This post is the third in a series related to the Q4 2025 Forisk Research Quarterly (FRQ), which includes forest industry analysis and timber price forecasts for North America. To learn more or to subscribe to the FRQ, please contact Nick DiLuzio (ndiluzio@forisk.com).

As analysts, investors, and managers, we each have different moments of awareness for recognizing the opportunity or problem of a situation. If we see a graph that shows timber acreage rising and forest inventory falling, our minds, thanks to years of experience in the industry, flag the contradiction and we start asking questions. However, those without similar backgrounds or insight benefit from guidance and frameworks, especially when faced with murky markets or economic uncertainty.  In this post, we frame the risk to forest industry investments associated with labor constraints in the construction industry.

Simple Risk Framework: Ask Two Questions

In 2018, we published a series of “thinking beyond deviations” posts with guidance on how to evaluate the relative impacts on forestry and mill investments from potential changes, good or bad. When thinking through the mechanisms by which disruptions affect forestry-related cash flows, I often ask two simple questions rooted in economic fundamentals:

• Big or small? In other words, how impactful, whether positive or negative, would we expect this disruption or change to be on forest supplies or wood demand?
• Long or short? What is the likely duration, whether positive or negative, of this disruption or change on supplies or demand (in the market or industry)?

This framework is directional; it focuses on relative importance. A big impact for a single forest owner can be small for the overall market. Disruptions that get handled on the ground via operations tend to qualify as shorter or smaller in this framework, while anything that requires a Board meeting or… an act of Congress better reflects longer-term disruptions affecting capital allocation and strategic advantage.

Construction Labor: Current Situation and Exposures

Consider the impacts of growing labor shortages with home builders on the demand for wood and forest products. This week, NPR reported on how recent immigration enforcement actions have exacerbated labor shortages in the construction industry. According to a 2024 report by the Home Builders Institute, one-third of workers in the construction industry are foreign born. Analysis by NAHB breaks down the distribution of foreign-born construction workers by state, with the highest percentages in California (41%), Florida (38%), Georgia (30%), New Jersey (41%), and Texas (38%).

As a disruption, how would we provide context to a shrinking labor pool in home construction on timberland owners and investors? We can organize our thinking with the two questions:

• Big or small? Big event nationally; anything that constrains the building of homes dampens demand from sawmills and OSB plants across regions for logs and pulpwood.
• Long or short? Medium to long; not a short one-week, month, or quarter disruption. The underlying demand exists and the desire to build exists, but the policy outcomes and timing are uncertain.

Conclusion

In sum, labor force constraints reduce the ability to use wood products, whether or not the fundamental demand exists. People mistake forest investments as allocating capital to trees when you’re really betting on the work, needs, availability, and preferences of people. When screening risks for investments in the forest industry, we find that most frictions are man-made: trade disputes, tax policy changes, and immigration inconsistencies. As a result, for strategic planning, we prioritize the tracking, aggregation and analysis of confirmable physical facts to test ideas and decisions that help us look past the current cycle.