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Dynamics of Hardwood Stumpage Markets in the Southcentral United States
Nagubadi, Venkatarao. 1999. Dynamics of Hardwood Stumpage Markets in the Southcentral United States. Mississippi State University. Major Professor: Dr. Ian
A. Munn. 159p.
This study is motivated by recent changes in hardwood stumpage markets and its distinctive features that distinguish from the softwood stumpage markets. This
research has two components: first, it tests whether the law of one price holds and hardwood stumpage markets are integrated; second, it estimates the supply and
demand structure of hardwood stumpage markets in the Southcentral United states.
The law of one price is tested using Johansen's simultaneous multivariate cointegration framework and the question of market integration is examined for hardwood
pulpwood, mixed hardwood sawtimber, and oak sawtimber in six states (Alabama, Arkansas, Louisiana, Mississippi, Tennessee, and Texas) using quarterly
stumpage prices from 1977 to 1997. The main finding is that the law of one price is not applicable and markets are not fully integrated for any of these hardwood
stumpage commodities. The implication is that the six states in this region can not be treated as single market for these commodities. Hardwood pulpwood markets
are less integrated than hardwood sawtimber markets. There is evidence for three separated markets for hardwood pulpwood, and for two separated markets for
each of mixed hardwood and oak sawtimber. Finally, there are differences in the degree of market integration between 1977-88 and 1988-97 for these
commodities.
The supply and demand structure of hardwood stumpage markets is estimated using annual aggregate data for the period 1982-97, using three-stage least squares
procedure to estimate a simultaneous equations model. Separate models are estimated for mixed hardwoods, oak, and all hardwoods. Hardwood stumpage markets
are distinctly different from the softwood stumpage market. Foremost among the results are the markedly insignificant stumpage price response and the highly
inelastic nature of hardwood stumpage markets in the region. Inventory and one-period lagged removals are major determinants in supply equations and final goods
prices and one-period lagged removals are major determinants in demand equations in all models. There is evidence for substitution of hardwood for softwood
pulpwood in the mixed hardwood model, and sawtimber for pulpwood in the oak model. Increasing hourly wages reduce the demand for oak sawtimber.
Full Dissertation
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