This post includes topics covered in the (virtual) Timber Market Analysis course on October 11^th and 12th, 2023 and in the Forisk Research Quarterly. Also, for those interested in conducting this type of research, please check out Forisk’s forest economist job opening.

We use forest products daily, from (more) toilet paper at home to (less) printing paper at the office to chairs, tables, and houses, in addition to products that we may not realize contain wood fibers, such as tomato sauce, salad dressing and granola bars. We also enjoy a range of forestry services such as filtered air and water, sequestered carbon, and recreation.

At times, coverage of emerging markets for forest carbon and ESG-focused portfolios distract us from the underlying drivers for wood demand and timberland investments. Looking ahead, the underlying demand for traditional forest products continues to grow. According to FAO’s “Global Forest Sector Outlook 2050” (United Nations 2022), baseline worldwide consumption of primary manufactured wood products is expected to increase 37% by 2050 from 2020 levels.

While the future of forest businesses will increasingly stack and leverage a range of environmental services and renewable products, consumers still want toilet paper and chairs and tomato sauce. While the forest products industry becomes more sophisticated, it still exists to meet basic human needs, however defined. In fact, for millions of people, forests supply the truest of necessities, such as food, charcoal, and sustenance level incomes.

More broadly, we often fail to see the practical connection between the things we use and where they come from. When true costs remain hidden, we may lack any sense of context or responsibility for our consumption. In economics, we refer to the indirect costs or consequences or benefits of our market transactions as “externalities.”

Consuming forest products, versus products made of non-renewable raw materials or energy intensive processes, has advantages from this perspective. When we build with wood, we send a signal to the market to replant trees and produce more wood. In this way, forest businesses comprise a set of sustainable and synergistic models supporting ESG-friendly construction and economic growth.

The value and health benefits we derive from forests reinforce the importance of active, balanced engagement with timberlands. While the demands on our forests are many, few – if any – advance through passive, disinterested management. See the fires in Oregon and California. If we want healthy, sustainable forests, active forest management and the use of wood products for our daily needs directly support these objectives.

In the United States, our successes as forest managers have grown export markets for wood. In the EU and UK, wood buyers come to the U.S. for our forest products and wood pellets. Domestically, producers and importers together meet our demand for wood and forest products, but regional and local combinations of wood users and forest supplies dictate the health and sustainability of forests at a local level.

Given the variety of markets, mills, and forest supplies, how do we organize our thinking for deciding what to do with our timberlands? We will address this in Part II.