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Welcome and thank you for joining Rayonier's Second Quarter 2023 Teleconference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at that time. Now I will turn the meeting over to Mr. Collin Mings, Vice President, Capital Markets and Strategic Planning.

Thank you, and good morning. Welcome to Rayonier's investor teleconference covering second quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.com. I would like to remind you that in these presentations we include forward-looking statements made pursuant to the Safe Harbor provisions of federal securities laws. Our earnings release and Forms 10-K and 10-Q filed with the SEC list some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on Page 2 of our financial supplement. Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measures in our earnings release and supplemental materials. With that let's start our teleconference with opening comments from Dave Nunes, our CEO. Dave?

Thanks, Colin, and good morning, everyone. First, I'll make some high-level comments before turning it over to Mark McHugh, President and Chief Financial Officer, to review our consolidated financial results. Then we'll ask Doug Long, Executive Vice President and Chief Resource Officer to comment on our U.S. and New

Thanks, Dave. Let's start on Page 5 with our financial highlights. Sales for the second quarter totaled $209 million, while operating income was $20 million and net income attributable to Rayonier was $19 million or $0.13 per share. On a pro forma basis, net income was $8 million or $0.05 per share after adjusting for an $11 million net recovery associated with the legal settlement. Adjusted EBITDA was $69 million in the second quarter, down from $83 million in the prior year period. On the bottom of Page 5, we provide an overview of our capital resources and liquidity. Our cash available for distribution, or CAD, for the first half of the year was $63 million versus $120 million in the prior year period. The decrease was driven by lower adjusted EBITDA, higher capital expenditures and higher cash interest paid, partially offset by lower cash taxes. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement. We closed the second quarter with $88 million of cash and $1.5 billion of debt. At quarter-end, our weighted average cost of debt was approximately 3.1%, and the weighted average maturity on our debt portfolio was approximately five years with no significant debt maturities until 2026. Our net debt of approximately $1.4 billion represented 23% of our enterprise value based on our closing stock price at the end of the quarter. I'll now turn the call over to Doug to provide a more detailed review of our timber results.

Thanks, Mark. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the second quarter of $44 million was $5 million or 13% above the prior year quarter, driven by higher volumes and nontimber income, partially offset by lower net stumpage pricing and higher costs. Total harvest volume rose 32% versus the prior year quarter, primarily driven by an increase in pine sawtimber volumes from the successful integration of acquisitions we completed in late 2022. Average sawlog stumpage pricing was $29 per tonne or a 15% decrease compared to the prior year period. The moderation in pricing reflected reduced market tension across our operating areas due to drier weather conditions, softer demand from sawmills and less competition from pulp mills for chip and saw volume. Meanwhile, pulpwood net stumpage pricing fell 26% versus the prior year quarter to roughly $16 per ton as weaker end-market demand, dry weather conditions and extended maintenance outages at pulp mills all contributed to softer market conditions. Overall, weighted average stumpage prices in the second quarter fell 14% versus the prior year quarter to roughly $22 per tonne. The market tension that drove exceptionally strong pricing levels a year ago has eased as a result of weaker end market demand for pulp products and softer residential construction activity. However, we believe the pricing deterioration we experienced during the first half of the year has largely played out and expect that the relative strength and diversity of our U.S. South footprint will be a key competitive advantage for us moving forward as end market demand improves. Moving to our Pacific Northwest Timber segment on Page 10. Adjusted EBITDA of $7 million was $7 million lower than the prior year quarter. The year-over-year decrease was primarily driven by lower net stumpage realizations, lower harvest volumes and higher costs, partially offset by higher non-timber income. Volume decreased 11% in the second quarter as compared to the prior year period as some planned harvest were deferred in response to soft market conditions. At $97 per tonne, average delivered domestic sawlog pricing in the second quarter fell 19% from the prior year period, primarily due to weaker demand from domestic lumber mills, coupled with reduced tension from export markets. Meanwhile, at $36 per tonne, pulpwood pricing decreased 20% versus the prior year quarter, as end market demand deteriorated relative to favorable working dynamics seen last year. During the second quarter, Pacific Northwest sawmills had ample log supplies, which constrained our pricing power even as lumber prices started to improve. However, we are optimistic that a further recovery in the end market lumber demand and the normalization of inventory levels will translate to positive momentum and solid prices in the latter part of this year. Moving to New

