Recently a conference was helded at Auburn University to look at the ‘Market Outlook for Southern Timberland and Timber Prices’. Let me shared some of the topics presented. The data is quite striking and certainly suggest some really good news for those landowners who hold timberland as an asset. It almost looks like the perfect storm. Let me explain:
- Canadian Pine Beetle epidemic – Canada supplies about 30% of the U.S. lumber requirement. Lodge Pole trees in the western provinces are under attack by the Canadian Beetle and at present about 55% of the standing trees in 1999 are now dead! The eastern provinces are constrained by a reduction in allowable annual harvest (i.e. they can only harvest a limited amount of timber) so the shortfalls will be hard to make-up.
- Underbuilding in the housing market - Housing construction was actually overbuilding up through 2006. Since 2007 there has been an unprecedented period of under building and inventories are at historic lows, we are approximately 2.5 million homes short of what is need to house our current population. This bodes well for southern timberland owners. This will eventually put huge demands on lumber markets as the construction industry plays catch up. See the following chart
- Expansion and investment in the Southeast (The land of opportunity) - Much of the timberland is owned by private landowners…that’s you and me. This timber is easily accessible to the timber/lumber industry and is not heavily regulated to the extend that public lands are in the west and northwest. As a result, many companies are pouring large sums of money into acquisition and expansions. See the following chart.
NOW, what does all this mean? I have described what I see as the ‘perfect storm’ and timberland owners are expected to reap huge rewards. Timber prices are predicted to go up by significant amounts over the next 3 years and my guess is even further into the future, see following chart.
For those of you who have struggled with low timber prices and paying property taxes each year…hold on, your ship is about to come in!!!
For information on Buying or Selling LAND, contact G. Kent Morris, ALC, RF @ 706.457.0090