Analyzing historical and regional stumpage price trends in Georgia / by Jerry W. Davis & Frederick W. Cubbage

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GEORGIA FOREST RESEARCH PAPER

64

May, 1986

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Received
MAY 3 1988
DOCUMENTS UGA LIBRARIES!

ANALYZING HISTORICAL AND REGIONAL STUMPAGE PRICE TRENDS

In Georgia

Jerry W. Davis

By:

&

Frederick W. Cubbage

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" GEORGIA "
FORESTRY RESEARCH DIVISION
^^
GEORGIA FORESTRY COMMISSION

Digitized by the Internet Archive in 2013
http://archive.org/details/analyzinghistori64davi

ABOUT THE AUTHORS

Jerry Davis received a Master of Science in forest economics from the University of Georgia School of Forest Resources in
July, 1985. He received a Bachelor of Science from the University of Kentucky. He is currently a computer programmer/ analyst with the Department of Engineer-
ing, University of Georgia Agricultural Experiment Stations.

Fred Cubbage is an Assistant Professor in forest economics and policy at the University of Georgia School of Forest Resources. He received M.S. and Ph.D. degrees from the University of Minnesota and a Bachelor of Science degree from Iowa State University. He has also
served as Service Forester for the State of
Kentucky and a Associate Economist at the Southern Forest Experiment Station.

ANALYZING HISTORICAL AND REGIONAL
INTRODUCTION
The stumpage price for wood is a
continual concern to forest landowners, forest industry, and potential investors in forestry. Planning investments in tim-
ber and wood products manufacturing
facilities always requires an estimate of future forest stumpage prices. Future prices depend on the supply of and de-
mand for wood, and are usually predict-
ed by analyzing past trends in stumpage prices. Price trends are important not only on a national or state basis, but also
on a regional basis since wood can be
transported economically for only limited distances. Georgia has had less infor-
mation on price trends than many other
states (Rosen 1984), yet has the largest forest industry base in the South. It has also been the center for foreign and institutional investment, and has some of the greatest reported prices in the
South (Timber Mart South 1983). How-
ever, historical trends have not been available to estimate the relative rise in price in the last few decades.
This study was initiated to examine historical and regional trends in stumpage prices in Georgia to help provide better information to forest owners and forestry planners in the state. The primary purpose of this study was to collect, summarize, and analyze data on the historical and regional stumpage prices for
wood in the state of Georgia. Aggregat-
ing past data and determing probable price trends will provide investors with
better information.

STUMPAGE PRICE TRENDS

In Georgia

By
Jerry W. Davis & Frederick W. Cubbage

Procedures

To accomplish the objectives of the study it was necessary to obtain many years of price information from a large geographi-
cal area. Price data has not been formally collected in Georgia, so secondary data was obtained on timber sale information from
private- and state-owned lands in the state made by the Georgia Forestry Commission. The Commission has records of assistance to private landowners dating back to the mid-1 940s. Commission foresters provide forest management assistance to nonindustrial private forest landowners throughout the state. Part of the management assistance program includes the provision of timber marking services to private owners at a nominal cost. Commission Service Foresters mark and tally each tree and then provide a marking report to the landowners. The report is a summary of the volumes marked by species, size class, and prod-
uct class. In addition, the foresters provide landowners with a list of potential timber buyers in the area, furnish a sample tim-

ber sale contract, and recommend that owners receive several bids for the sale. Actual contacts with the buyers and sale administration must be performed by the landowners.
Since the early 1970s, the Forestry Commission has also administered sales on state-owned forest lands. The marking procedures are similar. However, for state sales, the Commission also administers each sale, usually using a sealed bid process. Records of these private and state sales are kept in local Georgia Forestry Commission offices and provided the data for this study. Cases that involved timber marking performed by Commission foresters were selected for further examination. Many of these cases had received follow-up examinations to note the performance of harvesting crews and often listed the price paid to the landowner for his stumpage. Sales resulting from insect, disease, or weather damage, which can de-value stumpage, were excluded from the sample.

