Supply and demand for forest products—an econometric study

Abstract

Forest products dealt with were “all” lumber, softwood lumber, paper, paperboard, building paper and board and softwood plywood (referred to collectively as wood products), and softwood sawlogs, pulpwood, peeler logs and softwood sawlog stumpage (referred to collectively as primary products). The foundation of the study was a system of interrelated linear demand and supply relationships. Although only mill-level relationships were specified, attention was given to higher levels of demand and supply in their formulation. The study was limited to producers and consumers in the United States except for a brief consideration of Canadian suppliers of lumber and newsprint. Coefficients of wood product supply and demand relationships were estimated by 2-stage least squares, using annual data for the years 1929 to 1960. Point estimates of elasticities for wood products were prepared for the year 1960 to show the influence of “own” price, prices of competing materials, prices of inputs in production, and other supply and demand shifters. Lack of data on quantities marketed made it impossible to carry out estimation for primary products. Forecasts of wood product prices and consumption levels, and primary product prices, were made for a prediction period ending in 1975. Three types of forecasting equations were used: “solved structural,” “complete reduced form” and “exogenous reduced form.” Forecasting methods were compared, using 1961 and 1962 data which had been excluded from the sample period. Basic predictions were adjusted using actual and predicted values for 1961 and 1962. On empirical and theoretical grounds the adjusted solved structural method was judged to be generally the most satisfactory one. Forecasts of consumption levels of certain wood products prepared in this way were compared with predictions made in studies carried out by the U. S. Forest Service, U. S. Department of Commerce, the Stanford Research Institute, and Resources for the Future, Inc.