At 1.13 billion, timber is the third biggest agricultural crop in Mississippi, behind poultry/eggs at $2.16 billion and soybeans at $1.21 billion.
There are 125,000 timber landowners with 19.7 million acres. That's two-thirds of the total acres in the state.
So when lumber prices goes through the roof, it's big news in Mississippi. This week lumber prices hit $982 MBF (thousands of board feet.) That's 3.7 times higher than the 52-week low. Lumber MBF prices have hovered around $300 for the last 15 years.
The lumber cost increase is hurting homebuilders, adding something like $17,000 to the average new home.
Housing starts peaked at 2.2 million a year in 2007 then dropped to .5 million after the financial crisis of 2007, which was caused by a collapse in housing prices. In 2020, housing starts were 1.5 million. That's equal to the 40-year average from 1960 to 2000.
Studies estimate the two million houses a year need to be built for the next three decades to replace dilapidated ones. That level would increase demand for lumber and pine trees.
Stumpage, the price of standing timber and the right to harvest it, has increased as well, but nothing compared to the lumber price increase. That means Mississippi Pineland owners are not yet reaping the benefits of the lumber price boom.
The problem is apparently an excess supply of stumpage. Twenty -five years ago, stumpage prices were two to three times higher than today, fueling a boom in pine acreage. Adding fuel to the fire, federal conservation policies paid landowners cash to convert farmland to timberland. The result has been a historic surplus of timber.
Another problem is apparently shortage of sawmills in the state. When lumber prices declined, many sawmills shut down. Consolidation in the industry put many mills under the ownership of big companies such as the Koch Brothers ownership of Georgia-Pacific and Crown Zellerbach.
Georgia-Pacific owns a cluster of nine mills in south central Mississippi, giving it a strong position to dictate prices to landowners.
Sawmills can only process so many trees per day. If there are too many trees and not enough mills, then Mississippi landowners will continue to miss out on the parade.
This has caused a lot of wailing and gnashing by the 125,000 Mississippi landowners, many of whom wish they had sold their land and invested in the booming stock market.
Fancy Wall Street studies suggest that, over time, southern pineland will achieve long-term annual returns equal to stocks -- about 8 percent historically. Certainly this is the concept promoted by Dick Molpus' Woodlands Group, which stitches small patches of land into large tracts to sell to institutional investors. It stands to reason that all basic asset classes such as stocks, gold, land etc. would converge to the mean over time.
The best possible sign for landowners would be announcements of new sawmills being built. That's just what happened this month in Winona.
Biewer Lumber, headquartered in St. Clair, Mich., recently announced its plan to develop a state-of-the-art sawmill in Winona. The mill will be more than a $130 million investment and will bring more than 150 new jobs to Montgomery County.
Biewer Lumber is a family owned company that operates five sawmills -- two in Michigan, two in Wisconsin, and one in Newton, which was constructed two years ago.
In addition, for the first time in nearly a century, Lumberton will see the construction of a new sawmill which is expected to create at least 135 jobs in the region.
Mission Forest Products, a subsidiary of Timberland Investment Resources, LLC, is locating a sawmill in Corinth. The project is a $160 million corporate investment and 130 jobs.
This is the way free market capitalism is supposed to work. When a big mega company monopolizes the market, it creates an opportunity for smaller companies to profit by entering the market.
Even more interesting is mini-mill technology that will allow landowners to process their own timber.
Another positive development is the rise of the wood pellet industry. British coal plants have been converted from coal to wood pellets to reduce CO2 emissions. Several of these plants are creating a market for pulpwood in rural Mississippi. A planned $160 million wood pellet plant in Lucedale would be the largest in the U. S. Plants in Amory and Gloster have been producing pellets for years.
Other commodities such as corn, soybean, cotton, eggs and poultry are all moving in positive directions, which bodes well for our state.