Abstract
This paper examines the factors that could influence the long-term change in the real prices of teak (Tectona grandis Linn.f.), sold in auction in the Forest Department depots in Kerala State, India. Autoregression analysis showed that the real price of teak in a year was closely related to its preceding year’s real price, indicating a successive dependence which partly influence the trends in real prices. It was found that the real price was not related to the production of teak in the current year, but inversely related to one-year lagged production. It indicates that a reduction in production in the previous year follows an increase in the current year’s real price. The time lag, for transporting teak logs from forests to the depots and auction procedures, explains the relationship between current year's real price and one-year lagged production. Due to stoppage of clear felling of natural forests in 1984, production of teak from forests has diminished substantially. Moreover, considerable quantity of teak sold through the depots was found to move out of Kerala. The declining trend in production and growing demand for teak outside the state have cumulatively contributed to the drastic increase in the real prices of teak in Kerala after 1977.
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