TIMBER MARKET CONDITIONS Forest Landowners Association August 24, 2010 Ian A. Munn (With thanks to James Henderson) Department of Forestry Mississippi State University

Current Conditions

The Mississippi Timber Economy and the Great Recession National recession – Negative impact on MS’s economy Indirect impact on forestry Housing Market Collapse – residential construction down turn directly impacts forestry and the forest products industry

DECLINE IN HOME CONSTRUCTION Housing starts down 79.5% from early 2006 levels.

MS Pine Stumpage 41.54% Decline in ST

Mississippi Timber Harvest Value ( ) 2009 Harvest of forest products value fell bellow $1 billion for first time in 16 years.  delivered value down by 19.9%  $864.9 Million in 2009;  $1.08 Billion in 2008

Major Timber Product as Percentage of Total Harvest Value ( )

Lumber Market Indicators Source: Random Lengths July 9, 2010

Panel Market Indicators Source: Random Lengths July 9, 2010

Pending Home Sales Drop? Expiration of home buyer tax credit (April 30 th ) – Tax credit stabilized home prices Recovery in housing depends on private sector job creation in the second half of 2010 – Little to no growth in employment Source: National Association of Realtors

US Total Private Employment Source: Bureau of Labor Statistics

Source: U.S.F.S. Forest Products Laboratory

U.S. Economic Outlook: August 2010 Source: National Association of Realtors

Real GDP:US Economy

Unemployment: US

Housing Starts: US

Source: USDA Forest Service, Forest Inventory and Analysis Mapmaker

Lower Stumpage Prices Supply 1 Price Quantity P1P1 Q1Q1 Demand Increased Supplies of Sawtimber

Supply 1 Price Quantity P1P1 Q1Q1 Demand Supply Increased Supplies of Sawtimber

Supply 1 Price Quantity P1P1 P2P2 Q1Q1 Q2Q2 Demand Supply Increased Supplies of Sawtimber

Time to Sell? Definitely Not! – Developing new product markets – Increasing demand for non-timber uses – Traditional timber markets will improve – Underlying land values still holding – Unlike most other financial assets, timberland has Use Values

Forest Management Pays In 2009 for example: Timberland returned 14% S&P 500 returned 9.4% Timberland is the only asset class that “grows”

Questions?