The Dynamics of Beech Roundwood Prices in Selected Central European Markets

Round 1

Reviewer 1 Report

In this manuscript, authors examined the time-series properties of beech roundwood prices in a few EU countries. I found it interesting, well-designed, well-written and has merits to publish in Forests. A few minor comments:

1. In intro section (lines 100-104), a little more details on relevance and importance of this study are needed. For instance, what this study contributes to the literature and research gap and major implications of the findings.
2. How Figure 1 is created? Are these values average of annual shares from 2001-2018? Not clear
3. While Figure 2 and 3 have data starting from 2001, but in the time-series analyses, only the data from 2005 are included; justification is needed.
4. Authors should explain why these five price series are not co-integrated. Is that because these country markets are driven by different factors? Country-specific markets? But Figure 1 and 2 show that foreign trade is a driving factor, correct?
5. Conclusions are not summaries. I wouldn't present conclusions in bullets.

Author Response

Open Review

(x) I would not like to sign my review report
( ) I would like to sign my review report

English language and style

( ) Extensive editing of English language and style required
( ) Moderate English changes required
(x) English language and style are fine/minor spell check required
( ) I don't feel qualified to judge about the English language and style

Comments and Suggestions for Authors

In this manuscript, authors examined the time-series properties of beech roundwood prices in a few EU countries. I found it interesting, well-designed, well-written and has merits to publish in Forests. A few minor comments:

Dear Reviewer

Thank you very much for your kind response regarding our manuscript. We have revised entire manuscript and corrected the following changes You have suggested:

In intro section (lines 100-104), a little more details on relevance and importance of this study are needed. For instance, what this study contributes to the literature and research gap and major implications of the findings.

- Improved

How Figure 1 is created? Are these values average of annual shares from 2001-2018? Not clear

- Yes, Figure 1 presents average values of annual shares - Added 

While Figure 2 and 3 have data starting from 2001, but in the time-series analyses, only the data from 2005 are included; justification is needed.

-Figs. 2 and 3, which present data starting from 2001, provide background information in the introduction. The analyzed time series covers the period 2005–2018, as earlier data on beech roundwood prices are not available.

Authors should explain why these five price series are not co-integrated. Is that because these country markets are driven by different factors? Country-specific markets? But Figure 1 and 2 show that foreign trade is a driving factor, correct?

   - Thank you for your valuable attention -   Improved            

Conclusions are not summaries. I wouldn't present conclusions in bullets.

   - Corrected as suggested

Author Response File: Author Response.docx

Reviewer 2 Report

General remarks.

The paper major idea (purpose of research) that historical price series (time series) are an important tool for supporting forest management and harvesting I find doubtful. By today it is evident that forecasting demand and supply are very hard to predict. The process of tracing or trying to interpret the historical events or trends and then use them for the future could be quite misleading. 

However, the Authors put great effort for conducting this research what included collecting, interpreting and data analyzing. The type of paper is more professional then scientific. It brings us many new and useful data and info, but not in the science domain. 

The chapters Results, Discussion and Conclusion are written as one single big chapter. Both Discussion and Conclusion are repeating many cognitions already stated in Results. The idea of Discussion is to compare new findings (Author’s findings) with some similar research papers, and also to critically overview used methods and new findings (benefits and possible failures). In this paper Authors miss that. Conclusions should rise from problem statement (well addressed in the Introduction), used methods and from Results i.e. new findings. In this paper Conclusions just repeated some parts of Results and Discussion. The Introduction and Results can stay in present form but after improving some parts following detail comments below. Discussion and Conclusion should be written again. 

The paper brings much useful info but those cannot be used for future forest or wood-processing planning. The great importance of the paper is the data overview.

The paper in interesting as a professional report, rather than a scientific paper.

Comments per lines:

Line 10. After the Latin name add capital L. (Carl Linné) it is a common way when mentioning tree spaces on Latin

Line 48. Personally, I have doubts about this thesis. Citation 9 and 10 that Authors used as proof are dealing with plantations and the area which is not overlapping the European level. Considering the fact that Authors of dealing with sustainable forestry, close to nature silviculture I would like to suggest that they support sentence “From an economic standpoint, mixed forests are deemed less profitable for investors“ after a literature review of authors like Thomas Knoke and Gary Kerr. In one of my papers “Economic Consequences of Different Management Approaches to Even-Aged Silver Fir Forests” Authors can find cited publications by Knoke and Kerr essential for reading. 

