Timber Price Reporting is Essential

By Dr. Bob Daniels
Mississippi State University

"What is my timber worth"? That may be the most frequently asked question I've received in my years as an Extension Forester in Mississippi. If you examine your experience in forestry, I bet it ranks high on the list of questions you've been asked. Why is that? The most likely answer is that landowners want to get the full value from their trees when they sell them and most landowners don't keep up with changes in timber markets. But there's more to the story than that.

When asked about the timber market, many foresters and forest landowners feel that we operate in a purely competitive market environment. A landowner can sell his timber to anyone willing to buy it. This is largely true in the South, with some areas having less buying competition than others.

Economists generally define a "purely competitive market" as one that has the following characteristics:

1. Many buyers and sellers, each buying or selling a small fraction of the total amount exchanged in the market.
2. Firms produce a homogeneous product. (e.g. all pine dimension lumber is comparable)
3. All market participants are fully informed about the price and availability of all resources, output and production processes.
4. Firms and resources are freely mobile with no obstacles (such as patents, licenses or high capital costs) to prevent new firms from entering or existing firms from leaving a market.

How does the market for timber stack up to this standard? Many buyers and sellers - yes. Homogeneous product - largely yes, with some exceptions. Firms freely mobile - yes, though capital costs and timber supply can limit mobility. All market participants fully informed about price - not really. It can be argued that the lack of price information on the part of sellers is the forest industry's most significant departure from the characteristics of the purely competitive market model. Price reporting is essential, however, for markets to function efficiently. Prices are the market signals by which buyers and sellers communicate, over time in a market system.

A published, regional forestry goal is to increase timber production in the South because landowners and the region benefit economically from increased timber output. In the absence of a good price reporting system (i.e., efficient communication between buyers and sellers) markets do not function as well as they should. Producers don't know the full value of their products and have less motivation to produce them. To meet this regional goal, good communication between buyers and sellers is essential.

The need for widely available timber price information has been recognized in the past but is more important today than ever. In 1984, a long-range plan for forestry in Mississippi entitled, "Pathways for Forestry in Mississippi" was developed by a "blue ribbon panel" of forestry leaders appointed by the Governor. The "Pathways" report identified developments that were needed to bring about a "desired forestry future." In the report, forestry leaders listed goals, objectives and tasks to be accomplished in market development needed to secure a solid future for forestry in the state. Other southern states (such as Georgia 2000) have also produced similar forest planning documents. One of the "Pathways" objectives was to "develop and report timber price information". While price availability is more prevalent today, there still is a need to expand these efforts.

According to Birch (1997), the number of forest landowners in the South has increased from 3.8 million owners in 1978 to 4.9 million in 1994. More than 40 percent of these owners acquired their forestland for the first time since 1978. In general, this "new" individual, private forestland owner is younger, better educated and earns more than owners of the past. These owners are true consumers. They require price information and they shop around for the best deal.

In the past, some segments of the forest industry have discouraged timber price reporting. In their defense, the forest industry has been shy on the topic of price reporting out of fear of anti-trust legal action experienced in the past. Some have questioned the accuracy of timber price reports. Some have complained that landowners see published average prices and think this is "the price" of their timber, making sale negotiations more difficult. Others may have simply opposed timber price reporting to keep their market information advantage over sellers.

Whatever the reasons, readily available timber price information is essential for the market to provide timber to the forest products industry. An adequate future supply of southern timber will require increased management by the "new", private, non-industrial landowners. These owners will not invest in reforestation after harvest if they do not get the full value for their timber when it's sold. The only way for these owners to know if they are getting an adequate value from their timber sale is for market prices to be readily available for their use.

Today, there are various sources of standing timber prices available to private forest landowners in the South. Some, like Forest2Market, Inc. and Timber Mart South are subscription publications. Other sources available include state forestry agency reports, Extension Service reports, and consulting forester newsletters. These are good sources but they have limited circulation.

Birch (1997) estimates that there are about 1.8 million forest landowners in the South who own 10 acres or more of forestland. Most of these owners are not aware of the availability of reference timber price information from the aforementioned reports. A 1999 informal survey of state agency timber price report authors and Extension Forestry offices in the South found that states mail their respective state timber market reports and newsletters to an average of 2,300 subscribers per state. This means across the region about 29,900 landowners get direct timber price information this way in the 13 southern states. This is less than 2 percent of forest landowners that own 10 acres or more. While some of these reports are reprinted in other publications and a few are posted to the internet, it is clear that a very small percent of southern forest landowners have timber price information readily available.

If we want the market to produce more timber from private, non-industrial lands in the South, timber price "signals" must be more widely distributed. Without a recognized price system, buyers and sellers can't efficiently "communicate" and the market can't work as well as it should.

The value of standing trees in the South has increased dramatically in the past 20 years. Good stewards of forestland (or any asset) want to receive the full value for trees they (or their parents) have "tended" for many years. But part of good stewardship is paying attention to the markets and knowing the value of your assets.

Foresters, landowners and forest industry should work together to promote and provide timber market information to landowners throughout the region. Perhaps the most important reason for credible timber price reporting is that without it, forestry and industries using wood will have a dimmer future than would otherwise be possible.

Birch, Thomas W. 1997. Private Forest-land Owners of the Southern United States, 1994. Resour. Bull. NE-138. Radnor, PA: U.S. Department of Agriculture, Forest Service, Northeastern Forest Experiment Station. 195 p.