Page 10 - Georgia Forestry - Issue 3 - Summer 2020

Economic A
midst the pandemic, the
Outlook
Perspectives from Three Experts
The most pressing economic issues for our industry right now are housing starts and trade with China. If either of those are delayed, it is likely that the solid-wood side of our businesses will suffer greatly.
Government stimulus is the most likely solution to housing. The issue with China seems to be in the political arena now. The worst-case scenario is that both are delayed. That could potentially have worse fallout for our sector than the 2008 collapse. Government stimulus may carry us through the shutdown, but it is going
to take more action to restart the economy.
But what will we look like long-term? Will the fear of another virus, and the realization
that many people can effectively work from home, reduce demand for office space? Will fear of living in multifamily units cause increased demand for single-family housing? Will people want a larger house, including a separated home office? Will demand for small, forested tracts to build a getaway home increase? Will the need to domestically source many strategic supplies increase demand for our products?
It is likely that we are going to see big shifts in how we live and work. How these shifts play out will impact all of our businesses.
underlying thesis for timber-
Investors
— MARSHALL THOMAS, President, F&W Forestry Services
Supply Chain
S uppliers, loggers and truckers are adjusting and
repositioning. With grade markets softening,
suppliers have fewer delivery options and ”
are being forced to pursue additional market share
with pulp and packaging mills. To further complicate
things, many suppliers and loggers are carrying large
stumpage ledgers due to substantial wet weather over the
past 18 months. We expect an increased focus on specific product purchases and liquidation of existing inventory before returning to a more typical pattern of multi-product stumpage or lump-sum purchases. Longer term, we will likely see the more successful and well-capitalized companies expand operations, and some less efficient or smaller operators squeezed out of the business.
— DAVID FOIL, President, Forest Resource Consultants
land holds as well as ever for long-term investors: stability, diver- sification and security. Timberland is a hard asset and a finite resource; land will always be in demand. If the investment helpfully diversifies portfolios and generates cash as needed relative to other opportuni- ties, then ignore the noise and focus on other issues. Timberlands are doing what they are supposed to do.
Timberland investments benefit from the fact that they comprise a diversified bundle of businesses.
A given forest can serve multiple, often countercyclical, markets, including hardwood and softwood, grade and pulpwood, along with non-timber markets such as land, recreation and cell towers.
Thirty years of data indicates timberland satisfied its mandate. Since 1990, timberlands outperformed appreciation of the S&P over the longer 20- and 30-year timeframes that included three recessions (in 1990-91, in 2001, and the Great Recession of
2007-2009), while the S&P 500 outperformed private timberlands for shorter
timeframes and from 2010 to 2019.
Timber satisfies needs for diversifi- cation and safety.
What distinguishes timber from other commodities
is the pairing of continuous, positive
(biologic) growth along with the ability to store
volume and wealth over time as business markets
cycle. Current market turbulence reminds us that we don’t live in an absolute-returns world; we live in a relative-returns world. In real terms, timberland investments stabilize portfolios.
— BROOKS MENDELL, President and CEO, Forisk Consulting
8 | GEORGIA FORESTRY
Tim“
from the fact that they
comprise a diversified
berland investments benefit
bundle of businesses.