The Application of Time Series Decomposition for the Identification and Analysis of Fluctuations in Timber Supply and Price: A Case Study from Poland

Abstract

The objective of the study was to verify the applicability and usefulness of time series decomposition in analyzing the variability of timber prices and supply in Poland. The employed multiplicative model was the product of four components: cyclical, seasonal, and irregular fluctuations and the long-term trend. The elements of the time series were determined by means of the Census X11 method, while cyclicality was separated from the trend employing the Hodrick–Prescott filter. Data included quarterly information about the supply (volume) and prices (value) of the timber sold by the State Forests in the years 2005–2018. Analyses were performed for tree species with the greatest economic significance, that is, pine, oak, spruce, beech, birch, and alder, and for their most popular assortments: general purpose large-diameter timber (W0) and medium-diameter timber (S2A). Time series decomposition of quarterly timber production volume and prices revealed irregular, seasonal, and cyclic fluctuations. Within an annual time horizon, irregular fluctuations accounted on average for 6.7% and 28% of overall variability in timber prices and supply, respectively; they exhibited low amplitudes (+5%, −25%, respectively). Cyclical fluctuations were primarily found for prices and were characterized by substantial variations in cycle length (2–4 years) and change amplitude (3–27 Euros). Cyclical fluctuations in timber prices and supply were usually negatively correlated with each other: the upper turning points of price cycles fell near the lower turning points of supply cycles (with a shift of 1 to 3 quarters). The seasonality of prices was also inversely correlated with supply: quarters with low supply exhibited higher prices and vice versa. Seasonal fluctuations were more pronounced for timber supply (36%) as compared to timber prices (20.3%). Different seasonality patterns were found for hardwood and softwood. The lowest supply of softwood was found in the first quarter and the highest in the third quarter (spruce) or fourth quarter (pine). The supply of hardwood was the highest in the first quarter and the lowest in the third quarter.