Thanks, Doug. As detailed on Page 12, our Real Estate segment delivered strong second quarter results. Real Estate sales totaled $32 million on roughly 3,800 acres sold at an average price of $7,500 per acre. Real Estate segment adjusted EBITDA in the second quarter was $20 million. Drilling down, sales in the improved development category totaled $12 million. In our Heartwood development project, South of Savannah, Georgia, sales included a $3 million sale of a 101-acre site to a national homebuilder for the first phase of an active adult community, two residential pod sales totaling 62 acres for $1.8 million and 47 finished residential lots for $2.1 million reflecting an average base price of roughly $44,000 per lot. In our Wildlight development project north of Jacksonville, Florida, sales consisted of a $5.3 million sale of a 97-acre site to a national homebuilder for the second phase of an active adult community. We're very excited about the market reception to our two active adult sites in Wildlight and Heartwood as they are important components of our mixed-use development strategy. Overall, we continue to believe that both our Wildlight and Heartwood development projects are well positioned and will benefit from favorable migration and demographic trends, relatively affordable price points and a diverse mix of residential, commercial and industrial end users that each help to catalyze demand for one another. Turning to the rural category. Second quarter sales totaled nearly $16 million, consisting of approximately 3,400 acres at an average price of roughly $4,600 per acre. Key transactions included two sales in Walker County, Texas, totaling roughly 1,100 acres for $5 million, reflecting an average price of roughly $4,500 per acre. Overall, we are encouraged by the continued strong demand for rural land despite the higher interest rate environment. Lastly, during the second quarter, we also closed on the sale of 76 acres of nonstrategic holdings in Bradford County, Florida for $250,000 or roughly $3,300 per acre. Now moving on to our updated outlook for the full year. Based on our first half results and our expectations for the balance of the year, we now anticipate full year net income attributable to Rayonier of $63 million to $78 million, full year pro forma EPS of $0.30 to $0.40 per share and full year total adjusted EBITDA of $275 million to $300 million. With respect to our individual segments, we now expect that our Southern Timber segment will achieve full year harvest volumes of 7.2 million to 7.4 million tonnes, which is at the higher end of our prior guidance and reflective of stronger-than-expected production in the first half of the year due to dry weather conditions. However, we anticipate lower quarterly harvest volumes for the remainder of 2023 as compared to the first half of the year. Further, we anticipate a modest decline in net stumpage pricing versus second quarter pricing levels, primarily due to a seasonal increase in the proportion of thinning volume as well as geographic mix. Overall, we expect to achieve full year adjusted EBITDA in our Southern Timber segment of $150 million to $155 million. In our Pacific Northwest Timber segment, we now expect full year harvest volumes of 1.4 million to 1.5 million tonnes as we deferred some planned harvest in response to soft market conditions. However, we expect that weighted average delivered log prices in the second half of the year will increase modestly from first half 2023 pricing levels based on improved end market lumber demand and pricing. Further, we believe net stumpage realizations will also benefit from modestly lower cut and haul Costs over the balance of the year. Overall, we now expect to achieve full year adjusted EBITDA in our Pacific Northwest Timber segment of $30 million to $34 million. In our New

Thanks, Mark. As I reflect on the first half of the year, I'm pleased with how our team has remained focused on both preserving and enhancing the long-term value of our assets despite a difficult near-term operating environment. Following a challenging start to 2023, we're beginning to see encouraging signs of stabilization and improvement across many of the end markets served by our timber operations. In the U.S., prospective homebuyers have increasingly turned to new construction to meet their housing needs amid a housing shortage that has been further exacerbated by the rapid rise in mortgage rates. Specifically, the significant increase in rates over the past 18 months has discouraged many prospective sellers from listing their current residences and thereby translated to a dearth of supply in the resale market. As a result, we're seeing favorable momentum in several residential construction indicators such as home builder sentiment, new single-family building permits and orders for building materials. Further, there are early signs that the destocking of inventory for products derived from our pulpwood such as containerboard is nearing completion. Meanwhile, as discussed earlier, the New

[Operator Instructions] Mike Roxland with Truist Securities. You may go ahead, sir.

