Over the last few years, the stumpage value of timber has either been stable or declined. The reasons for this situation are the following:
- Imported timber is significantly less costly than timber grown here in the United States;
- The mills that use fiber have diminished in number and are now located so that they have much less competition between mills for the same fiber;
- There has been such aggressive planting of timber over the last two decades that there is now a surplus of timber compared to demand.
Like any commodity, the demand for timber goes through peaks and valleys. The current combination of the three above-mentioned items is not a short-term situation, but rather has some long-term aspects.
A stable price for timber means land prices are relatively stable. However, it may take some period of time before the supply versus demand shifts, and we once again see rising timber prices.
It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is land.