Data Analysis

The data collected from the Georgia Forest Management case records consisted of 333 timber sales conducted from 1949 to 1984. There were 169 pine sawtimber sales, 187 pine pulpwood sales, 29 hardwood sawtimber sales, and 4 hardwood pulpwood sales. The raw data were categorized by product class, Forestry Commission District (Figure 1), and time.
Average prices by district were calculated for each year that data were available. Tables 1 and 2 were made from the
averages for easy reference. Summary statistics were calculated
for product prices, product volumes and other important sale characteristics (Table 3). The small number of hardwood sales did not warrant further analysis. Therefore, the remainder of this discussion deals with pine pulpwood and sawtimber only.
Nominal (including inflation) and real (without inflation) statewide averages by year were calculated for pine sawtimber
(Table 4). Some regional variation in price was evidenced by a $15.60 per thousand board foot (MBF) mean difference in northern and southern prices. However, this was not statistically significant according to group t-test comparisons. Thus state-
wide averages were used for the statistical analysis in order to provide a larger sample.
Nominal and real regional averages by year were calculated for pine pulpwood, and are shown in Tables 5 and 6. Forestry

Commission districts 1 through 6 comprised the North Georgia Region (I); districts 7 through 12 comprised the South Georgia Region (II). Unlike sawtimber, the pulpwood data were sufficient to permit analysis for each region. The sawtimber and pulpwood annual price series served as the basis for further
analyses.
To account for the affect of inflation, nominal prices were
deflated to 1952 dollars using the GNP Implicit Price Deflator.
Real prices were determined by discounting each year's nominal price to 1952 levels. The price deflator served as the discount
rate.
The nominal and real price series were graphed over time and appear as Figures 2 through 7. Price indices were constructed on both nominal and real prices to show how later years compare to the base year of 1952.
Trend-line regression was used to determine long term annual rates of increase. It was applied to nominal prices, yielding a 5.4 percent per year increase for sawtimber, a 3.8 percent per year increase for pulpwood in region I, and a 5.2 percent per year increase for region II. The same procedure was applied to real prices yielding a 1.14 percent increase per year for sawtimber, a 0.55 percent decrease per year for pulpwood region I, and a 0.85 percent increase per year for region 1 1.

Figure 1. Georgia Forestry Commission Districts and Pine Pulpwood Analysis Regions

Table 1. Yearly Average Sawtitnber Stumpage Prices, by Forestry Commission District 1/

Year

II

III

IV

District

VI

VII

VIII

1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

24.00

22.50 20.37 23.45 30.50 29.00 30.00 30.00 29.00
-
30.00

31.25
-
54.54
-
35.50 31.77 27.61 32.50 36.78

30.00 32.26 25.00 35.00 30.00 30.00 36.40 40.00

45.82
-
25.00 25.00
-

32.00
50.00 70.33
45.22 70.00 120.00 133.28 130.00

35.66 40.00 40.00 40.00

33.22

85.00 88.29
94.90

80.00 125.00

157.26

- All prices In dollars per MBF Scrlbner log rule.

IX 37.53 35.50 25.83 25.85
-
100.00 110.05

-
35.17 39.49 50.00 39.63 38.96
40.00
96.00 68.53
142.04 148.68 161.19

XI

XII

31.21 53.22
50.00

Table 2. Yearly Average Pulpwood Stumpage Prices, by Forestry Commission District 1/

Year

"IT

TTT TV

District

"VT

-VTT

TTTT

1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

-
5.25 4.74
-
5.00
-

5.00 12.00

3.33 4.11 2.97 4.24 5.25 4.80 5.00 5.00 6.05
7.00
5.00 5.35 5.25
7.27 6.34
6.00 6.62 8.20
8.94

3.00
-
3.52 5.00 5.42 5.87 5.33
6.47
-
-
,, ~
-

13.18

1/ All prices in dollars per standard cord.

8.50 7.57

3.43 3.25 3.57 5.98 4.88 5.00 5.63 8.66
7.00
7.00 7.83 8.00 6.50

7.92

7.32 16.05

-
4.93 5.87
-
6.50
17.16 15.77
20.11 21.12 18.50 25.36 20.46

7.00 8.00
15.00

TT
4.80
6.67
18.00 14.67 20.46

6.15 6.26 7.28 7.50
7.50 7.51 9.52 8.05 8.78

TfT
8.00 10.00

XTT
7.25 7.00

Table 3. Georgia Timber Sale Data Summary Statistics, 1952-1983

Acres Harvested
Sale Value
Pine Sawtimber Vol. (MBF) Scribner
Pine Pulpwood Vol. (cds)
Hdwd Sawtimber Vol. (MBF) Doyle
Hdwd Pulpwood Vol. (cds)
Pine Sawtimber Price (S/MBF)
Pine Pulpwood Price (S/cord)
Hdwd Sawtimber Price (S/MBF)
Hdwd Tulpwood Price ($/cord)
Pine Sawtimber Vol. (MBF/acre)
Pine Pulpwood Vol. (cords/acre)

Number 330 333 169 187 29 4 169 187 29 4 169
18*.

