Real price appreciation forecast tool: Two delivered log market price cycles in the Puget Sound markets of western Washington, USA, from 1992 through 2019

Abstract

Delivered log prices represent stochastic values exchanged in competitive marketplaces, responsive to unfolding macroeconomic forces operating through shifts in supply and demand. Major market disruption events, experienced as price appreciation or devaluation, shape into predictable cycles to balance at market price equilibrium.Monthly delivered log price records of a single grade/sort in the United States of America, Washington state's Puget Sound, from January 1989 through October 2019, are considered. The price series is analyzed during two market disruption and recovery events, reveal characteristics of a Markov-chain of order following a random-walk with ultimate return to base price levels. The Real Price Appreciation Forecast tool is guided by commodity real price disruption event severity in terms of how significant the price change is and how long it takes for the price disruption to initially peak or trough. The path of real price recovery to stable market equilibrium levels is predicted through the Real Price Appreciation Forecast tool presented in this manuscript. Within this price forecasting analysis, shocks, white noise, and other short-duration market events are viewed as peripheral factors when observing the ultimate market real equilibrium price level. The Real Price Appreciation Forecast tool gives the practitioner a mathematical model to analyze delivered log market data to predict the equilibrium price range shaped by the Markov-chain of order random-walk.