Modeling and forecasting different stumpage price assortments in Finnish roundwood market

With the global changes in supply and demand for forest products and their international trade, analyzing the long-term development of the Finnish stumpage market and forecasting different assortments of Finnish stumpage prices is more and more important. There are limited number of studies on forecasting Finnish stumpage prices and even less up to date information about forecasting the markets. According to the previous studies, it is difficult to get precise forecasting results in real-life situations, purely utilizing simple time-series forecasting methods. In addition, the forecasting error is usually unavoidable in the price forecasting studies. The present study increases information on stumpage price forecasting using updated price data and testing alternative statistical approaches that take account of structural changes of stumpage prices in Finnish roundwood market. The aims of this study are to test applicability of alternative statistical approaches in forecasting long-run stumpage price development up to 2050. The annual price data are from the years 1967-2010. First we tested the stationarity of time-series data, using an augmented Dickey-Fuller (ADF) Unit root test. Compared to the complicated prices behaviors of sawlog, the prices behaviors of pulpwood are much more stationary. It can be seen clearly that there are three business cycles both in sawlog and pulpwood prices, around 30 years per cycle. Further studies can be analyzed involving some impact factors to the demand and supply of Finnish roundwood, such as prices of roundwood and forest products export, prices in domestic market, GDP of Finland, etc. Basing on the results of the study, the forecasted prices of all assortments of Finnish roundwood will decline from 2010 to 2023. We assume that the Finnish roundwood market will suffer from the global changes of demand and supply of forest products. Demands for many traditional end products are decreasing in Europe. Thus we recommend the Finnish roundwood market stakeholders should pay more attention on this situation. The forestry companies can change their products structure: develop more new products in bioenergy industry; what is more, companies can develop new markets in internationally. The forest private owners should communicate more frequently with roundwood market experts and forest industry to build a coherent picture on industry trends impacting roundwood price determination