Jump In at the FLA Family Forest Busines Conference
The Forest Landowners Association caught Dr. Cubbage between travel commitments for a short preview of the presentation that has garnered industry-wide interest.
3 Questions with Dr. Fred Cubbage
A question you’ve posed in recent presentations is; “What would have to happen for sawtimber stumpage prices to increase to pre-recession levels in the next five years”. In your opinion, is this question a straightforward one to answer?
Bob Abt and I have worked with our SOFAC timber market co-op to examine timber supply and demand in the South for more than two decades. In theory, this is a question that we can answer with a few economic assumptions like perfect competition; known timber price elasticities; and existing timber inventory, supply, and demand. We know most of this information well enough for now, and are very good at projecting current timber inventories in the future, which is a good place to start for estimating future prices. If we make reasonable estimates of demand, we can provide some well educated guesses on prospects for price changes.
Throughout your talk the relationship between supply and demand is explored. Do supply and demand impact stumpage prices equally or does a change in one variable move the needle more notably than the other?
Mathematically, supply and demand effects would be the same if the slope of their price/quantity relationships are the same. In practice, however, some drivers of price change such as timber inventory and growth are easier to predict with current biological data, and are affecting prices the most now. Large economic and policy factors such as housing starts and lumber tariffs are harder to predict, and so far not changing as much. Pulpwood prices are still close to long term trend levels, by the way, and pulpwood is relatively scarce. Relatively less pine planting in the last decade and less pulpwood inventory will continue to increase its price.
With all of your work to better understand the near and long term chances for a rebound in sawtimber stumpage prices, when would be a good time for forest landowners to plant new trees?
We project pretty large increases in sawtimber inventories still for about 10 to 15 years, which will tend to dampen stumpage prices for much of that period, unless sawtimber demand increases faster. However, rapid decreases in sawtimber supply after that and the recent opening of new lumber mills suggest that now, or even 5 to 10 years ago, would be a good period to plant pine trees. There also should be a good pulpwood market in the foreseeable future due to steady demand and less small wood inventory than in the past.