The U.S. 

South’s Timber 

Sector in 2005:

A Prospective 

Analysis of 

Recent Change

David N. Wear, Douglas R. Carter, 

and Jeffrey Prestemon

■ Except during very brief periods, total timber production grew between 1962 and 1998. ■ Between 1998 and 2002, total timber production 

declined by about 9 percent, back to 1995 levels. ■ Prices for softwood products declined between 1998 and 2004. For softwood pulpwood, 

the price decline was dramatic. By 2004, inflation-adjusted prices for softwood pulpwood had fallen to their lowest levels since 1997. ■

Prices for hardwood products had not turned downward through 2004. ■ Based on price and quantity patterns, we identify three phases of 

development in southern timber markets: a moderate growth phase from 1977 to 1986, a rapid growth phase between 1986 and 1998, and 

an adjustment phase between 1998 and 2004. ■ The moderate growth phase 

was characterized by expanding demand and supply. The rapid growth phase 

was dominated by growth in demand, which outstripped supply growth for 

wood products. The adjustment phase was dominated by declines in demand. 

■ During the rapid growth period, hardwood sawtimber prices grew 

steadily but output grew only slightly. This suggests a possible contraction of 

available hardwood sawtimber inventories and supply. ■ Consumption of lumber in the United States has grown 

at a lower rate than housing starts, indicating some substitution away from lumber as a building material. ■ 

Both nonwood and engineered wood products have substituted for lumber in many applications. For example, 

the share of floors, walls, and roofs made with wood is about constant but there is a shift toward greater use of 

engineered wood products. ■ Electronic media are substituting for paper. ■ A majority of pulping capacity 

in the United States is located in the South, but this share has declined since the mid-1990s. ■ Pulping capacity 

in the South, an indicator of long-term demand, has declined by 16 percent since 1998. ■ Increasing world 

demand for paper products is leading to expansion in paper production capacity in countries other than the 

United States. ■ Shifts in capacity indicate that the United States has lost some of its comparative advantage for producing paper for the 

world market. Possible causes of this decrease in comparative advantage are disadvantageous resource and labor costs and location of the 

United States relative to major world demand centers. ■ Overall, there is no indication that domestic demand for southern pulpwood will 

increase. ■ Softwood lumber production capacity in the South has increased steadily in recent years (1997–2003). ■ Softwood lumber 
About the Authors

David N. Wear, Project Leader, U.S. Department of Agriculture Forest 

Service, Southern Research Station, Research Triangle Park, NC 27709; 

Douglas R. Carter, Associate Professor, University of Florida, Gainesville, 

FL 32611; and Jeffrey Prestemon, Research Forester, U.S. Department of 

Agriculture Forest Service, Southern Research Station, Research Triangle 

Park, NC 27709. 

Cover photo: A beautiful spring day in the Southeastern United States is 

seen in this SeaWiFS image. Several smoke plumes are visible including 

a rather large one that originates in Georgia, midway between the 

Savannah and Altamaha rivers. A good-sized plume of turbid water can 

also be seen flushing out of Mobile Bay. Photo courtesy of the SeaWiFS 

Project, NASA/Goddard Space Flight Center, and ORBIMAGE.

January 2007

Southern Research Station

W.T. Weaver Blvd.

Asheville, NC 28804

This first update of the Southern Forest Resource Assessment 

published in 2002 was produced in collaboration with the Southern 

Group of State Foresters.
The U.S. 

