The Brazilian Forest Agribusiness (SAG-Forest), also known as forest supply chain, plays a major role in the Brazilian economy. According to the last report of IBÁ (Brazilian Tree Industry, the major institution of SAG), the segment of planted forests accounted for a GDP of 69.1 billion BRL in 2015, corresponding for 1.15% of the Brazilian GDP in the same year. Exportations generated a revenue of 9 billion USD in 2015, representing 4.7% of the international sales of the sector.
The SAG-Forest comprises markets that work distinctly, related many times to the behavior of both local supply and demand, which reflects in different sizes and/or trends for prices of the same product.
The Brazilian SAG-Forest produces a large variety of products, namely in natura (wood, log and leaves), semi-processed (boards, batten and cellulose) or processed (wood and paper sheets).
FOREST MARKET CHARACTERISTICS – Trades of a forest, planted or native (also called natural), are carried out based on the type of wood that can be extracted. Diameters of a tree trunk decreases from the base to the peak. Therefore, tree purchasers evaluates what can be removed when it is standing. This fact allows defining three types of prices for a standing tree, mainly eucalyptus and pines: total price, value of the part that can be processed at sawmills and price of the part that can be sold as wood. These prices are named, respectively, as prices of standing tree, prices of log to process at sawmills and prices of standing wood.
A seven-year-old eucalyptus tree and an eleven-year-old pine tree can be entirely sold to produce wood chips to be used in cellulose production or wood sheets. This allows having the standing tree price to produce cellulose. Quotes of these parts of trees can also be defined after cutting and with products stacked at the farm. Moreover, there is the price of these products (wood, log and wood chips) delivered at the purchaser.
Another characteristic of the timber forest markets is the use of stere and solid cubic meter. The stere meter is the cubic meter of stacked wood or log, counting the empty space among them. The solid cubic meter is obtained by discounting these spaces. Usually, the stere meter of stacked log is multiplied by 0.7 (if the product is more uniform, it can be multiplied by 0.75) to obtain the solid cubic meter. As for semi-processed wood (board, batten and rafter), they are measured in solid cubic meter. Cellulose, paper and wood scrap are measured in tons.
The third characteristic of the forest products market is that while wood, log, mechanically processed wood, scrap and paper are traded in BRL in the domestic market, cellulose is negotiated in USD – in trades in Brazil, the prices in dollar are converted to real.
PRICES – Evaluating the period between January 2016 and February 2017, prices of in natura forest products that come from eucalyptus and pines are lower in São Paulo compared to other less developed states in Brazil. Considering in natura and semi-processed wood of the same species, quotes do not have variations similar to those observed in São Paulo State. In spite of environmental restrictions to the exploitation of native forests in the northern region in Brazil, wood prices have not been increasing. As for cellulose, values in dollar have moved up in both domestic and international markets, bucking the downward trend observed in the second semester of 2016.
Traditionally, São Paulo State has higher values for several agricultural commodities because its production is closer to consumer markets, allowing growers to add to their prices the costs of transporting products elaborated in further places. However, considering in natura wood originated from planted forests (especially log and wood to produce wood chips), prices were, during last year, lower than those registered in some states in the northeast.
Prices of the stere meter of eucalyptus wood standing at the farm to produce log, for instance, has been kept at around 31.05 BRL in São Paulo State since mid-2016, after decreases in the past 12 months (in June/15, the average price was 33.14 BRL per stere meter). In Bahia, current trades (March 2017) of the stere meter of the same product range between 35.00 and 38.00 BRL. This price gap occurs due to the relative higher supply of this product in São Paulo compared to the demand and to the fact that major energy consumers in this state can vary log consumption for natural gas, which is cheaper due to currency appreciation in early 2017.
Prices of in natura and semi-processed wood of exotic species, namely pines and eucalyptus, have not changed in the same intensity over the last 14 months. Comparing prices in February 2017 to those in January 2016 in São Paulo State (CEPEA-Forest data), the average price of the standing stere meter of eucalyptus log to process at sawmills rose 27.3% and, of pine log, 6.8%. In the same period, the average quotes for the cubic meter of eucalyptus and pine boards moved up 7.1% and 5.3%, respectively, for an accumulated inflation of 6.1%, according to IGP-DI. There are clearly changes of relative prices due to different conditions of supply and demand for those products.
There is a significant market for wood from native forests in spite of environmental restrictions to exploitation. For boards and log from Pará State, prices of jatobá and maçaranduba moved down from January 2016 to February 2017. In the same period, real prices of ipê, angelim pedra, angelim vermelho and cumaru boards and logs remained stable. There are distinct markets for the same product depending on the species used.
Concerning cellulose, in the second semester of 2016, prices in dollar dropped consecutively, especially in Europe and Brazil. In the first two months of 2017, in turn, quotes moved up. Long fiber cellulose quotes in Europe decreased from 815 USD per ton in June 2016 to 810 USD per ton in December 2016, closing at 818 USD per ton in January 2017, according to data from Natural Resources Canada. In Brazil, short fiber cellulose (USD) in the same months were 688, 658 and 674 USD per ton, respectively (CEPEA-Forest data).