Mean 79.26
$ 4726. 00 126. 9*.

231.18

25.10

66.75

$ 48.87

$

7.09

$ 31.19

$

6. 40

2.19

4.87

St andard De viation
130.83 $ 9948.15
144.16

487.61

41.09

85.38

$ 38.31

$

4.25

$ 20.03

$

.74

1.68

6.72

Source: Georgia Forestry Commission Case Files

Mi nimum 1.00
$ 6.00 2.0 2.0 1.0
10.00 $ 10.00 $ 2.66 $ 5.00 $ 6.00
.04 .15

Maximum 1340
$ 103,711.85 1080.33

3982.0

215.0

192.0

$

174.13

$

25.36

$

90.65

$

7.51

8.72

47.73

Sum 26155.0 $ 1,573,771.7 21453.53 43230.25
727.9 267.0
-

Table 4. Nominal and Real Pine Sawtimber Stumpage Prices

Year
1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Stumpage Price S/MBF
34.36 26.84 28.44 27.96 33.95 31.59 33.46 32.47 42.24 30.00
-
-
36.61 36.56 40.00 40.50 40.00
-
50.00 75.22 85.53 96.00
-
87.81 77.63 125.00 70.00 120.00 142.04 143.08 154.17

Price Index
100 78 82 81 98 91 97 94
122 87
-
106 106 116 117 116
-
145 218 248 279
-
255 225 363 203 349 413 416 448

% Change From Previous
Year
_
-23.2 5.9
-1.6 21.4 -6.9
5.9 -2.9 30.0 -28.9
-
-0.0 9.4 1.2
-1.2
-
50.4 13.7 12.2
-
-11.5 61.0
-44.0 71.4 18.3 0.7 7.7

GNP Price Deflator
1.4 1.6 1.2 2.2 3.2 3.4 1.7 2.4 1.6 0.9 1.8 1.5 1.5 2.2 3.2 3.0 4.4 5.1 5.4 5.0 4.2 5.8 8.8 9.3 5.2 5.8 7.4 8.6 9.2 9.4 6.0 4.2 3.7

Real Price S/MBF
34.36 26.42 27.66 26.61 31.31 28.17 29.34 27.81 35.60 25.06
-
28.53 27.61 29.33 28.44 26.73
-
28.97 41.20 43.06 44.21
-
36.35 29.91 44.35 22.74 35.64 39.79 38.47 39.42

Real Price Index
100 76 80 77 91 81 85 80
103 72
-
84 80 85 82 77
-
84 119 125 128
-
105 87
129 66
103 115 111 118

Real % Change From Previous
Year
_
-24.4 4.7
-3.8 17.6 -10.0
4.1 -5.2 28.0 -29.6
-
-3.1 6.2
-3.0 -6.0
-
42.1 4.5 2.6
-
-3.9 48.2 -48.7 56.7 11.6 -3.3
6.3

Table 5. Nominal and Real Pulpwood Stumpage Prices, North Georgia

Year
1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Stumpage Price
S/cord
3.16 3.65 3.07 3.91 5.22 4.88 5.24 5.44 7.12 5.00 6.73 7.00 5.00 5.67 6.42 7.83 7.39 6.42
-
6.00 6.21 8.10
-
8.94
-
7.31
-
16.05 13.18 12.00

Price Index
100 115
97 123 165 154 165 172 225 158 212 221 158 179 203 247 233 203
-
189 196 256
-
282
-
231
-
507 417 379

% Change From Previous
Year
.
15.5 -15.8
27.3 33.5 -6.5
7.3 3.8 30.8 -29.7 34.6 4.0 -28.5 13.4
U.2
21.9 -5.6 -13.1
-
3.5 30.4
-
-17.8 -8.9

GNP Price Deflator
1.4 1.6 1.2 2.2 3.2 3.4 1.7 2.4 1.6 0.9 1.8 1.5 1.5 2.2 3.2 3.0 4.4 5.1 5.4 5.0 4.2 5.8 8.8 9.3 5.2 5.8 7.4 8.6 9.2 9.4 6.0 4.2 3.7

Real Price $/cord
3.16 3.59 2.99 3.72 4.81 4.35 4.59 4.65 6.00 4.18 5.52 5.66 3.98 4.42 4.84 5.74 5.19 4.29
-
3.48 3.40 4.08
-
3.91
-
2.59
-
4.50 3.54 3.07

Real Price Index
100 113
94 117 152 137 145 147 189 132 174 179 126 139 153 181 164 135
-
110 107 129
-
123
-
82
-
142 112
97