Thanks, David, Mark, on getting on the call and for taking my questions. Just wanted to kick it off with what's happening in the U.S. South and your expectations for lower quarterly harvest volumes -- I think back half of the year that is -- is that more a function of pulpwood sort of Timber, given what type of housing last couple of months, I would have expected certainly improving sawtimber given the increase that we've seen in single-family housing so I just wanted to get your thoughts, your, the back half of the year, on the Southern volumes?

Yes, sure, this is Doug. I'll answer that one. We have a reasonable mix of both stumpage and deliver business and what we've seen is that there has been pretty active harvesting on our stumpage sales. So a lot of the harvesting that we had in the first half of the year, sales, we sold a 12-month contract. A lot of wood has been pulled forward in the first half of the year by the harvesting. So what we're seeing out there in the market is that while the folks who do buy stumpage, they have very low inventories and so they've moved on and harvested on those tracks. And so we have a lower mix of stumpage going into our second half the year. So just so just a slight slowdown in the volumes that we harvested.

Got it. But in terms of how does it relate to say, the mix itself in terms of pulpwood or saw timber? Have you seen it? I mean, would you -- obviously included it or sourced. Have you seen improvement in this sawtimber demand, particularly given single family housing construction, which has accelerated in the last two or three months?

Yes, absolutely. We've been encouraged by some of the recent price negotiations we've had both on our delivered sales programs as well as some of our recent stumpage sales. And as we discussed in our prepared remarks, while there will be some fluctuations in reported pricing based on geography, harvest type of mix, we think on an apples-to-apples basis, pricing appears to have bottomed out, and we're actually starting to see some improvement in pricing in our recent negotiations. This is really compared to earlier in the year. But it's historically has been the case, about 5% of our volume shifts in harvesting from the stronger coastal markets to the Gulf markets kind of during Q3 and into Q4. And that's the company by a 20%, 25% increase in fitting volume. That's almost all pulpwood. So while we've seen per pricing stabilize and even improve, the shift in location harvest type is still there in our composite pricing going in the second half, which is what's built into our guidance.

Yes, Mike, and just reiterate the lower expectation for volumes in the second half of the year is really driven by, like Doug said, that acceleration of volume on the stumpage sales and not any statement about market conditions. We actually expect market conditions to be more favorable in the back half of the year.

Got it. I appreciate all the color there. And then just one other question on New

Yes, this is Doug, and I'll take that one. So we have not seen any impact on additional fiber or logs flowing into China from Australia, and we operate a large JV-- exporting JV that used to move quite a bit of wood from Australia. And what we've seen is that over that course, the trade war between Australia and China, really the wood flow started to really shift back and being used domestically. And there's been further restrictions on harvesting in Australia during that time, too. So we don't expect it to be a significant shift in volume going from Australia to China. There will be some. There'll be Some marginal, wood that comes from ports, but I don't see this to be a significant event for us going forward.

Yes. And Mike, I'd add to that. You -- if you think about where they were prior to this trade spat, they were roughly 10% of that China market, and we don't see them returning to anywhere near that based on some of the shifts they've made to increased domestic processing.

Thank you very much. Good luck in the second half.

Thank you. Our next question comes from Mark Weintraub with Seaport Research Partners. [Operator Instructions] Mark, you may go ahead.

Thank you. So obviously, a pretty big increase on the real estate side relative to original guidance. Curious to me how much of that is a function of markets being better versus kind of just a push forward or pull forward from just -- and it's more timing driven. And maybe relatedly, kind of what is your just sense of your HBU holdings today versus maybe where they had been a couple of years ago? Have you had a positive shift in that view and color you could provide would be helpful.

