By Jim Griffith
Everyone remembers the 1998 hardwood timber market when prices went through the roof. The really unique thing about that market was prices for all timber products skyrocketed at the same time. It was an extraordinary market that resulted from numerous circumstances occurring simultaneously. The economy was good, building was booming and paper-packaging products were in hot demand. This drove up prices for solid wood products and pulpwood.
Although demand for timber was high, the supply was down for several reasons. Canadian timber imports were at bay for the time. The endangered Spotted Owl had shut down logging in the Northwest. In the Southeast, rains came all summer long and set in to stay throughout the winter, resulting in even lower inventory at wood manufacturing supply yards.
This brief period was the perfect storm of circumstances that led to unprecedented stumpage prices for all timber products. We had not seen such high prices before that time and have not seen them since.
Free trade agreements, global shrinking due to improved communication and transportation, and ever-increasing imports into our country are anything but helpful to timber owners who wish to sell their products at those one-time high prices. The increase in international alliances and continued opening of our borders to developing countries that have lower production costs than the U.S. (due to subsidized timber and less stringent environmental regulations) puts us at a competitive disadvantage that keeps our prices where they are.
The short-lived high demand and low supply of 1998 disappeared, so did our all time high timber prices. Many timber owners have held off selling their timber in hopes prices would climb to what they heard a neighbor got for his timber a decade ago. That was 10 years ago and if that is the price a landowner is still waiting on, then they have a long wait yet to come.
Judging from the sluggish economy we are currently experiencing, some might think it’s not the time to consider selling any timber. Although pine sawtimber prices are somewhat reduced, I am receiving prices for hardwood that I have never seen before! These high hardwood prices are for both pulpwood and hardwood sawtimber.
If you hold off selling because of a neighbor’s advice, you might just miss an excellent peak in the market and find yourself waiting another 10 years wondering if the price is ever going to come back around. Will your neighbor chip in to cover the loss you incur due to their untimely advice?
We have had several smaller cycles in timber prices during the past 10 years. If you are not close enough to the timber market to know when prices are rising, you might just miss one of these cycles, especially if it is short lived and gone by the time you get the word on the street. You may need an independent forestry professional looking after your best interest.
Jim Griffith is the general manager of the Georgia Farm Bureau Timber and Real Estate Companies.
Georgia Farm Bureau News – September 2008