Timberland

Forisk Update: Wood Demand, Timber REITs & Bioenergy

Wood Demand: Q3 pine roundwood purchases were mixed in the South.  Pine grade volumes decreased 3.3%, while demand for pine pulpwood increased 1.9% (though prices did not).  OSB mills, however, followed pine grade mills in reducing wood receipts, consuming 7% fewer tons in Q3 than in Q2.  Hardwood grade volumes remained stable, while hardwood in-woods chip receipts fell 7.5%.  Looking ahead, pine grade demand typically bottoms during Q4 due to maintenance and holidays, but recent rallies in lumber futures markets signal that sawmills will, at a minimum, maintain current production levels.

Timber REITs: Q3 earnings results show Rayonier (RYN) – along with soon-to-be-REIT Weyerhaeuser (WY) – beat expectations, while Plum Creek (PCL) and Potlatch (PCH) missed expectations. YTD as of November 1, the Forisk Timber REIT (FTR) Index returned 7.90% versus 6.21% for the S&P 500.  Once WY completes its REIT conversion, the FTR Index will represent 6% of total public REIT capitalization.

Wood Bioenergy: As of October, 434 operating and announced wood bioenergy projects in the US represent 121.9 million tons of incremental wood demand by 2020.  However, based on Forisk analysis, projects representing only 55% of this volume – 66.6 million tons – pass basic viability screening.

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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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  • Are there small timber RIETS in CA? My Broker buddy has a listing on a 500Acre , more or less timber site . A non profit seeks to buy 1/2 of the site and offers tax credits by october and december. They have no immediate capital as yet. A local lumber company has ability to log until december and coulds make a lease to cut the lumber. I need a third party donation to the non profit to make a tax free transfer of the title. The land owner seeks his invested capital and might carry back a short term mortgage on the 1/2 to be sold.A Reit might work on this sale. I am not offering this for sale, but i am seeking a solution. Only the broker can deal and negotiate for the principle.Your thoughts please.

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