Forecasting prices with accuracy is as much of an art as it is a science. The art requires that one determine the likelihood certain events will occur over a forecast period, identifying both the direction and degree of those changes. The science requires that the forecast be initiated by using the most accurate and precise historical data from which to project forward, and Forest2Market has the only transaction-based data available to the forest industry, which includes 300 million+ historical data points and a wealth of industry knowledge.
But this task is made even more difficult for participants in the forest products industry, who rely on a steady supply of raw materials that must be procured regardless of the season. Ask any forester what most influences delivered fiber price (regardless of region), and 9 out of 10 will answer “the weather.” There are also drastic differences and weather dynamics between regions, which makes forecasting even more challenging for the global forest industry.
For example, October 2015’s record precipitation and flooding event in South Carolina provided a unique opportunity to demonstrate the impacts of significant, widespread precipitation events on the forest products industry and its supply chain. Areas hardest hit by rain experienced both short (1-2 weeks) and long-term (12+ weeks) decreases in supply, and these shortages caused suppliers to stretch for wood in areas that experienced less storm impact.
A comparison of month-end inventories in South Carolina versus the rest of the US South (below) demonstrates that South Carolina mills were forced to rely on their inventories following the storm event. During the early part of the year, these mills averaged one additional day of inventory compared to mills elsewhere in the South. During each month of 4Q2015, however, South Carolina mills had 4 to 5 days less inventory than their counterparts in the rest of the South.
Seasonal weather extremes also affect timber supply in the Great Lakes region, and hardwood inventory management is vital for mills to manage as it dictates the market pricing for all fiber. Harvesting activities are in full-swing during the winter months in this region, and hardwood inventories grow significantly during winter to include as much as 80 days’ worth of system-wide inventory to last through the spring months. It is equally important for the system to maintain a minimum of 30 days’ worth of hardwood inventory during the rest of the year so that winter surge capacity is not stressed beyond its capabilities.
What are the most important takeaways for wood procurement managers in these two vastly different scenarios?
- Gain a firm understanding of your unique operating environment, including the direct and indirect factors that may affect supply and price. This includes harvesting considerations, competition, capacity and inventory, haul distances, pricing factors and much more.
- Always be prepared for the atypical when it comes to weather. For facilities in the US South, this means keeping a close eye on inventories and trends during hurricane season. For facilities in the Great Lakes and Northeast, this means operating with added capacity flexibility during the winter months.
Forest2Market’s data-driven, comprehensive forecasts are designed to be customized from the ground up to help you better understand these circumstances. The price factors that influence your facility are unique, and our forecasting options allow you to identify those criteria that are most important in maximizing your own profitability. Our forecasts are designed to help you make consistently reliable business decisions by providing you with the most accurate and detailed industry information available, including:
- Global and local economic drivers
- Most complete and accurate historical data
- Price volatility and seasonality
- In-depth market analysis and economic factors that influence price
- Price forecasts based on custom criteria (geography, timeframe, species/product, stumpage/delivered, etc.)
Improve Forecasting with SilvaStat360
To further enhance the data and analysis that Forest2Market can provide, we will soon be launching a new business intelligence platform that will add an unparalleled view of the analytics that drive decision making and forecasting. The interactive platform, SilvaStat360, provides access to more comprehensive, client-driven custom data and analytics that will allow you to extract more value from our products and to make important business decisions faster. In addition to the features available in our current products, the following interactive enhancements are available via SilvaStat360:
- Access to current and historical data—Log in to the web-based platform to access data 24/7/365 to view and download historical trend/time series data.
- Presentation-ready graphics—Data and graphics are presentation ready for managers, executives and investors; easy to download for use in budgets, strategic plans and presentations.
- Download to Microsoft® Excel®—Multiple download options (monthly, quarterly and yearly) provide the ability to perform additional analysis.
- Global insight—Combined regional datasets allow for international indexing and global benchmarks so that you can compare your performance to the performance of your peers worldwide.
- Unit, grade scale and currency conversions—Instantaneous conversions to other units, grade scales and currencies to enable strategic and tactical decision-making; useful for international reporting and purchasing and intranational differences in units and grade scales.
- Convenient one-stop repository—A single warehouse for all your data needs, including Forest2Market’s proprietary pricing datasets and other 3rd party data (including Federal Reserve Economic Data, USFS Forest Inventory and Analysis data and National Oceanic and Atmospheric Administration precipitation data).
Using a forecast model to maximize return and minimize risk is good business, which can help you gain strategic advantage, operate efficiently and increase profits. A custom Forest2Market forecast is the most data-intensive tool on the market and, when complemented by the new SilvaStat360 platform, these tools will provide lasting, actionable intelligence and value at every level of your business.