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Econ Home > Products > Southern Markets > Timber Sector
Trends in the price of a commodity can provide useful insights into its relative scarcity. Timber prices can be considered an indicator of the scarcity of timber as an input to the production of wood products. If stumpage prices are increasing, then timber is becoming relatively more scarce. Conversely, falling stumpage prices indicate that timber is becoming more abundant relative to demands for its use. Prices for various wood products have demonstrated a variety of trends over the past 27 years (since 1977, the period for which we have comprehensive data), indicating an evolving story regarding the scarcity of these natural resources.2
Between 1977 and the late 1980’s, timber prices were flat to declining for hardwood and softwood products (Figure 4). Softwood sawtimber prices declined at a very slight rate between 1977 and 1991 and softwood pulpwood prices were essentially flat between 1977 and 1989. Hardwood pulpwood prices likewise were flat between 1977 and 1988. (Our price series for hardwood sawtimber begins in 1992.) No indications of increasing scarcity were apparent through the late 1980’s while harvests grew at moderate rates (Figure 3).
Figure 4. Real stumpage prices in the US South by product (Source: Timber Mart South).
Beginning somewhere between 1989 and 1992 price patterns for these products changed substantially (Figure 4). Prices turned upward in real dollar terms for all four products and increased through 1997 or 1998. Between 1988 and 1998, hardwood pulpwood prices increased at an average annual rate of 12 percent; softwood pulpwood at a rate of 5 percent, softwood sawtimber at a rate of 8 percent, and hardwood sawtimber at a rate of 6 percent (over the period 1992-1998 for hardwood sawtimber). Price data therefore indicate increasing scarcity for all timber products over this decade.
Between 1998 and 2004, hardwood pulpwood and sawtimber prices leveled off and softwood sawtimber prices declined and are today at 1994 levels. Softwood pulpwood prices have however, demonstrated a decidedly different pattern. Prices for this product have fallen to the point where prices are less than one half of their values in 1998 and are now at their lowest levels for the period (1977-2004).
2 To examine price trends we have constructed regional price indices based on prices reported by Timber-Mart South for all regions of the South. Throughout this paper we report prices in real terms, adjusted for inflation using the Consumer Price Index price deflator with 2004 as the value basis. We use indices of timber prices to allow more ready comparison among product types. When indices are used, we define 1952 as the base year (i.e., the index is set equal to 1 in 1952) and apply the indexing to the real prices described above.
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modified: 07-Feb-2017 created by: John M. Pye |
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