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“Everyone is asking, what’s it going to take to see an increase in demand for our southern pine and hardwood timber,” says James Henderson, Mississippi State University assistant Extension professor for forest economics and management, who spoke at the Mississippi Farm Bureau Federation’s Winter Commodity Conference at Jackson. “We want to see increased residential construction, we want to see the supply of existing homes on the market come down, and we want to see the unemployment rate drop — economic growth means more jobs and more people buying houses.”
TO REVIVE slumping sales of southern pine and hardwood will need increased residential construction, a reduction in the supply of existing homes on the market, and a drop in the unemployment rate, says James Henderson, Mississippi State University assistant professor for forest economics and management.
China No. 1 buyer
Something that has been helping prices nationally is “the incredible amount” of timber and lumber that China has been purchasing from the U.S., Henderson says. “They are now our No. 1 export market. Hopefully, that trend will continue as their economy keeps developing and they’ll purchase even more of our timber and lumber.”
Longer term, he says, the expansion of the Panama Canal “will allow movement of some really large cargo ships into southern U.S. ports, and hopefully we’ll send them back with some lumber.”
Another silver lining of sorts, Henderson says, is that “real estate analysts and economists are very optimistic about what they see in the statistics for population growth and household formation.
“During a recession, people delay starting new households, waiting for conditions to improve. While the U.S. housing affordability index is the highest it has been since 1980, getting home loans isn’t terribly easy right now — some banks require a 20 percent down payment.
“But as the unemployment numbers improve and credit markets start to thaw a bit more, we can expect the formation of new households to begin to spike upward, and that will be good for timber.
“An overriding question is, how frail is the U.S. economy right now?”
The Conference Board of Consumer Confidence notes that building permits are up and the long decline in housing is slowing, Henderson says. “But they have a caveat: they’re concerned about the ongoing recession in Europe, which could derail the economic recovery and open the door to a global financial crisis.
“So, you need to take all this into considering in forming your strategy for holding or marketing timber.
“There’s a lot of timber out there growing on the stump, and the harvest rate has been down for some time, which is adding to the supply. Take this into consideration when you’re making your future harvest decisions.”