Line 48-50. “Given the increasing area and stocks of beech stands, the revenues of forest owners will be largely determined by the demand for large-diameter beech logs generated by the wood industry”. Can you support this by some citation, please?

Line 106-172 the whole 1.2 Section Beech growing stock and roundwood trade in Europe could be shortened using more citations. By that this section would be more appropriate for readers, and for those who would like to know more could use the citation for further research. The importance of the topic is very clear, but I would like to suggest that the Section would be half as long as it is now.

Line 174-191 Well done!

Line 265 Country Slovenia is written by “v” not by “w”. Correct this throughout the manuscript

Author Response

Dear Reviewer

Thank you very much for your detailed response regarding our manuscript. We have revised entire manuscript and corrected the following changes you have suggested (particular  improved the discussion and conclusions)

Comments per lines:

Line 10. After the Latin name add capital L. (Carl Linné) it is a common way when mentioning tree spaces on Latin

- Corrected

Line 48. Personally, I have doubts about this thesis. Citation 9 and 10 that Authors used as proof are dealing with plantations and the area which is not overlapping the European level. Considering the fact that Authors of dealing with sustainable forestry, close to nature silviculture I would like to suggest that they support sentence “From an economic standpoint, mixed forests are deemed less profitable for investors“ after a literature review of authors like Thomas Knoke and Gary Kerr. In one of my papers “Economic Consequences of Different Management Approaches to Even-Aged Silver Fir Forests” Authors can find cited publications by Knoke and Kerr essential for reading. -
-Thank you very much for your valuable attention.

Thank you for the literature suggestions (was added) - Improved

Line 48-50. “Given the increasing area and stocks of beech stands, the revenues of forest owners will be largely determined by the demand for large-diameter beech logs generated by the wood industry”. Can you support this by some citation, please?

-Converted this sentence

Line 106-172 the whole 1.2 Section Beech growing stock and roundwood trade in Europe could be shortened using more citations. By that this section would be more appropriate for readers, and for those who would like to know more could use the citation for further research. The importance of the topic is very clear, but I would like to suggest that the Section would be half as long as it is now.

-We deleted a few sentences. Literature added.

Line 174-191 Well done!  - Thank you very much for your kind comment

Line 265 Country Slovenia is written by “v” not by “w”. Correct this throughout the manuscript

 -Corrected

Reviewer 3 Report

The article provides a nice illustration of price variations in the different countries
and adds interesting attempts to explain possible reasons for the price irregularities
(for example line 502).

Line 34
> "Both KPSS and ADF cointegration tests indicated the absence of a long-term
> equilibrium between the analyzed beech timber markets. "

This should be corrected in the abstract. KPSS and ADF are not cointegration test, they are stationarity tests. ADF is used in the Engle-Granger procedure to test for cointegration, but it is incorrect to call it the ADF cointegration tests.

Furthermore, the absence of a long term equilibrium is only supported for 2 countries:
Slovakia and Slovenia. The other countries (Austria, Czechia, Germany, Poland) having
stationarity time series could very well be in long term equilibrium.

Line 48
> "From an economic standpoint, mixed forests are deemed less profitable for investors
> [9,10]."

Comment: The question of risk has also to be taken into account. The most
profitable investment in the absence of risk can become less profitable when risk is
factored in. Can you cite publication mentioning profitability of mixed forests when
risk is taken into account?

Line 106
Comment: Restructure the section on "1.2. Beech growing stock and roundwood trade in
Europe" In general clarify the product scope, it's sometimes difficult to know whether
you are talking about roundwood, sawnwood, or both. Maybe explain at one point in the
section that you always talk about roundwood unless otherwise specified?

Line 130
> "Beech roundwood was exported mainly from Germany (21%), as well as France and
> Slovakia (14%). At the same time, the greatest volumes of beech roundwood were
> imported by Austria (30%), Italy (19%), and Belgium (16%) (Figure 1)."

Comment: Compare sawnwood export and import **volumes** for all these countries to
roundwood export/import to highlight the fact that sawnwood is much more important on
international trade level. Note: no need for bilateral trade, this can be done with the
FAO trade data

Line 138
> "France and Germany remain major producers at approx. 1.5 and 1.1 million m 3 in 2018,
> respectively, although their supply is restricted by limited wood resources (and in
> particular beechwood in Germany) as a result of exports outside the EU"

Comment: This statement is slightly misleading, resources cannot be limited if they are
available for export outside the EU. Could this be explained in another way? Increased
demand will naturally lead to price increases. European sawmill have an issue of
restricted supply *at the price they are willing to pay*. But supply would be increased
if they were willing to pay a higher price. Then a related question is whether the
European sawmills have sufficient margin to absorb price increases in their raw-material
supply and/or to pass the price increases to their customers.