Real % Change From Previous
Year
.
13.6 -16.8
24.6 29.3 -9.5
5.5 1.3 28.8 -30.4 32.2 2.4 -29.6 10.9 9.7 18.4 -9.6 -17.3
-
-2.1 19.8
-
-21.1 -13.3

Table 6. Nominal and Real Pulpwood Stumpage Prices, South Georgia

Year
1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Stumpage Price
$/cord
4.80
-
4.92 6.03 6.26 7.28 7.20 7.00
-
6.83 8.00 7.50 7.51 9.52
-
9.01 8.78
-
17.58 15.22
-
20.45 70.11 18.06 18.50
-
25.36 20.46
*

Price Index
100
-
102 175 130 151 150 145
-
142 166 156 156 198
-
187 182
-
366 317
-
426 418 376 385
-
528 426
-

% Change From Previous
Year
_ -
22.5 3.8
16.2 -1.1 -2.7
-
17.1 -6.2
0.1 27.7
-
-2.5
-
-13.4
-
-1.6 10.1
2.4
-
-19.3
~

GNP Price Deflator
1.4 1.6 1.2 2.2 3.2 3.4 1.7 2.4 1.6 0.9 1.8 1.5 1.5 2.2 3.2 3.0 4.4 5.1 5.4 5.0 4.2 5.8 8.8 9.3 5.2 5.8 7.4 8.6 9.2 9.4 6.0 4.2
-

Real Stumpage Price
S/cord
4.80
-
4.68 5.56 5.58 6.38 6.16 5.90
-
5.52 6.37 5.84 5.67 6.98
-
6.02 5.57
-
8.85 7.00
-
8.46 7.75 6.41 6.01
-
7.10 5.50
~

Real Price Index
100
-
97 115 116 133 128 122
-
115 132 121 118 145
-
125 115
-
184 146
-
176 161 133 125
-
148 114
"

Real % Change From Previous
Year
57.7
-
18.7 0.4
14.3 -3.4 -4.3
-
15.4 -8.2 -2.9 24.0
-
-7.5
-
-20.7
-
-8.4 1.4
-6.1
-
-22.5
m

PINE SAWTIMBER STUMPAGE PRICES
GEORGIA 1949 TO 1984

150-
135-
120-
P 105R I 90-| C E 75-t
$ 60
/
M 45 B
F 30-1
15-
0-
1949

pi 111 -- -t--ii-r-i--j- 1 t-r-i i-i t-r r-j -ri -ri i-t--t-t r

ii

r-r i i i |- i i i i i -i i i i | i i i i i i

i | ii iiiiii

|

1954

1959

1964

1969

1974

1979

1984

YEAR

Figure 2. Actual Pine Sawtimber Stumpage Prices in Georgia, 1949 to 1984.

REAL PINE SAWTIMBER STUMPAGE PRICES
GEORGIA 1952 TO 1983

100-

S

:

T 90-

U

:

M 80-

P
A 70J

G

E 60^

P 50-

R

:

I 40-

C

:

E 30-^

$ 20-

/

:

M 10-

B

:

F

rni 1 j

i

t -r-r

rrrrryirrr-r T-t-T~t |-tit rrt'r TT f

r ti

Tr[riTT i iiii|iiii i - r i i i-j-rrTi n-frry*

1949

1954

1959

1964

1969

1974

1979

1984

YEAR

Figure 3. Real Pine Sawtimber Stumpage Prices, 1952 to 1983
10

r
PINE PULPWOOD. STUMPAGE PRICES
REGION I GEORGIA 1952 TO 1984
24-

21-

18 P R I 15-4.
C E
12
$
/
C9 O R D6
3-

0-

|III1I II II

I

IT

I

I

I

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|

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--I I

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[

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II

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I

I

I

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I

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|

1949

1954

1959

1964

1969

1974

1979

1984

YEAR
Figure 4. Actual Pine Pulpwood Stumpage Prices in l^orth Georgia, 1952 to 1904,

