U.S. Timberland Discount Rates

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AGRICULTURAL FINANCE

U.S. Timberland Discount Rates

Jun. 30, 2020

Expanding sawmill capacity in the U.S. South has contributed to decreasing real discount rates on timberland in the region, particularly in states with the largest investments in capacity. Sawmill expansion has been driven by the accumulation of U.S. South log supply over the past decade, resulting in depressed log prices. With logs accounting for the greatest proportion of a sawmill’s operating costs, North American sawmill capacity has shifted to the U.S. South to capitalize on relatively low input costs. Increased investment in the U.S. South will likely keep timberland discount rates near historical lows.