Yes. Good question, Mark. And there's a fair bit to unpack there. So if you break down the pieces of our real estate, a lot of the baseline in the real estate is rural recreation and residential properties. And what we have found is there's a fair component of that market that is somewhat insensitive to interest rates, cash buyers. And so that has been remarkably stabilizing. It hasn't had -- there certainly has been some impact, but it's not an arena where you tend to see highly levered transactions. And so that has provided a nice baseline of support. I think another thing to keep in mind is as we progressed through COVID and came out on the other side, I think you're seeing a fundamental shift in and more people wanting to live in more rural settings because they can work from home. And so we have seen that translate into our rural places product, which is where we will put a modest investment into subdividing parcels and putting a modest amount of capital into those. And the inventory that we've had of those has -- or the sales pace has vastly exceeded our expectations as we have progressed through and now post-COVID. And so that's been another big component of it. And then I think thirdly, our improved development projects, the ones north of Jacksonville, Wildlight and South of Savannah, Heartland -- Heartwood. Those have been really progressing nicely. I'd say an absorption standpoint, we're well ahead of our expectations when we originally underwrote those projects, and we're seeing that momentum. And as we discussed briefly in the prepared remarks, certainly, a piece of that is the strategy around diversifying end uses. And a good example of that is efforts around our shifting from finished lot sales to plot sales. And the plot sales is where we will sell a group of entitled plots, and the homebuilder will have their capital to develop those lots into finished lots and then ultimately sell homes. And it helps us from a capital standpoint, and it gives the builder a little bit more control on their end. And we've been very pleased with the progression of that. And then secondarily, the move for more active adult communities. We've got a big active adult community in both Heartwood and Wildlight. And we've had two closings on our Wildlight project, one closing on Heartwood. And these are progressing nicely and complementing the single-family lots. Another piece that has influenced this and it really kind of boils down to rates of absorption is the big Hyundai plant announcement that touches our Heartwood project. And we've had homebuilders who've had a number of sales already that have come out of that Hyundai project. And so I'd say with both Heartwood and Wildlight, which are very big projects, many, many years' worth of supply, we're well ahead of our expectations. And you're seeing that in the results. And so we're extremely encouraged by how those projects are progressing. And keep in mind, when we got into those two projects, the motivation was not just for those lands, but also the lands around them. And we feel like as those projects are progressing, they're adding a lot of value to our surrounding timberlands.

Thank you very much for all that unpacking. And so when you sort of put it all together, is it your -- do you have a more elevated view as to what kind of the run rate for the next five, seven years can -- average will be? Presumably yes, given the heightened pace, but just wanted to clarify.

Yes. I'd say that where we sit now, we certainly have seen a higher run rate than we expected and sort of faster absorption. Some of the same dynamics that I talked about on the rural residential also apply to these projects. And they both benefited from some of the regional migration patterns that we've seen in particularly in the U.S. South. Both of these areas have strong school districts and strong in migration. And so yes, we've been very encouraged by what we've seen, and we expect more of this to come. And another thing that we we're continuing to kind of work on the pipeline. We have a number of other projects that we are working on within the real estate sector that are at earlier stages. And so we expect as these two projects progress, some of our other projects that we're working on are going to start to translate as well to P&L impacts.

Mark, this is Mark. I'd just balance that a little bit, though, in terms of the longer-term expectation around just the rise that we've seen in underlying timberland values as well as optionality around nature-based solutions. Recognize that, that rural HBU business is all about premium. And the clearing price to hit our premium expectations it continues to move up, again, given some of those alternative land uses. And so while our development business we feel it certainly hit its stride, and we expect that, that will continue to perform at a higher level relative to what we've seen for the last, call it, five years ago. Again, I think that rural HBU business will be somewhat balanced in terms of our willingness to sell land given some of the other optionality and the increase in values that we've seen there..

Interesting. And so just shifting gears quickly, Pacific Northwest, and I understand the comments you were making on the timber business. But I guess I'm sort of surprised given lumber pricing has been pretty strong domestically that there wasn't kind of a more robust carry through to sawtimber pricing. I mean how much of that the export market or any other kind of additional nuance that you would bring to the process of analyzing what's been going on there?

