The U.S. South’s timber sector in 2005: a prospective analysis of recent change

Abstract

Forest product markets are an important part of rural economies of the U.S. South, but recent changes in timber markets have raised questions about the future. Several factors have altered forest products markets since the late 1990s, including industry consolidations and associated changes in land ownership, changes in domestic consumption patterns and international trade patterns, and depreciation and closure of older processing facilities. The focus of this assessment of timber markets is on understanding how these and other demand and supply factors have affected the markets for various timber products. Our findings suggest that the demand for domestically produced timber products has declined somewhat in the United States, as domestic demands as well as exports have fallen. At the same time, the supply of domestically produced timber products has continued to expand since the late 1990s. The net result of these demand and supply changes may be (a) a decline in timber product output and (b) a disproportionately strong decline in associated prices. An evaluation of investment of wood products firms in manufacturing capacity within the region provides insights into future production potential. Paper production capacity has declined since the late 1990s, while lumber production capacity has remained near 1990s levels. Indications are, therefore, that demand for pulpwood to produce paper may not rebound to late 1990s levels in the foreseeable future. However, persistent low prices for softwood pulpwood could indicate long-term opportunities for the manufacture of other products from this product class. Long-term demand for solid wood products appears strong, signaling that a relatively favorable investment climate should exist in this part of the forest sector.