An Analysis of Price Volatility for Wood Products Sold Under Supply Agreement Versus Wood Products Sold on the Open Market

by Pete Stewart & Suzanne Hearn, Forest2Market

The Project examined the hypothesis that price volatility for conventional forest product raw materials is reduced for products moving under supply agreements, in reference to data from 11 Southern states.

The project found advantages to both supplier and consumer in adopting a system of supply agreements, as opposed to open-market sales. For procurement, the advantage lay in lowering risk; for suppliers, even in the absence of an opportunity to “time the market,” supply agreements tended to provide a slightly higher price, on average.

KEY FINDINGS: See Price Volatility: Supply Agreements v. Open Market Sales (FRA Technical Release 12-R-13, Spring 2012); and WSRI Price Volatility Study (PowerPoint, presented at WSRI Annual Meeting, April 18, 2012).