Today's Prediction: Wood price inflation isn't going anywhere.

Background: Growing up, my family would visit my grandparents in South Carolina. We'd drive through these dense woodlands to get there. My dad would always tell us stories about how parents would buy land, plant trees, and by the time their kids were old enough, harvest the land and have money for things like wedding costs or college.

This dynamic has been in the logging industry for years...1. Acquire land 2. Plant 3. Wait 4. Harvest. You needed capital upfront, the capital during the time of growth to pay taxes and a buyer for a lump sum payout at the end.

Today we've got fewer buyers as less paper is used in day-to-day transactions. This is a good thing to help keep costs down(lower demand = lower costs).

That said, what if at year twenty, instead of getting a lump sum and restarting the cycle, you cashed in on an annual payment for every year the tree grows? No more 20-year slump. Instead, you are paid a perpetual income stream every year for life... Might be enticing to leave the trees where they are.

Introduce Carbon Offsets. For many industries, they are pushing to be carbon neutral or carbon negative by a certain target date in the next 50 years. The way they hit their goals is a combination of reducing emissions, and "buying" credits from a forester that can prove the density of their forest and the amount of carbon capture. As a forester, you follow the money. As more and more foresters realize they can literally grow money on trees....logging supplies can/will be limited.

Lower demand + lower supply could cause price hikes depending on which side of the equation falls faster and when.

#trees #finance