UGA timberland investment conference: potential effects of logging/capacity and recovering log prices on southern timberland returns
March 21, 2013
(Industry Intelligence Inc.)
– In a presentation prepared for the UGA Florida timberland investment conference, The Campbell Group LLC Forest Economist Bruce Glass addressed the potential effects of logging capacity and recovering log prices on southern timberland returns.
Themes of Glass’s presentation included:-
• Why logging is important for timberland investment
• Logging workforce capacity
• Recent changes in the logging force
• Short and longer term implications
Logging costs are a major driver of income returns, as the net timber price equals the delivered log price minus logging and haulage costs.
Glass’s presentation (delivered on his behalf at the conference by Dr. Jack Lutz) questioned how quickly logging can respond to recovering demand, noting the accumulation of substantial pent-up demand in the U.S. housing market.
The presentation noted that logging capacity varies with the type of operation. Mills typically manage to maintain relatively low log inventories, which often results in substantial unused logging capacity. Other factors that impact on logging capacity, the presentation noted, are:-
• Market conditions (e.g., quota, curtailments, closures, etc.)
• Weather and availability of operable tracts
• Harvest planning issues (e.g., access to tracts, match of equipment to stand conditions, etc.)
Meanwhile, investment in logging operations is influenced by:-
• Credit Availability/Lender Enthusiasm
• Outlook for end-use consumption
And that, in turn, affects the ability of loggers to meet payments, and to maintain or upgrade equipment
The presentation noted that consolidation during the downturn has reduced the number of logging companies, and that small operations continue to dominate the sector.
Among the short term implications of these changes are:-
• Increased competition for loggers raise logging costs
• Large timberland owners develop/retain dedicatedlogging capacity
• Cooperation to secure needed capacity
In the longer term, there will be increased investment in capacity as end-use demand improves; greater mechanization of logging operations occurs; more innovative harvesting practices are implemented; and workforce skills and demographics change.
With its headquarters in Portland, Oregon, The Campbell Group is a Timberland Investment Management Organization (TIMO) that controls more than 3.2 million acres of timberland in the U.S. and Australia.
The full conference presentation by Bruce Glass is attached in PDF form.
More than 500 delegates from 16 nations attended the timberland investment conference at the Amelia Island, Florida Ritz Carlton, organized by the University of Georgia Center for Forest Business on February 27-March 1, 2013. The theme was 'The Timberland Asset: The Long-Term Investment for The Bright Green Future.' Among those represented were investment funds, high wealth individuals, family offices, REITS, TIMOs, consultancies, forest products industry, risk managers.
More coverage on selected conference presentations can be found on Industry Intelligence Inc. For more information about the 2013 Timberland Investment Conference, visit: http://www.ugacfb.com/timberlandasset/