Forest2Market Produces Forecast for South Arkansas and North Louisiana Timber Market

The South Arkansas and North Louisiana timber market has traditionally been driven by sawlog production. Before the 2008 recession, timberland investors could always rely on the region’s quality forests to produce sawtimber for a growing market. This is no longer the case.

Over the past 10 years, demand for building products—and thus for pine sawtimber—has waned and so has sawlog price. The following chart shows annual pine sawtimber price change from 2001, when Forest2Market began tracking stumpage prices, to 2016, the last full year of data, for the states of Arkansas and Louisiana. While some gains have been seen in the last 5 years, markets in Arkansas and Louisiana have a long way to go to make up the substantial losses that occurred during the Great Recession.

Investors in South Arkansas and North Louisiana forests have been waiting for a turnaround.  Do the modest gains seen over the last five years indicate that the turnaround has begun? If not, when will it come? The answers to these questions about the timing of a full recovery dramatically affect investment decisions. 

Sawlog price increases are highly dependent on the balance of supply and demand. We all know demand is increasing marginally as more houses are being built, but what many investors don’t know is the extent of pent-up sawlog inventory and how long it will take to work through the oversupply. The timing of an increase in demand that prompts a reduction in the oversupply of sawtimber will be the fulcrum that eventually affects price.

Forest2Market has taken a close look at the South Arkansas/North Louisiana market in order to fully understand both the historical and current state of the markets as well as the health of the existing sawmill industry in the region. We are using this information to build a 20-year forecast of supply, demand and pricing in the market.