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Econ Home > Products > Southern Markets > Timber Sector
Figure 43. Forecast of the percent of industry timberland in a land conversion-value class in Georgia, 2010 (Source: Wear and Newman 2004).
Perhaps the most important implication of the sale of forest industry land regards who will own the timberland that is not converted to another use and how that timberland will be managed. Clutter et al. (2005) indicate that a large portion of the most productive timberlands are being sold to Timber Investment Management Organizations (TIMO’s), which largely act as fiduciaries for using timberland as an investment instrument. Many are held by pension funds and much of the new ownerships will be tied to closed-end and other funds that tend to trade frequently. The implication of greater TIMO ownership seems to be a more rapid turnover in forest ownership and the potential for ongoing parcelization.
These highly productive forest lands will be in a much more liquid forest ownership. TIMO’s face strong incentives to maximize returns and will draw capital to forest investments in strong markets. It seems clear, however, that management will be defined by a shorter time horizon and that timber inventory and timber supply could be less stable with this large scale change in forest ownership.
Another implication of industry divestiture is the greater reliance by industry on timber produced by private landowners and the TIMO’s. This could increase the price responsiveness of the timber owning sector to demand shifts, increasing the volatility of timber prices. Furthermore, given that industry has historically accounted for a large share of pine plantations growth in area, the divestiture of these lands by industry could foretell a continued lower rate of pine plantation growth. As Prestemon and Abt (2002) indicate, fewer plantations are connected to greater total forest losses in the long run.
Finally, we might speculate that the loss of industry ownership in the South could lead to lower investments in timber growing research and development. The consequences of such a pull-back are difficult to foresee but may leave the US in a worse position to compete globally in the long run, with other countries continuing such research into timber production technologies.
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modified: 15-Jun-2011 created by: John M. Pye |
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