Transaction evidence analysis: stumpage prices and risk in central Georgia

Abstract

This paper uses hedonic regression techniques to analyze timber bid transactions in central Georgia. Softwood stumpage prices from pay-as-cut transactions are regressed against timber sale and stand characteristics. We identify observable factors that are statistically associated with the volatility of pine sawtimber stumpage prices in the market. The remaining price volatility, defined as market risk, characterizes undiversifiable price volatility in the market. Isolating market risk in this way has implications for relative price risk across predefined timber markets. Applications of this these techniques suggest that analyzing market price variability with total measures alone, such as standard deviation, may provide false senses of timber price risk.

The Analysis of Pine Stumpage Prices Based on Timber Sale Characteristics of the Southern United States

“…Although the pine stumpage price showed mainly a decreasing tendency, there were some main fluctuations in stumpage price change during the research period. It is likely that such a situation have also contributed to relatively low R-squared values, compared to other similar research using hedonic price function (Buongiorno and Young 1984;Puttock et al 1990;Leefers and Potter-Witter 2006;Sydor and Mendell 2008). Variables describing year, contract length, number of bids, harvest type, grade, market conditions, and logging conditions are statistically significant based on corresponding probabilities.…”

“…Based on empirical results, they found that the models within the same geographic region cannot be transferred easily to other regions. Sydor and Mendell (2008) analyzed timber bid transactions using hedonic regression techniques in central Georgia. They estimated a regression model of softwood stumpage prices from pay-as-cut transactions against timber sale and stand characteristics.…”

Effects of sale-specific factors on stumpage prices in Finland

“…Stands with seasonal harvest restrictions have to be harvested during suitable weather conditions, while stands with no seasonal harvest restrictions can be harvested according to demand. MacKay and Baughman (1996), Sydor and Mendell (2008) and Brown et al (2012) also found that harvest restrictions lowered the willingness to pay for standing timber.…”

“…Load volumes in transport have also been found to be on average lower for pulpwood than for sawlogs (Nurminen and Heinonen 2007). Sydor and Mendell (2008) also found that a higher percentage of pulpwood within a particular sale lowered stumpage prices.…”

“…Some studies suggest that factors such as harvestable volume density (e.g. Huebschmann et al 2004;Brown et al 2012), total sale area (Buongiorno and Young 1984;Sydor and Mendell 2008) and the volume or diameter of the trees (e.g. Niquidet and van Kooten 2006;Sydor and Mendell 2008) influence stumpage prices, while others (Mey Huang and Buongiorno 1986;Sendak 1992;Leefers and Potter-Witter 2006) found that these factors had no significant effect on stumpage prices.…”