Yes. Sure. This is Doug. I'm happy to answer that one. So yes, when we had those higher interest rates at the beginning of the year, that really cooled demand for building products and particularly in the West, kind of start the year, which forced the mills basically to trim back production and lower their inventories to match that lower demand. And like you said, this was also coupled with weakening market attention from exports to Asia. So the mills had ample log inventory. And as we move into Q3, and to your point, we're seeing homebuilders gain more confidence, as Dave mentioned in the market and people are starting to increase that demand. And so we're seeing that pause movement in the lumber pricing. But you would expect that to have translated maybe to your logs as you said. What we're seeing right now is those mills are starting to increase that capacity. So they had brought down their capacity and weren't running at full capacity. They're now stepping that back up. And so what we've seen with that is that really results in stabilization in log pricing and even some positive momentum here recently in some specific markets. So I think that's the positive thing we've seen. But really, it took -- they weren't running at full capacity. They ramped up, so more logs came in, specs got a little bit easier, so we were able to move more wood. But at that point in time, it just wasn't flowing in. But we're really starting to see that tension in the market now. And we saw a 25% reduction in North American volume at China ports during July. So a pretty steady drawdown in China. And so we're also encouraged by increasing customer demand from there. And we ourselves are moving back in that market in Q3 with exports from our Port Angeles Export yard. So I think we're just -- we've seen that point where the mills have gotten back up. They're running at capacity. There's less supply from British Columbia, Canada. They're been more confident now, and we're starting to see that kind of drain now on the logs and so expect to see some price increases and I've already seen some as we go into the second half of the year.

Okay. I'll get back in queue. I do have another question if it doesn't get hit, otherwise, good luck in the next quarter.

Thanks, Mark.

Thank you. Our next caller is Anthony Pettinari with Citi Research. You may go ahead, sir.

Good morning. I was wondering if you could talk a little bit more about kind of free cash flow or CAD implied by the updated full year guidance. And in case the kind of second half improvement doesn't materialize, and maybe we're in a weaker economic environment in 2024. Can you just talk about sort of free cash flow profile versus the dividend if we really stress test macro assumptions, say there's a recession, obviously, that's not the base case, but just wondering if you could kind of talk about that and levers that you can pull?

Mark, you're on mute.

I'm sorry. Yes. No, our expectation is for higher free cash flow in the back half of the year. That's largely driven by higher adjusted EBITDA in the back half of the year. And so despite that, we do expect that the dividend will be modestly underfunded this year, and that's just a function of macroeconomic headwinds that we've seen really through the first half in particular. Obviously, we set the dividend on the basis of long-term cash Flow expectations also with the desire to grow the dividend over time. As cash flow has grown. We saw very strong growth in cash flow in 2021 and 2022. And obviously, that's backed up some here in 2023. But we still feel as though long term, we're poised for growth in cash flows as we see a market recovery. But that's something that we have to continuously assess. And certainly, if we saw a more pronounced pullback in market conditions, we have to assess the dividend against that backdrop. But right now, we certainly feel confident that long term, the business is pretty well situated. And obviously, the -- our balance sheet is still in very good shape, and we have a lot of levers at our disposal to manage both cash flow as well as leverage.

Okay. That's very helpful. And then maybe just shifting gears on credits. You mentioned the plan to increase New

Sure. This is Doug again. The New

Yes. As it relates to nature-based solutions more broadly, we do still see tremendous opportunity long term around nature-based solutions. Carbon credit markets are really just one piece of that. We tend to think of nature-based solutions as broadly falling into three categories, first of which would be carbon markets, both voluntary markets, which is what we have in the U.S., as well as regulated markets like the New

Yes. Thanks, Mark. Yes, I would just following with Mark's comments on the carbon credits with respect to voluntary area. We're in the process of working on that, and we have some of our initial projects we expect to come online in 2024, and we've been developing relationships with counterparties that are focused on top-tier quality credits. As Mark mentioned, kind of given concerns about credibility some of those early carbon Credits that were developed and sold. We're really hoping to see improved standards and best practices further evolve before issuing our own carbon credits. And we've seen some of this with the Integrity Council for voluntary carbon markets, and just pass the framework to assess carbon credit integrity. And we think that's a positive development. But given our experience for well over a decade now in New

