What contributes to timberland returns?
• A tree’s biological growth typically contributes almost two-thirds (~61%) of the return from a timberland investment.4 Changes in timber prices make up another third (~33%), while changes in land value compose the remainder of the return, approximately 6%.4 It’s important to remember that a product’s fees and expenses, combined with its cost of debt and operational expenses, directly impact returns as well. Because trees continue to grow regardless of economic forces, the overall value of a timberland investment may grow steadily through market fluctuations. Furthermore, unlike farmed crops such as wheat or corn, timber does not have to be harvested at a set time, but can be stored “on the stump” through periods of weak pricing or demand. This unique aspect of timber production helps to regulate the prices of timber products and may in turn help to smooth out investment returns over the long-term. More importantly, trees typically grow in value as they grow in size, and that creates
