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Timberland
The value of timberland was at
historic highs during the first part of 2006 with some sales in
the $2000/acre range for bare land. Many of these tracts were
purchased by recreational buyers. Sales in recent months indicate
a decline from those levels, and the number of sale transactions
has decreased. Saw-timber prices for pine in 2006 were in the $375
MBF range but have dropped to the $300 MBF area.
It appears that the softening of
timber land values has occurred for two reasons. First, Wall
Street has pressured forest-products companies to unload some of
their land holdings following several major industry mergers.
There is an unprecedented supply of timberland coming on the
market. Second, there is a slowdown in real estate development.
Many timberland sales in recent months have been affected by
buyers who sold commercial and residential property and reinvested
their proceeds in timberland tracts. The amount of this "tax
deferred" money has dwindled from the high levels of last year. In
this type market, motivated sellers should be careful not to
over-price their offerings.
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Farms and Agriculture
Agriculture in the southeastern United States
is on the threshold of dynamic change due to a significant rise in
corn, wheat, and soybean prices. The strong demand for corn from
the rapidly-expanding ethanol industry is driving feed grain
prices sharply higher. Soybean prices are being positively
impacted by shifting production patterns as farmers respond to
corn prices that have hit 10-year highs during the past year.
Although higher corn prices have at least
temporarily reduced operating margins for ethanol plants, there
are now over 120 ethanol plants in the United States that are
producing some 6.2 billion gallons of ethanol annually. Another 90
plants capable of producing over 6.4 billion gallons of additional
capacity are under construction. Each 100 million gallon increase
in corn-based ethanol production will require over 30 million
bushels of corn. Futures prices for corn, soybeans and wheat
provide profitable price levels for at least the next three years
for farmers who are willing to forward price or hedge their
anticipated production.
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