Hardwood Timber Price Trends
Despite the harvest of trees on approximately 235,000 acres each year to supply the large forest products industry in the state, Tennessee forests are growing about twice as fast as they are being cut. But, even though the forest supply is growing, timber prices have increased significantly. Overall, stumpage rates have risen faster than inflation since 1980. Increases have varied by product type, with the biggest rises occurring in higher-quality oak sawtimber.
Given past timber price trends and the increasing global demand for forest products, prices for wood in Tennessee should continue to rise. However, there are many uncertainties. The population of the state is increasing, and this is putting other demands on the forest resource. Urban sprawl converts forests to houses, stores and parking lots. Increasing numbers of people living in the suburbs can restrict the ability of loggers to harvest timber on the forests surrounding cities. At the same time, population growth is increasing demand for forest products, both in the state and around the world.
Imports are currently only a small part of the domestic wood products markets but, with increasing globalization, more imported wood products will be sold in Tennessee . However, the future balance between supply and demand in the world is not yet known. Russia and tropical countries have enormous forests, and highly productive forest plantations are being established throughout the world. On the other hand, deforestation is a serious problem in some countries and developing economies in China and India may provide a huge demand for wood, even for exports from the United States .
The Tennessee wood products industry is also changing. The furniture and pulp industries have traditionally been the largest buyers of Tennessee wood. Recently though, the furniture industry has shrunk dramatically, with production moving overseas. The pulp and paper industry is also contracting and this downward trend is expected to continue. On the other hand, plans are underway to build more oriented strandboard (OSB) mills in the South. These mills will be large buyers of logs from the region. There is also much discussion of the possibility of using wood and other “biomass” as a source for fuel and other products. How these changes play out, and what happens to demand for logs in Tennessee , remains to be seen.
Despite the many uncertainties, it is likely that forests and forest products will continue to be important in Tennessee . There are abundant timber resources in the state and, if past trends continue, prices for wood products will increase. Traditionally, high-quality sawlogs have commanded top prices and prices for these logs have risen the fastest. This suggests that forest management that emphasizes production of quality timber will continue to provide the best monetary returns.