COLLEGE STATION, Texas
– Landowners may wonder what the record-high lumber prices in the first half of
2018 signal for timber prices. This historically high lumber price leads many
to expect higher prices for standing timber, however, the association between
lumber and timber prices is loose over short time spans.
Lumber and timber
prices should rise and fall closely together, in theory. However, after
plotting price fluctuations between 1984 and 2018, Forest Economist Nana Tian
and Forest Resource Analyst Aaron Stottlemyer found that differences between
lumber and timber prices can be dramatic over shorter periods, such as a
quarter or one or more years, though the prices follow a similar pattern over
many years. Several factors contribute to the short-term disconnect.
“The price of lumber is
primarily affected by the U.S. housing market, which continues to improve since
the 2008 recession,” Tian explained.
The U.S. housing market, current lumber production capacity, and reductions in
Canadian imports all factor into record-high lumber prices in early 2018.
However, timber prices have stayed relatively flat over the last couple of
years and the primary reason is the abundant
supply of standing timber.
Technological
advancement in lumber production can also weaken the correlation between lumber
and timber prices. Abundant timber supplies and improved technology result in
lower timber prices, even during periods when lumber is in high demand.
“In summary, the
combination of housing markets, lumber demand and production capacity, sawmill
technology, timber supplies, and local market conditions all contribute to short-term
disconnections between lumber and timber prices,” Tian stated.
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Contacts:
Nana Tian, Forest
Economist, Texas A&M Forest Service, nana.tian@tfs.tamu.edu
Texas A&M Forest
Service Communications Office, 979-458-6606, newsmedia@tfs.tamu.edu