Timber Prices

April 2012-Timber Market Update

April 2012

Timber Market Update

by Dr. James Henderson, Extension Forestry

It appears that the long awaited recovery in U.S. home construction is finally underway. Building permits for March are up to 747 thousand (Figure 1). That's a 30% increase from a year ago. Home construction volume should gradually increase this summer, which will increase lumber production across Mississippi, resulting in increased consumption of timber products. Stumpage prices for Mississippi as reported by Forest2Market, while at historically low levels, are beginning to show improvement. Pine sawtimber prices for the first quarter of 2012 reached $27.33 per ton rising for the third consecutive quarter. Fluctuations in timber prices will continue; however, given the recent promising rise in building permits (the highest since 2008), pine sawtimber prices should continue to show signs of improvement. Another positive indicator of increased demand for Mississippi timber is the current volume of homes available for sale. Both new and existing homes are at 6-month supply levels, which is generally considered to be characteristic of a "healthy" housing market. That volume reached 12-month supply levels during the recession. Mortgage rates remain at record lows and financing availability is improving as mortgages are being bundled and sold to investors again. So, conditions for seeing improvement in home construction are the most favorable we have seen since the recession.

Print advertising expenditures in the U.S. have fallen to the lowest levels since the late 1980s. This results from a combination of the lingering impacts of the recession and greater use of internet advertising. However, the paper sector is expanding production as the economy is growing, albeit modestly, which should help boost pulpwood demand in the months to come. Pulpwood prices for both pine and hardwood for the first quarter 2012 were $7.37 and $5.79, respectively.