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Why do stumpage prices increase more than lumber prices?Author(s): William G. Luppold; John E. Baumgras; John E. Baumgras
Source: In: Meyer, Dan A., ed. Technology and market information for the next millemmium, proceedings of the 26th annual hardwood symposium; 1998 May 6-9; Cashiers, NC. Memphis, TN: National Hardwood Lumber Association: 53-61.
Publication Series: Miscellaneous Publication
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DescriptionEvery sawmiller who has been in business more than 5 years realizes that hardwood stumpage prices tend to increase faster than lumber prices, decreasing the margin between these two prices. Although increases in stumpage versus lumber prices are readily apparent, the reason for the decrease in the margin is not. Recent research findings indicate that the stumpage/lumber market margin is decreasing as sawmills become more efficient. During a given year, progressive sawmills adopt new production technologies and marketing procedures in an effort to increase profits. Other mills implement these processes if they seem profitable while others cannot or will not adopt them. When periodic downturns in the lumber market occur, many less efficient mills are forced out of the market. When subsequent increase in price occurs,the remaining efficient mills vigorously compete for stumpage, eventually erasing any short-term profits gained by adopting new technologies or marketing methods. Each time this happens, the stumpage/lumber market margin decreases. These margins tend to decrease faster for a species that experiences large increases in lumber prices. However, most species eventuallywill have similar decreases in lumber stumpage market margins because of similarities in production and market methods across sawmills.
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CitationLuppold, William G.; Baumgras, John E. 1998. Why do stumpage prices increase more than lumber prices?. In: Meyer, Dan A., ed. Technology and market information for the next millemmium, proceedings of the 26th annual hardwood symposium; 1998 May 6-9; Cashiers, NC. Memphis, TN: National Hardwood Lumber Association: 53-61.
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