Explaining wood stock increases in times of decreasing profitability: A statistical analysis

The aim of this paper is to analyze the statistical relationship between the yearly timber supply of Maritime Pine and Eucalyptus and their market prices in Galicia (northwest of Spain) during the 1985–2007 period. The development of profitability and growing stock is similar for both species in the forestry sector of this region. Specifically, we observe that forest owners decide to accumulate growing stock in spite of decreasing profitability, due to the evolution of prices and costs. In this study, we attempt to explain statistically the forest owners' behavior using the Granger causality test and an analysis based on the cross-correlation functions. The statistical analysis between timber supply and market prices shows opposite results for both species. The increasing growing stock is due to a decrease in wood prices in the case of Pinus pinaster. Lower prices and less timber supply resulted in a higher accumulation of growing stock. On the contrary, this result does not hold for Eukaliptus globulus. In this case, a decrease in price does not statistically cause a reduction in timber supply. This may suggest that the accumulation of growing stock could be a consequence of subsidies, forest abandonment, and rapid natural regeneration of this species.

Research highlights▶ We analyze the statistical relationship between timber supply and market prices. ▶ Increasing growing stock is due to a decrease in price in the case of Pinus pinaster. ▶ Increase of the growing stock is not based on price changes in the case of Eucalytus. ▶ Other explanatory factors should be consider in the development of the growing stock. ▶ Growth rate, regeneration and maintenance costs and grant schemes of the CAP.