• About
  • Forestry Investment
  • World Forestry Update
  • Archives
  • Categories
  • Why Invest In Timber?

    2010 - 02.19

    I have said it before and I will say it again timber is the number one commodity in a recession.

    In early February the stock market was trading off its recent highs and most commodities were taking a hit as the US dollar rose. Not timber though as it shrugged off the selling and hit a fresh two year high.

    The price of timber is at its highest since August 2007, rising above $280 per 1,000 board feet. In 2009 timber was up by approximately 60%, which is slightly ahead of US equities. This might be a little confusing to most as according to the Western Wood Products Association the housing sector, which is responsible for 45% of timber demand, has yet to show sustainable recovery signs. This could be down to one of three options.

    The first is that the rise in timber could be an early indicator that the housing market is about to make a recovery. The second reason could be that due to a drop in supply; as less was produced during the recession and some producers have gone out of business. Lastly it could be that timber is rising with every other commodity and asset class off the March lows after investors priced in a depression scenario that never occurred.

    What you need to ask yourself now is how to take advantage of the rise in timber prices. You could for example buy into the companies that produce timber for the construction sector. Or you could put your investment towards the DIY stores that supply timber for homeowners. However before doing either of these options you have to ask yourself these two important questions. One – will the housing market improve? And two – will the economy help the home improvement business?

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Your Reply