Thursday, November 1, 2007

Changes in Timberland Investments in the South

There is an outstanding paper by Tom Harris, Jacek Siry and Sara Baldwin (the TimberMart-South crew) that can be downloaded at no charge from Forestweb's site. The paper looks at the major changes and trends impacting forestry investments in the U. S. South. An outline of what is covered follows:

  • "Major Changes in the U. S. South: New items worthy of note
    »» A decade of timber price declines
    »» Retirement of the vertically integrated model for forest products
    »» Improved competitive position
    »» Maturing forestry investment industry
    Southern Timber Trends: Key, Overarching Issues
    »» Globalization
    • Increased Global Trade in Forest Products
    • Shift in Manufacturing
    • Role of Paper in Communications
    • Energy and Bioenergy
    »» Abundant Timber Supplies
    • Planting Rates down
    • New emphasis on thinnings
    »» Consolidation and Dis-integration
    • More concentrated products markets.
    • Dis-integration essentially complete
    »» Forestland Ownership Shifts
    • New owner objectives and investment horizons unclear.
    • HBU based values assuming new importance.
    A long-term history shows nominal increases in stumpage prices"

The paper is well illustrated with charts and graphs illustrating the authors' observations. It covers "all the usual suspects" (price trends, ownership changes, transactions, etc.) but I think the most interesting observation is the impact of the declining U. S. dollar. The charts compare delivered prices of conifer pulpwood in the major wood producing regions as well as a more detailed comparison (see graph) between the U. S. South and Brazil. Guess what? The South is now very competitive!! So while we hear all of the wailing and gnashing of teeth due to the falling dollar on the nightly business shows, there is a very positive impact in our manufacturing sector (more jobs, higher wages, higher stumpage prices from increased demand? etc.).

I would recommend reading FORESTRY INVESTMENTS: Major Changes in the U.S. South made available from Forestweb. Harris and bunch did a good job. --Brian

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