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Good Time for Timber and Forestry Investment as Long-Term Outlook Remains Strong

The timber and forestry investment outlook is seen as remaining positive, with constrained timber supply in Canada likely to drive prices up. On 28 March 2013, the alternative investment news website Opalesque reported that it was a good time to invest in timber.

Opalesque quoted Dr. Jacek Siry, Associate Professor of Forest Economics at the University of Georgia’s Warnell School of Forestry and Natural Resources, as saying that it was a good time to invest in timberland with US prices being at historic lows.
“If you can acquire high quality timberland and create a diversified portfolio, looking down 10 to 20 years from now, you can expect very solid returns,” Dr. Siry was quoted as saying. “Long term outlook for wood and wood prices, in my opinion, is very strong and very positive.”

**The Mountain Pine Beetle**
Among the factors seen as supporting timber and forestry investment in the longer term is the mountain beetle infestation plaguing Canadian timberland. “They’re trying to salvage as much wood as possible,” pointed out Dr. Siry, as quoted by Opalesque. According to him, output from Canada would decline, exerting “output pressure on timberland prices”.

In February, Bloomberg quoted excerpts from State of Canada’s Forests annual report showing that the mountain pine beetle was responsible for killing more than 710 million cubic meters of British Columbia pine from 1998 to 2011, whereas about 1.3 million hectares of forest in Alberta had been affected by infestations since 2001. Canada is reported as being the world’s third largest exporter of wood products after China and Germany.

**US Timber to Fill in the Gap Dented by Mountain Beetle**
The latest Timber Trends report by the Oregon-based timberland investment advisory company The Campbell Group LLC described 2013 as the “beginning of a long term bullish trend for the timber industry.” The mountain beetle received a special mention in the report, with the authors forecasting the epidemic to continue taking its toll on Canadian forests and expecting the US timber industry to fill in much of the gap.

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Opalesque quoted Dr. Siry as seeing Europe as being unable to meet its increased demand for wood. He however pointed out that there were a lot of pine trees in the US South, whereas those on the US East Coast had a good access to the European market. Dr. Siry said that if an investor were to put money in Southern US timberland now, rates of return would be close to zero, but in five to ten years the forestry investment returns could potentially reach five to eight percent.
The Campbell Group LLC sees timberlands on the US West coast as being in a better position on account of increased demand from China. The company expects increased exports to China, the world’s largest timber importer, to have a major impact on the timber market, with 12 to 22 percent of the North American lumber market likely to be affected.

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