An investigation of log prices in the U.S. Pacific Northwest

Abstract

Log prices can be volatile and hard to predict from month to month. For those tasked with managing timberland investments and the marketing of logs, however, short run predictions of price could be useful. This study shows that Douglas-fir log prices can be predicted with reasonable accuracy using only a small amount of readily available macro-economic information. For example, nearly half of the variation in log prices over time can be predicted using the number of housing permits issued in a month. Information about exchange rates and mortgage rates provide further refinement of estimates. An attribution experiment shows that expansionary U.S. monetary policy over the last decade has raised log prices by about 5% above what they otherwise would have been. A strengthening U.S. dollar increased the supply of Canadian softwood in U.S. markets, however, and had a depressing effect on U.S. log prices. The results illustrate how policies enacted in locations far from forest-dependent communities can nonetheless have outsized impacts.