And Anthony, if I could just add a little perspective to that. We began this work in earnest back in 2021. And part of that effort was to really divide up the potential opportunities from what we believe then would be the timing expectations and start to improve our understanding of the opportunities, bring in more expertise and you fast forward to where we are today, and it was one of the key reasons behind the reorganization that we announced earlier this year, where we moved that under Doug's leadership. We've brought a lot of new dedicated positions to go after these opportunities. And it's allowed us to shift as the opportunities have become -- those opportunities that have become more material. And so we're very excited about not just the positioning of the portfolio, but also the positioning of our team and the way we're structured to pursue these. And so stay tuned. It's still the early days, but we like kind of the approach that we've taken, and we like the fit to our portfolio.

Great. Great, thank you. That details are very helpful. I'll turn it over.

Thank you. Our next caller is Ketan Mamtora with BMO Capital Markets. You may go ahead, sir.

Thank you. Good morning, Dave, Mark and Doug. I would like to start with -- Doug, you talked about port inventories in China having come down quite a bit. Any sense as to kind of where they are relative to historical averages? Whether they are down to normal levels or you expect to get there at some point pretty soon?

Sure. Yes, this is Doug. I'll answer that one. So yes, as we mentioned, we saw a 15% decrease in port inventories during the month of July, which is resulting in about 3.7 million cubic meters at the month-end. And we're seeing average daily sales in July of approximately 72,500 cubic meters, and that's up 5% year-over-year. And we typically like to think about kind of what's the demand to the inventory ratio. And if you think about that right now, this equates to an inventory demand ratio of about 1.7 months. And historically, when we've seen this ratio below two months that equates to tensioning in the market with price appreciation, which is what we're seeing currently. So we're getting back, to your point, we're at a point now where we're getting below that two months inventory demand ratio, and that's where we typically have seen things. So the inventories have come back down quite a bit from where they were. And to your point, getting into more normalized, when we get to that to that two month ratio. So I think that's a good thing. Additionally, we've seen lumber inventories have also fallen through July, which has yielded some price improvements in lumber too. So the Chinese softwood market is showing signs of recovery with a reduction in both inventory and increased prices during a seasonally low period of demand because we're in the monsoon season, it's very hot temperatures. So I think we're seeing a point where we're starting to see price appreciation attention in that market. So it's feeling like a good time right this minute to be in that market.

All right. No, that's helpful context. And then Doug, any update on kind of where we are with the European spruce bark current situation and the exports that we are seeing from there into Asia, whether it's kind of logs or lumber?

Sure. Yes. I think what we've seen is that the European spruce beetle salvage has mainly wound itself down. They're still harvesting some of that. But from what I've read and seen the excess of harvest where they were harvesting beyond their average annual cuts in certain countries, that has come back down now, it's where they're pretty much cutting within their kind of more normalized annual harvest. So we've seen the amount of volume from Europe, particularly being exported for those salvaged reduced significantly over the years. And I don't expect to see that ramp back up. What we can see though is that kind of with the weaker demand in macro across the country that still could see European volume moving around and trying to find a home if it's not being processed at sawlogs. But I don't see that really increased ramp-up that we saw before. So not expecting to see European logs look anything way they did in kind of 2020.

Got it. That's helpful. And then final question from my side. Can you talk a little bit about how your M&A pipeline is looking and just deal activity in timberland?

Sure. I'll take that, Ketan. I think generally, this has been a slower year. I think some of that speaks to the optionality that a lot of these nature-based solution, types of opportunities have presented. And I think it's translating into a number of buyer -- excuse me, a number of land owners sort of sitting and waiting to see how these various markets develop. And I think that's part of why you're seeing a slowdown in activity. From a demand side, I think we've continued to see pretty robust demand. And I say that sort of in the context of our understanding of capital flows, and your capital flows often have a big impact on pricing and can even impact volumes. And so we're seeing -- and again, for those same reasons around the nature-based solutions, we're seeing capital flows flowing into this asset class for that reason. And so in the end, we're going to have to kind of see how that sorts itself out. We continue to look pretty much across all our geographies for bolt-ons. We're always sort of active in smaller transactions that have a good fit for us, and we'll have to we're taking kind of a wait-and-see approach on some of the larger transactions until some of these things sort themselves out.

