Southern timber prices continued to find equilibrium and largely resettled in 4Q2019. After surging in 1Q2019 due to prolonged wet-weather challenges and then sharply reversing course in 2Q, prices tapered and flattened in 3Q and 4Q.
The overall trend of all timber products was up slightly in the fourth quarter, as the weighted average price per ton increased +2.6 percent. While pine products were up, hardwood products demonstrated a significant drop in price.
On a Southwide basis, pine pulpwood prices increased +6.3 percent to $8.82/ton during 4Q2019, and only one region saw prices drop for this product. The East-South experienced a decrease of -5.6 percent to $11.24/ton. However, prices in the Mid-South increased +18.5 percent to $7.43/ton and prices in the West-South jumped +16.2 percent to $9.16/ton.
Hardwood pulpwood prices Southwide demonstrated a significant correction compared to pine pulpwood, dropping -15.2 percent during 4Q to $8.45/ton. The West-South region experienced the largest decrease, dropping by -34.4 percent to $9.36/ton, and the East-South decreased -23.7 percent to $3.58/ton. Prices in the Mid-South dropped by a much more modest -2.8 percent to $10.93/ton.
Pine chip-n-saw prices experienced a slight decrease to $16.38/ton on a Southwide basis, a drop of -0.8 percent. The Mid-South experienced the largest decrease of -2.6 percent to $16.38/ton. The West-South dropped -0.5 percent to $14.14/ton, but the East-South region jumped +6.5 percent to $18.99/ton.
Pine sawtimber prices were up +6.6 percent to a Southwide average of $26.10/ton and, unlike 3Q, all three regions experienced increases. The West-South experienced the largest rebound, increasing +12.1 percent to $29.14/ton. The Mid-South rose +3.7 percent to $24.71/ton, and prices in the East-South ticked up 1.0 percent to $24.20/ton.
After experiencing a 7.9 percent jump in 3Q, Southwide hardwood sawtimber prices reversed course sharply in 4Q2018 by dropping -15.0 percent to $38.06/ton, driven by significant sales volume in the West-South region. In that region, prices were down -29.9 percent to $37.70/ton. However, prices in the East-South surged +15.4 percent to $36.65/ton, and the Mid-South region rose +2.2 percent to $38.95/ton.
These numbers are noteworthy because they demonstrate pockets of strong hardwood demand in a market that has been significantly impacted by the current trade and tariff situation with China. As noted in the trendline in the chart below, Southwide stumpage prices for hardwood sawtimber prices have been extremely volatile, yet slightly increasing despite the substantial drop-off in hardwood log and lumber exports over the last year. New trade negotiations, however, look promising for the sector.
Real gross domestic product (GDP) increased at an annual rate of 1.8 percent in 4Q, according to the "advance" estimate released by the Bureau of Economic Analysis. After revisions for 3Q, real GDP increased 2.1 percent. Economic indicators, employment numbers and housing market data remain solid as we begin a new decade.
Based on strong housing starts, continued demand for finished lumber across North America and stable manufacturing data, we look for Southwide timber prices to hold steady as 2020 progresses. A rebalancing of the stumpage market has largely taken place since 1Q2019 and while temporary market fluctuations are normal, there don’t appear to be any developments on the horizon that would cause significant price movement in either direction.
However, there are a few supply and demand drivers worth watching in the near term that could impact southern timber prices through the rest of winter and into the spring season:
- While southern inventory building largely took place last Fall, most mill facilities will continue to work through this supply in the coming months while carefully monitoring their inventory levels, the weather and local stumpage markets. However, there is always the potential for a temporary price spike (as witnessed in 1Q2019) if any of these factors get out of balance.
- Sustained wet weather has a tremendous influence on logability and therefore availability and price; stay ahead of the market with Forest2Market’s precipitation and stumpage price data, and identify trends that could impact your market.
- As we noted in December, many timber purchasers still have a surplus of wood on their books as a result of severe weather in 2018/2019. Based on these weather challenges, many timber tracts that were previously purchased became unworkable for much of 2019; the markets reacted accordingly and sent stumpage prices soaring, at which point many harvesting crews put these tracts on the back burner and moved to workable tracts to maintain production. However, when the wet weather subsided, these crews simply circled back to work the previously-purchased tracts in the “bottoms” that had dried out.
As procurement teams continue to catch up and work through their backlogged harvests, they will need to fill the supply pipeline with new stumpage purchases in the coming months. This is a demand driver that could have significant impacts in local markets.
As we enter the heart of the winter season, procurement teams must plan ahead in an effort to mitigate unnecessary exposure and avoid any supply pinch that will result in high prices. Conversely, landowners who have been disappointed with price decreases over the last few quarters need to pay close attention to developments in their local markets to maximize timber sale values at the right time.