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Explaining the disconnect between lumber and timber prices
Pundits are wondering “Lumber prices are soaring. Why are timber owners miserable?”1 They declare “Lumber prices soar, but logs are still dirt cheap”2 Indeed, lumber prices reached record highs at levels perhaps four times what were previously thought to be “trend” prices. Many are left wondering: (1) why are lumber prices so high? And (2) why haven’t timber prices, especially in the U.S. South, followed lumber prices up? In this research note we provide some comments on the former and take a deeper dive to answer the latter.
1 WSJ, 24 February 2021
2 Bloomberg, 20 April 2021
Binkley, C.S. 1994. Long-run timber supply: price elasticity, inventory elasticity and the capital:output ratio. Nat. Res. Modelling. 7:163-181.
Cardellichio, P.A. and C.S. Binkley. 1988. The effects of overrun improvements on stumpage price inflation. Can. J. For. Res. 18:981-985.
Sendak, P. E. 1991. Timber sale value as a function of timber sale characteristics and the number of bidders. USDA Forest Service Research Paper NE 657.
Hartman, Richard. 1976. The harvesting decision when a standing forest has value. Economic Inquiry 14(1): 52-58.
Hyde, W.J. 1980. Timber supply, land allocation and economic efficiency. (Resources for the Future Press: New York)
Johansson, P.O and Lofgren, K. G. 1985. The economics of forestry and natural resources. (Blackwell: London)
Johnson, R. M. 1979. Oral auction versus sealed-bids: an empirical investigation. Natural Resources Journal. 19(April):315-336
McAfee, R. P.; McMillan, J. 1987. Auctions and bidding. Journal of Economic Literature. 25:699-738.
van Kooten, G.C., C.S. Binkley and G. Delcourt. 1995. Effect of carbon taxes and subsidies on optimal forest rotation age and supply of carbon services. Am. J. of Agric. Econ. 77 (May): 365-774.
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