Line 141
> ". In 2014, Chinese imports of valuable hardwood reached 29.8 million m 3 (USD 10.6
> billion), while their imports of hardwood sawtimber amounted to USD 4.3 billion."

By "Valuable hardwood", did you mean roundwood hardwood or sanwood hardwood? Does this
include all species including tropical timber? What about the chinese import values of
beech roundwood and sawnwood in particular?

Line 152
Comment. Figure 1. Pie charts are not optimal for comparison. If you can, use a bar
chart, one bar per country, sorted by highest to lowest. Search for "Stephen Few, pie
chart" for an explanation.

Line 215
> "However, the application of linear regression may lead to spurious results if the
> price time series involved are non-stationary."

Comment: What about series that are stationary? Could you try and provide more
information on series that are mean reverting (with or without an additional trend).
You have 4 price series of type I (0)): Austria, Czechia, Germany, Poland, could you
perform a simple regression analysis? And if not explain why it's not possible.

Line 472
> "On the other hand, over the past decade there was an increasing emphasis on wood as a renewable energy resource [80], in accordance with European Union policies."

Comment: Specify which EU policies in particular.

Line 610
> "The conducted analyses did not reveal cointegration between the prices of
> large-diameter beech logs in Central European countries"

Comment: Specify that cointegration tests were performed for 2 countries only: Slovakia
and Slovenia. According to the KPSS and the ADF test on residuals, stationarity could
not be be rejected for the other countries: Austria, Czechia, Germany, Poland.

Line 612
> "Thus, Central Europe has separate domestic beech roundwood markets despite considerable exports and imports between them."

Comment: Since cointegration was tested for 2 countries only: Slovakia and Slovenia.
This statements on "separate markets" is valid for those to countries only. Markets of
other countries could be linked, or could be separate. It is not possible to say based
on the current study, because cointegration could not be tested for the other countries.

Line 652
> "6. Both Johansen’s and Engle–Granger’s tests for the cointegration of price time series revealed the absence of a long-term equilibrium between the analyzed beech roundwood markets."

Comment: Specify that this conclusion can be drawn for 2 countries only.

Author Response

Open Review

(x) I would not like to sign my review report 
( ) I would like to sign my review report 

English language and style

( ) Extensive editing of English language and style required 
( ) Moderate English changes required 
(x) English language and style are fine/minor spell check required 
( ) I don't feel qualified to judge about the English language and style 

Comments and Suggestions for Authors

The article provides a nice illustration of price variations in the different countries 
and adds interesting attempts to explain possible reasons for the price irregularities 
(for example line 502).

Dear Reviewer

Thank you very much for your insightful review and comments that have substantially improved our work. Our responses are given below.

Line 34
> "Both KPSS and ADF cointegration tests indicated the absence of a long-term
> equilibrium between the analyzed beech timber markets. "

This should be corrected in the abstract. KPSS and ADF are not cointegration test, they are stationarity tests. ADF is used in the Engle-Granger procedure to test for cointegration, but it is incorrect to call it the ADF cointegration tests. - corrected on “Johansen’s and Engle-Granger’s”

Furthermore, the absence of a long term equilibrium is only supported for 2 countries: 
Slovakia and Slovenia. The other countries (Austria, Czechia, Germany, Poland) having 
stationarity time series could very well be in long term equilibrium.

-Improved

Line 48
> "From an economic standpoint, mixed forests are deemed less profitable for investors
> [9,10]."

Comment: The question of risk has also to be taken into account. The most
profitable investment in the absence of risk can become less profitable when risk is factored in. Can you cite publication mentioning profitability of mixed forests when risk is taken into account?

- Yes, thank you for your valuable attention - literature was added

Line 106
Comment: Restructure the section on "1.2. Beech growing stock and roundwood trade in 
Europe" In general clarify the product scope, it's sometimes difficult to know whether 
you are talking about roundwood, sawnwood, or both. Maybe explain at one point in the 
section that you always talk about roundwood unless otherwise specified?

- We improved in every sentence

Line 130
> "Beech roundwood was exported mainly from Germany (21%), as well as France and 
> Slovakia (14%). At the same time, the greatest volumes of beech roundwood were 
> imported by Austria (30%), Italy (19%), and Belgium (16%) (Figure 1)."