REAL PINE PULPWOOD STUMPAGE PRICES
REGION I GEORGIA 1952 TO 1984

24-

21-

18-1
P R I 15-j C E
12->
$
/
C 9H o
R D 6-1

3-

8-
I

i

i

i

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1949

1954

1959

1964

1969

1974

1979

1984

YEAR

Figure 5. Real Pine Pulpwood Stumpage Prices in North Georgia, 1952 to 1984
11

.
PINE PULPWOOD STUMPAGE PRICES
REGION II GEORGIA 1952 TO 1984
24-

21

18-
P R I 15 C E
12H $
/
C9 O R D 6-1

3-

0-

i |

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1949

1954

1959

1964

1969

1974

1979

1984

YEAR

Figure 6. Actual Pine Pulpwood Stumpage Prices in South Georgia, 1952 to 1984,

REAL PINE PULPWOOD STUMPAGE PRICES
REGION II GEORGIA 1952 TO 1984

24-

21

18-3
P R I 15
C
E 12
$ / C9 O R D6
3-

0-

'
|

i

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1949

1954

1959

1964

1969

1974

1979

1984

YEAR
Figure 7. Real Pine Pulpwood Stumpage Prices in South Georgia, 1952 to 1984

12

DISCUSSION
Sawtimber stumpage prices remained relatively constant from 1950 to 1960, fluctuating be-
tween $30 and $40 per MBF. This was also the case for the South in general (Anderson 1969). Nominal prices exhibited an upward trend throughout the 1970's and early 1980's, exhibiting small deviations from the mean. In the past ten years, however, real prices have shown a gener-
al decline, possibly caused by a depressed lumber market due to the high inflation and reduced housing starts. Since 1952 the real rate of increase was substantially less than the nominal rate of increase, indicating the strong influence of inflation on prices. However, Georgia sawtimber prices have appreciated at an average rate at least one percent per year greater than the inflation rate. Volatility in the sawtimber market is reflected by the percent changes for one year to another. Nominal values ranged form -44 to +71 percent. Real percent changes were similar since percent changes are independent of the relative level of prices.
Pulpwood stumpage prices exhibited less volatility than did sawtimber prices. Annual percent changes were smaller and less erratic. Nominal prices in both regions showed modest annual increases until the late 1970's and early 1980's. Nominal prices in region II were significantly greater than prices in region I, confirming the general belief that prices differ between regions within the state. Real prices in region II were greatest in the late 1970's and have decreased since then. Real prices in region I have remained less than 1960 levels for the past 15 years. The rate of increase for region II is encouraging. Milliken and Cubbage (1985) found no real pulpwood increases using southwide national forest timber sales. Thus, South Georgia has had greater pulpwood increases than other parts of the South, as many people in the industry have believed.
The negative increase for region I is disturbing, but not unexpected. Conversations with Commission foresters familiar with the Atlanta area suggest that this area is a source of inexpensive pulpwood. As areas are cleared for commercial and residential construction, the timber present is often considered a nuisance. Therefore, local forest products firms and wood dealers are able to procure pulpwood at low prices, leading to reduced prices throughout much of the Northern Region. Also mountain logging increases harvesting costs, leading to lower (residential) stump-
age prices.
Overall, real prices for sawtimber and pulpwood in region II (South Georgia) have increased at more than the rate of inflation for the past 32 years. This should be encouraging to long term investors in forestry. The drop in real prices for the past few years may indicate that we are nearing the low point in the cycle and can expect prices to improve in the near future. Improvements in the economy may make this assumption reasonable, perhaps stimulating investments in forest management.
In South Georgia the real price increases for pulpwood indicate increasing resource scarcity. Again, this should be attractive to timberland investors, since pulpwood prices are less volatile and pulp and paper industries are apt to continue to demand large volumes of wood. Naturally, forest industry and procurement foresters are less likely to be pleased with real price increases.
The prospects for improved pulpwood markets in North Georgia are not as good. Urban sprawl continues to advance into counties surrounding the Metro Atlanta area. Perhaps a strong urban forestry program could minimize the clearing of forest land, providing some improvements to present market prices for landowners. For the industry, pulpwood prices will remain relatively
cheap, at least until available pine inventories decrease significantly.
13

VERSITY OF GEORGIA LIBRAR
3 ElDfi D455M 225fl
LITERATURE CITED
Anderson, Walter C. 1969. Determinants of southern pine pulpwood prices. Research Paper SO-44. U.S.D.A. Forest Service,
Southern Forest Experiment Station. New Orleans. 10 p.
Milliken, Russell B. and Frederick W. Cubbage. 1985. Trends in southern pine timber price appreciation and timberland investment returns 1955 to 1983. Research Report No. 475. The University of Georgia College of Agriculture Experiment Station. 40 p.
Rosen, Barry N. 1984. Price reporting of forest products to nonindustrial private forest landowners. Journal of Forestry 82(8) :491 -495.
Timber Mart-South. 1983. Timber Mart-South 1983 Yearbook. Data Resources, Inc. Lexington, Mass. 291 p.
15

GEORGIA
FORESTRY
John W. Mixon, Director
J. Fred Allen, Chief of Research