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Local Variation in Supply, Demand, and Prices

As part of our featured research in the Q1 2024 Forisk Research Quarterly, we investigated local variations in supply, demand, and timber prices. Our findings confirm standard economic assumptions regarding timber prices over time and across geographies. 1) Wood demand and stumpage (timber) prices tend to correlate positively. 2) Significant supply changes alter the demand-price relationship rather than dictate the direction of prices. 3) Abundant supply relative to demand inhibits prices. Timber markets remain uniquely local. Supply and demand can fluctuate across relatively small distances and understanding the local situation remains vital.

Prices and the Supply-Demand Balance

Removal years, a metric Forisk uses to test forest supplies relative to demand, measures the current inventory of a product as a ratio of the total removal volume of that product. If we have 1 million tons of sawtimber inventory and currently harvest 100,000 tons per year, we have 10 removal years of inventory. The removal years ratio helps scale market-specific supplies to market-specific demand, while providing a metric for comparing markets.

In the South, we compared pine grade stumpage prices across the 22 TimberMart-South markets relative to removal years of pine grade inventory (Figure). Pine grade removal years range from fewer than 15 in both Florida markets and South Georgia to 100+ in the Tennessee markets. When compared to pine sawtimber prices, higher removal years, and the implied supply surpluses, were associated with lower stumpage prices, as indicated by the downward sloping trendline.

Figure: Private Pine Grade Inventory/Demand (“Removal Years”) to Pine Grade Stumpage Prices for 22 Southern Markets


To learn more about the Forisk Research Quarterly (FRQ), click here or email Nick DiLuzio at ndiluzio@forisk.com

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