Throughout the year, the value of trees in a forest can fluctuate due to physical and price changes in the market. Timber prices are an important element in forest evaluation, i.e. calculating the estimated profit from the assets in a forest.
A forest stand does not necessarily need to be cut at the rotation age, instead an owner is able to wait until wood prices increase and then sell it. This ensures they will receive maximum income from the forest. But how is the price of the timber actually decided?
Supply and Demand
As with many products available for purchase, timber costs are very much determined by supply and demand. The requirement for the successful growth of the forest can take the power away from the vendor, as a poor crop will yield less of a return. However, the effects of supply changes in terms of pricing are easy to predict. The rarer the product, the higher the cost!
Having said that, the volume will be much lower so the revenue returns will likely balance out. And it’ll be much harder to sell fewer trees at higher prices should a rival market’s supply meet the demand.
Timber Prices & the Export Market
The timber industry and the forests of the world share a symbiotic relationship, which is unique to the industry. However, there are other environmental and economic factors which affect the way in which timber prices fluctuate between suppliers.
For example, the Latvian forest sector is highly dependent on export markets, with Sweden and Finland being forced to buy Roundwood from Latvia at extremely high prices. This has been caused by high demand vastly outstripping available supply of the product in these countries. However, this situation will change when native forests can once again meet the demand.
The unique relationship between the industry and its supply chain is one that can lead to confusion, but Landguard Point are committed to supplying our products at the best prices.
If you would like to discuss timber prices with the Landguard Point team, please get in touch today. You can call us on 01359 258264 or email us on [email protected]. You can also use our contact form.