Buying Land

Forisk Update: January 2011

Wood Demand/Bioenergy: Historically, the fourth quarter of each calendar year features the lowest volume of pine grade receipts in the US South due to weather and holiday downtimes.  However, Q4 2010 pine sawtimber and chip-n-saw demand increased, 1.1% and 3.5% respectively, at lumber and plywood mills.  Hardwood sawtimber demand also peaked for 2010 in Q4.  Pine pulpwood and direct chip consumption fell 1% in Q4 2010, though this was still 3.4% higher than for Q4 2009.  South-wide, after taking closures into account, effective sawmill capacity utilization was 70%, while effective capacity utilization at pulp/paper mills was 83%, for the quarter.  US-wide, current wood consumption associated with bioenergy projects exceeds 35 million green tons per year.  The US North leads all regions in newly proposed wood bioenergy projects, while the US South leads all regions in wood bioenergy projects under construction.

Timber REITs: Forisk Equity Research just completed a comparative analysis of timber REIT forest harvesting activities to address the question, “Who wins as the housing markets return?” The firms include Potlatch (PCH), Plum Creek (PCL), Rayonier (RYN) and Weyerhaeuser (WY). In assessing the future operating performance of public timber REITs, this Technical Note analyzes potential revenue implications from (1) direct exposure to housing markets; (2) the capacity to increase harvest volumes; and (3) the ability to improve harvest mix. While timber REITs emphasize the centrality of timberlands and forest products to their businesses, less than 50% – in cases, much less – of firm revenues derive from timber sales.  Rather, direct exposure to housing – as measured by revenues from Timber, Wood Products and Homebuilding segments – exceeds 60% of revenues for three of four REITs.

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About the author

Brooks Mendell, Ph.D.

Brooks Mendell, Ph.D. is President and Founder of Forisk Consulting, a forest industry, timber REIT, bioenergy and timber market research firm. Dr. Mendell has over fifteen years of operating, research, and consulting experience in forest business and finance. Mendell has published over sixty articles and two books on topics related to timber and timberland REITs and markets, forest business management and operations, and communication skills.

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