Comment: Compare sawnwood export and import **volumes** for all these countries to 
roundwood export/import to highlight the fact that sawnwood is much more important on 
international trade level. Note: no need for bilateral trade, this can be done with the 
FAO trade data

  - Figure with sawnwood export and import was added.

Line 138
> "France and Germany remain major producers at approx. 1.5 and 1.1 million m 3 in 2018, 
> respectively, although their supply is restricted by limited wood resources (and in 
> particular beechwood in Germany) as a result of exports outside the EU"

Comment: This statement is slightly misleading, resources cannot be limited if they are 
available for export outside the EU. Could this be explained in another way? Increased 
demand will naturally lead to price increases. European sawmill have an issue of 
restricted supply *at the price they are willing to pay*. But supply would be increased 
if they were willing to pay a higher price. Then a related question is whether the 
European sawmills have sufficient margin to absorb price increases in their raw-material 
supply and/or to pass the price increases to their customers.

-  Thank you for your valuable attention, we removed this sentence.

Line 141
> ". In 2014, Chinese imports of valuable hardwood reached 29.8 million m 3 (USD 10.6 
> billion), while their imports of hardwood sawtimber amounted to USD 4.3 billion."

By "Valuable hardwood", did you mean roundwood hardwood or sanwood hardwood? Does this 
include all species including tropical timber? What about the chinese import values of 
beech roundwood and sawnwood in particular?

- Valuable -removed (excuse me It was a mental shortcut)

“Valuable”- means hardwood (logs and sawn)

 Line 152 
Comment. Figure 1. Pie charts are not optimal for comparison. If you can, use a bar 
chart, one bar per country, sorted by highest to lowest. Search for "Stephen Few, pie 
chart" for an explanation.

- Improved  - bar chart is really better for comparison

Line 215
> "However, the application of linear regression may lead to spurious results if the 
> price time series involved are non-stationary."

Comment: What about series that are stationary? Could you try and provide more 
information on series that are mean reverting (with or without an additional trend).
You have 4 price series of type I (0)): Austria, Czechia, Germany, Poland, could you 
perform a simple regression analysis? And if not explain why it's not possible.

- Improved - regression analysis was performed and results were added to paragraph 4.3

Line 472
> "On the other hand, over the past decade there was an increasing emphasis on wood as a renewable energy resource [80], in accordance with European Union policies."

Comment: Specify which EU policies in particular

- Added

Line 610
> "The conducted analyses did not reveal cointegration between the prices of
> large-diameter beech logs in Central European countries"  - Improved

Comment: Specify that cointegration tests were performed for 2 countries only: Slovakia 
and Slovenia. According to the KPSS and the ADF test on residuals, stationarity could 
not be be rejected for the other countries: Austria, Czechia, Germany, Poland.

- Improved

Line 612
> "Thus, Central Europe has separate domestic beech roundwood markets despite considerable exports and imports between them."

Comment: Since cointegration was tested for 2 countries only: Slovakia and Slovenia. 
This statements on "separate markets" is valid for those to countries only. Markets of 
other countries could be linked, or could be separate. It is not possible to say based 
on the current study, because cointegration could not be tested for the other countries.

-Canceled

Line 652
> "6. Both Johansen’s and Engle–Granger’s tests for the cointegration of price time series revealed the absence of a long-term equilibrium between the analyzed beech roundwood markets."

Comment: Specify that this conclusion can be drawn for 2 countries only. -Corrected

Author Response File: Author Response.doc

Round 2

Reviewer 2 Report

Dear Author,

in my personal opinion, the Article is much better in this form. It is obvious that you put the effort into this.

Author Response

Thank you very much for your review and comments that have substantially improved our work.

Reviewer 3 Report

Line 181
> Figure 1. Average shares of individual countries in the exports and imports of beech
roundwood and sawnwood in the years 2001–2018.

Please specify the quantity unit. Are these percentage values calculated based on the
trade value, the weight or the volume? Also explain how the percentage share is
calculated. I suppose it is the percentage among all these countries. The united States
appear as an importing country. Why is China not in the importing country graph? What
countries are included in "others" does this include all remaining countries in the
world, or is this a specific list of countries?

