U.S. timberland accelerated its price growth, despite some lumber market concerns centered on China and the domestic market, which prompted one of the top forestry groups to warn on profits.
U.S. timberland prices were 7.2% higher in the April-to-June quarter than a year before, nudging 0.2 points higher than the rate of annual appreciation recorded for the January-to-March period, the National Council for Real Estate Investment Fiduciaries (Ncreif) said.
Factoring in income of 2.6%, the total return from forestry land over the year was 9.9%, the highest figure in nearly six years, although still behind the 17.2% achieved from farmland.
The performance “reflects a combination of strong export demand from China for logs and lumber and a healthy domestic demand in the U.S. for timber products”, said Mary Ellen Aronow, chair of the Ncreif timberland committee. However, Aronow, a senior forest economist at Hancock Timber Resource Group, acknowledged some challenges to these factors, saying noting “some hurdles still facing the recovering U.S. housing market, and a cloudy outlook for Chinese demand”.
Earlier this week, Plum Creek Timber, which controls 6.7m acres of U.S. forestry, cut its forecast for full-year earnings to $1.05-1.25 a share, from $1.30-1.50 a share, citing a market recovery in 2014 which “has been more muted than we and other industry participants initially expected”.