Page 18 - Georgia Forestry - Fall 2018

16 | GEORGIA FORESTRY
On October 10, Category 4 Hurricane Michael hit the Gulf Coast of Florida and moved through Georgia. The storm damaged more than 2 million acres of timberland at an estimated value of $763 million.
How to Think About Disruptions
In August 2005, Hurricane Katrina, a Category 5 event, struck the Gulf States, brutally affecting homes, forests and infrastructure. In more than a decade since, we’ve anticipated — and sometimes experienced — many storms on Georgia’s coast. Such natural disasters can have both positive and negative impacts on timber markets. So how do we think about them?
Two simple questions rooted in economic fundamentals can help anyone in the forestry industry consider how disruptions might impact cash flows:
A small disruption in the overall market can have a big impact for
a single forest owner. Disruptions that get handled on the ground via operations tend to qualify as shorter or smaller in this framework, while anything that requires a board meeting or an act of Congress better reflects longer-term disruptions affecting future capital allocation and strategic advantage.
Consider the two questions in the context of a hurricane:
BIG OR SMALL?
Big event locally; devastating to some forests and damaging to many.
BIG OR SMALL?
In other words, how impactful, whether positive or negative, would we expect this disruption or change to be on forest supplies or wood demand?
LONG OR SHORT?
What is the likely duration, whether positive or negative, of this disruption or change on supplies or demand
(in the market or industry)?