Got it. That's very helpful. I'll jump back in the queue. Good luck in the back half.

Thank you our next caller comes from Buck Horne with Raymond James. You may go ahead, sir.

Hi, good morning, thanks for the time guys. Just wondering should we go back to the pulpwood market for a second, just to characterize maybe a little bit better what you're hearing from your end market customers on your -- the pulp mills in terms of what their log inventories look like going into the back half of the year? You're seeing any signs that demand for containerboard or other pulp products is starting to rebound? Or what's kind of the color you're hearing on the ground from the pulpwood market these days?

Sure. A lot of the inventory destocking that has occurred across supply chain was as a result of that shift in economic consumption from good services post-COVID. And recently, we started to see that inventory situation improve as inventories at mills and box plants fell to 2.6 million tonnes in June, which was down from a high of 3.1 million tonnes in July last year. And for reference, in the two years leading up to the pandemic, inventories averaged about 2.6 million tonnes. So we're right in that ballpark. And this is why in our prepared remarks, we mentioned that the destocking process for in products derived from our pulpwood is largely complete as we now see mill inventories and retail inventories at more normalized levels. Kind of the last part of the supply chain that is still working on clearing inventory is that wholesale channel between the mill and the retail. And when that happens, we expect to see a more pronounced recovery in the containerboard demand. But all that said, we felt the inventory situation is much improved from where we were as mentioned there. And we've started to see improved demand on the ground matching that. So we've had mills where we were under quota, who have now removed the quotas from us and said, we can take more volumes. It's much like that. I mentioned more in the lumber in the Northwest, where before we see price improvements, we have to see the capacity improvements and the wood move in. And so what we're seeing in quite a few areas is that the mills have started to open up the quotas and allowing us to bring more logs in. And we expect that to -- as things move on and they start to see demand on their side that, that should translate into pricing, and we have seen that in individual mills so far.

Awesome. That's very helpful color. I appreciate that. And then switching just to the timberland M&A markets, as you guys have highlighted, I mean, demand has remained pretty strong, not only for rural real estate, but just timber in general as an asset class. Sounds like there's not a lot of sellers putting packages together in the market right now. Would you guys think about stepping into that and looking at maybe putting some parcels that are noncore, nonstrategic to you guys and maybe step-up disposition activity in the back half of the year?

I mean I think that's, Buck, that's something that we always look at. And I think that's one of the areas of advantage that we have as a pure play timber read is that we have greater flexibility to kind of actively manage our portfolio. And so that's something that we're always considering. We have kind of rank ordering of our own properties from a quality standpoint, and it gets back to some of the flexibility that Mark touched on as it relates to balance sheet that we have in our toolkit. And we take that active portfolio management role very seriously as a pure play.

Okay, all right, thanks guys. Appreciate the time.

Thank you. And our last question comes from Mark Weintraub with Seaport Research Partners. Sir, you may go ahead.

Thanks for all the color and especially kind of the rundown on the nature-based solutions. Lots of good information, lots of follow-ons. I'll just ask one, though. And on the carbon capture solutions, you talked about I think, 26,000 opportunity -- acre opportunity having been identified and the possibility of 400,000 over time. Can you give us a sense in terms of how much earnings or revenue could be associated with -- just a ballpark with the 26,000 so we can begin to scale the potential of the opportunity for you here?

Yes, Mark, we're not in a position to provide that level of detail just yet. I recognize there's a lot of activity that's ongoing in this arena. A number of the discussions that we're having currently are under confidentiality agreements as well as agreements that have been entered into and prospective agreements that we might enter into around CCS leases. And so we're working on appropriate disclosures on a go-forward basis, and we do hope to be in a position to provide some more color on that here in the next short while. We're not quite at a point where we can provide economics on the transactions that we're evaluating.