Percentage values are good for comparison but we miss the information on the overall
market size. Can you provide an idea of the market size by either (1) giving the yearly
Sawnwood and Roundwood import / export trade value for all these countries combined or
as an alternative (2) replacing percentages in the plot by the average yearly
import/export value over the 2001-2018 period. In addition, "Eksport" should be replaced
by export. The figure's sub-titles could be harmonised as such: Beech roundwood imports,
beech roundwood exports, Beech sawnwood imports, beech roundwood exports.

Line 517
> simple correlation between stationary beech roundwood prices is positive and of value:
> 0.77, 0.73, 0.64 between Czechia - Poland, Czechia - Austria and Austria - Poland
> respectively.

What is the significance of those correlation coefficients? Please provide a summary of
the estimations in a table with standard error and R squared in the supplementary
material and add information in the text about whether or not these results are
statistically significant. Do they really provide more information?

Line 722 Conclusion

If I'm not mistaken, the time series going from 2001 to 2018 have 18 * 4 = 72 points.
This a small number of points to test for stationarity and for a cointegration
relationship. These methods are also used in other fields (for example agricultural
commodity prices) with daily or hourly price series with thousands of points. The
conclusion should warn about the small number of points and mention that with longer
time series, the outcome may differ in the future.

What message to you extract from the estimations? The first version of the article
concluded on "separate domestic beech roundwood markets despite considerable exports and
imports between them." Now that this sentence has been removed from the conclusion,
there is a lack of interpretation of the results.

Coming back to line 91
> "The elucidation of price relationships between local timber markets is critical in
> the context of forecasting future roundwood prices."

The conclusion should mention if this price relationships are supported by your analysis
or not and what are the caveats: (1) only 2 countries show the absence of integration,
(2) short time series might prevent proper detection of cointegration,
(3) other sources of errors/uncertainty... .

There should be a sentence describing the main outcome at the end of the abstract too.

Author Response

Thank you very much for your review. We are grateful for your valuable comments. We have revised entire manuscript and corrected the following changes you have suggested.

Line 181
> Figure 1. Average shares of individual countries in the exports and imports of beech 
roundwood and sawnwood in the years 2001–2018.

Please specify the quantity unit. Are these percentage values calculated based on the 
trade value, the weight or the volume? Also explain how the percentage share is 
calculated. I suppose it is the percentage among all these countries. The united States 
appear as an importing country. Why is China not in the importing country graph? What 
countries are included in "others" does this include all remaining countries in the 
world, or is this a specific list of countries?

Percentage values are good for comparison but we miss the information on the overall 
market size. Can you provide an idea of the market size by either (1) giving the yearly 
Sawnwood and Roundwood import / export trade value for all these countries combined or 
as an alternative (2) replacing percentages in the plot by the average yearly 
import/export value over the 2001-2018 period. In addition, "Eksport" should be replaced 
by export. The figure's sub-titles could be harmonised as such: Beech roundwood imports, 
beech roundwood exports, Beech sawnwood imports, beech roundwood exports.

- Improved in manuscript

Line 517
> simple correlation between stationary beech roundwood prices is positive, and of value: 
> 0.77, 0.73, 0.64 between Czechia - Poland, Czechia - Austria and Austria - Poland 
> respectively.

What is the significance of those correlation coefficients? Please provide a summary of 
the estimations in a table with standard error and R squared in the supplementary 
material and add information in the text about whether or not these results are 
statistically significant. Do they really provide more information?

- Improved in manuscript - A summary of estimations is provided in supplementary material. 

Line 722 Conclusion

If I'm not mistaken, the time series going from 2001 to 2018 have 18 * 4 = 72 points. 
This a small number of points to test for stationarity and for a cointegration 
relationship. These methods are also used in other fields (for example agricultural 
commodity prices) with daily or hourly price series with thousands of points. The 
conclusion should warn about the small number of points and mention that with longer 
time series, the outcome may differ in the future.

- Authors agree with Reviewer that time series are short, conclusion is improved and warn about short period - small number of quarter prices.

What message to you extract from the estimations? The first version of the article 
concluded on "separate domestic beech roundwood markets despite considerable exports and 
imports between them." Now that this sentence has been removed from the conclusion, 
there is a lack of interpretation of the results.

Coming back to line 91
> "The elucidation of price relationships between local timber markets is critical in 
> the context of forecasting future roundwood prices."

The conclusion should mention if this price relationships are supported by your analysis 
or not and what are the caveats: (1) only 2 countries show the absence of integration, 
(2) short time series might prevent proper detection of cointegration, 
(3) other sources of errors/uncertainty... .

There should be a sentence describing the main outcome at the end of the abstract too.

Author Response File: Author Response.docx