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Prices for Pine Saw Timber Declined Dramatically

Land owners, timber producers and sawmills are suffering as prices for pine saw timber declined dramatically in 2006. At the same time, the data shows that consumers are enjoying the best lumber prices from their local hardware stores in more than 18 months, according to Forest2Market, Inc. (F2M), a Charlotte-based provider of pricing data for the forest products industry.

Those conclusions are derived from F2M's Free on Board (FOB) Delivered service, which uses actual data from major forest product industry players to establish credible cost benchmarks for delivered logs, including every variable associated with getting a tree removed from the forest and delivered to a mill. Established in mid-2006, FOB uses actual data from 65 percent of all wood fiber transactions in the southern United States.

According to the data, pine saw timber ended the year on a sour note. Delivered prices declined almost six percent, from the $55 range in early 2006 to $51.77 per ton by the fourth quarter. Ample timber supply and a slumping housing economy aided in driving prices down. While pine saw timber prices and demand declined, strong demand from pulp and paper created higher prices for pine pulpwood. The trend in hardwood pulpwood delivered prices also increased.

"FOB has given us insight into the market that had not been previously available," said Pete Stewart, president and founder of F2M. "Since it is based on actual data from more than two-thirds of the market, it enables those in the timber industry to make better operational and strategic decisions."

FOB allows forest products companies to evaluate their performance against their peers - a first for an industry known for being highly fragmented. Components include the actual stumpage (the cost of the tree attached to the ground), cutting and loading, hauling and commission and procurement costs.

To use FOB Delivered, forest product companies must provide F2M with their actual data, on a load-by-load transactional basis. F2M then organizes the data in a consistent manner and computes a weighted average for each benchmark, which is updated quarterly. Benchmarked raw materials include pine pulpwood, hardwood pulpwood, pine sawtimber, pine and hardwood chips and residual woodfuel.

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