Okay, fair enough.

And keep in mind, too, that you have kind of two pieces. You have the land lease piece, and you have the injection piece. And while the land lease piece has started, the injection piece is very determinant based on the permitting and the pace of activity. And so that's going to be a harder one to sort of get your hands on early in the game.

Got it. So there would be like an underlying rental fee on the land lease and then it would be a bit more variable depending on the injection. Is that -- how do I understand that?

That's correct.

But recognize, again, that those injection payments wouldn't theoretically occur until a later date, given that the long permitting process that's involved in getting these injection wells permitted.

Understood. And not to hold you to it because I realize things are dynamic, but I think you suggested you might be in a place to go is a bit of a sense more on the economic side soon, what maybe when we might soon represent?

Well, illustratively, Mark, I can point you to Wall Street Journal article from about a month ago that provided some detail around land owner economics. But again, they were given in fairly wide ranges. And again, we're working through at what point in time and at what level of detail we can provide that information going forward. But recognize that, again, we see this as a pretty meaningful opportunity for us long term, but it's still very much in the early stages and some of those revenues are still several years out -- or prospective revenues are several years out. So again, I don't want to put a specific timeline on it, but it's something that again, we've seen a lot of activity here just in the last six to 12 months. And I think over the next six to 12 months, we'll be looking to provide some more detail around kind of how we expect that to impact the business long term.

And getting back to my team comments, Mark, we're devoting a lot of resources to furthering these efforts.

Okay. Really appreciate the help. Thanks.

Thank you. And our last question comes from Paul Quinn with RBC Capital Markets. You may go ahead, sir.

Yes. Thanks so much. Morning, guys. Just following up on Mark's question. If you looked out 10 years, how big is this carbon opportunity to you between the wind solar, carbon capture, storage, everything all in a bucket? Is that I think this is 10% of your business, you think it's 20%, What's a ballpark number that without giving any financials, which it sounds like you're still a ways from. How do we how should we think about it?

Paul, we're just not quite at the point where we can put that type of figure out there publicly. Again, we are currently working to better refine the long-term view around that, but just recognize that there has been just a lot of activity in the last six to 12 months. We are still trying to size both the market opportunity as well as the specific opportunity for Rayonier. Suffice it to say, we think that it's meaningful. But again, putting that type of -- those type of brackets around it in terms of percentage contribution to cash flow, revenue, EBITDA. We're just not quite at the point that we're ready to do that.

Okay. Maybe look at it...

And to remind you, you also have a lot of you have a lot of overlay between various potential land uses and products. And so that -- we're managing that complexity as well.

Okay. And then I don't know, maybe I take another look at it on a current capture sequestration basis. Do you think that as some of these projects get up and the credits gets sold, the areas get deferred from harvest. Is that going to be a material increase in terms of log pricing to you, the way you think of it down the road?

It certainly could be. If you saw a meaningful deferral around for example, carbon projects or sale of forestry credits into the voluntary carbon market. I think it could also be meaningful as you look at the prospective demand for that fiber going into bioenergy or biofuels. But again, recognize that all of these emerging industries are still in the relatively nascent stages. And so again, we haven't seen -- we've seen a lot of talk around bioenergy facilities and biofuel facilities like sustainable aviation fuel, but we haven't actually seen that pull of fiber into those types of facilities yet. So again, I think what's exciting for us as you look at any one of these opportunities in isolation, again, be it carbon capture and storage or solar or fiber into bioenergy or sustainable aviation fuels. And in isolation, we think that they could be meaningful for our business. When you start to think about the confluence of all of them together, it has a compounding effect, right, just in terms of that demand for wood fiber and demand for land use more generally. So this is clearly something that's affecting our industry and is driving -- views around land values currently, it's obviously making the timberland M&A market that much more competitive. And so we're excited about the long-term prospects, but we're really still at the point of trying to size these opportunities long term.

All right, fair enough. Thanks a lot.

Thank you. There are no further questions. I will now turn the call back over to Collin Mings.

Thank you. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.