently launched Forisk Market Bulletin.

When investing in timber assets, we either invest in established forests with mature wood markets, or we invest in areas that require development of the forests and/or wood markets. And when disaster strikes – whether a fire or hurricane or recession – we must evaluate potential disruptions relative to our current assets, market and strategy, or those specific assets and markets under consideration for future investment.

Three years ago in 2017, Dr. Shawn Baker and I posted a two-part series on hurricanes and implications for timberlands, timber prices and forestry markets (“Natural Disasters and Forestry Markets”: Part I and Part II). The analysis notes how these events do not occur in economic vacuums. Mother Nature does not have a 401K or invest with hedge funds, but her actions affect markets differently depending on what else is happening in the economy. And available data provides a sense of the magnitudes involved.

From a strategy perspective, in 2018, we published a series about the implications of major disruptions on timberland investors. This included thinking through the mechanisms by which major events, such as hurricanes, affect forestry-related cash flows over time and in portfolios. One of the challenges remains the development of useful, qualitative analysis in the near term while we gather and verify the data needed for major reallocation decisions during or after big changes. As my Dad says, “first, get the cow out of the ditch.” Later, figure out how to keep the cow out of the ditch in the future. [Note: we consolidated several related ideas into a downloadable Q3 2018 Forisk Strategy Note.]

For current market intelligence and tracking of timberland transactions and mill investments, subscribe to the Forisk Market Bulletin.

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