A successful timber market analysis answers two questions. One, what are the “facts on the ground” for this market or wood basket? This helps profile the market with respect to forest supplies and wood demand. The timber suppliers and wood-using mills are both there and open for business, or they are not, so let’s figure this out. Two, what “matters”, and what does not, in this timber market or wood basket? We answer the first question, about the physical profile related to forest supplies and wood demand, in order to address the second related to timber prices, business strategy and forecasts.
Through answering these two questions in a systematic and repeatable way, we can identify the key variables across markets that let us:
- Understand historic relationships between prices and flows;
- Assess future impacts as changes occur in policies, supplies or mill investments; and
- Make timberland and mill investment decisions based on relationships as we interpret them.
This approach builds on three fundamentals.