South’s Timber 

Sector in 2005:

A Prospective 

Analysis of 

Recent Change

David N. Wear, Douglas R. Carter, 

and Jeffrey Prestemon

List of Figures ................................................. iv

Introduction .....................................................1

Recent Trends in the Timber Sector.................2

Harvest Quantities ............................................2

Timber Prices ...................................................2

Summary of Changes .......................................3

Key Observations—Recent Trends ..................4

Demand Factors ..............................................5

Competing Nonwood Products ........................5

Domestic Demands ...........................................6

International Trade in Wood Products............12

Key Observations—Demand...........................19

Supply Factors ............................................... 20

Competing Uses of Land.................................20

Land Ownership Changes...............................24

Key Observations—Supply.............................24

Conclusions and Implications........................ 25

Acknowledgments.......................................... 26

Literature Cited.............................................. 26

Appendix: Data Notes .................................... 29

Contents
iv

List of Figures

Figure 1—Roundwood harvests in the U.S. South by product. (Sources:

U.S. Department of Agriculture Forest Service timber product

output reports.)...................................................................................................2

Figure 2—Roundwood production in the U.S. South, all products. (Sources:

U.S. Department of Agriculture Forest Service timber product output

reports and see appendix for explanation of interpolation procedures.) ..............2

Figure 3—Roundwood production in the U.S. South, selected products.

(Sources: U.S. Department of Agriculture Forest Service timber

product output reports and see appendix for explanation of

interpolation procedures.)...................................................................................3

Figure 4—Real stumpage prices in the U.S. South by product. (Source:

Timber Mart-South.)...........................................................................................3

Figure 5—Hardwood pulpwood harvest and price in the U.S. South.

(Sources: Timber Mart-South and various Resources Planning Act timber

product output reports.) .....................................................................................4

Figure 6—Softwood sawtimber harvest and price in the U.S. South. (Sources:

Timber Mart-South and various Resources Planning Act timber product

output reports.)...................................................................................................4

Figure 7—Softwood pulpwood harvest and price in the U.S. South. (Sources:

Timber Mart-South and various Resources Planning Act timber product

output reports.)...................................................................................................4

Figure 8—Engineered wood products production. (Source: The Engineered

Wood Association.).............................................................................................5

Figure 9—Distance in miles by county from the forested center of the county

to the closest pulpmill or chipmill. White dots are pulpmills and chipmills

within the Southern States. Note that the universe of all pulpmills and

chipmills within the United States and a circuity factor of 1.4 were used in

the distance calculation. (Source: R. Huggett, preliminary findings, economics

of biomass removals, U.S. Department of Agriculture Forest Service, Research

Triangle Park, NC.) .............................................................................................6

Figure 10—U.S. pulp output processing capacity, 1961–2000. (Source: Smith

and others 2004.)................................................................................................7
Figure 11—Pulpmill capacity in the United States and the U.S. South,

1983–2003. (Sources: Forest Resources Association; U.S. Department of

Agriculture Forest Service, Southern Research Station; Pulp & Paper North

American Factbook; and Timber Mart-South.) ....................................................7

Figure 12—Pulp production for various countries, 1995 and 2002. (Sources:

Pulp & Paper International and Paperloop.com.)................................................8

Figure 13—Average annual rates of change in pulp production for various

countries, 1995 to 2002. (Sources: Pulp & Paper International and

Paperloop.com.)..................................................................................................8

Figure 14—Kraft linerboard mills manufacturing costs, 2003. (Source: Jaakko

Poyry Management Consulting.) .........................................................................8

Figure 15—Delivered coniferous pulpwood prices. (Source: Wood Resources

International.) .....................................................................................................9

Figure 16—Delivered nonconiferous pulpwood prices. (Source: Wood Resources

International.) .....................................................................................................9

Figure 17—Average distance in miles by county from the forested center of

the county to the closest five sawmills within 150 miles. White dots are

sawmills within the Southern States. Note that the universe of all sawmills

within the United States was used in the distance calculation. (Source: R.

Huggett, preliminary findings, economics of biomass removals, U.S.

Department of Agriculture Forest Service, Research Triangle Park, NC.)............10

Figure 18—Softwood sawmill capacity. (Source: Spelter and Alderman

2003.) ...............................................................................................................11

Figure 19—Panel capacity in the U.S. South. (Source: McKeever and

Spelter 1998.)....................................................................................................11

Figure 20—Southern panel production. (Source: The Engineered Wood

Association.)......................................................................................................11

Figure 21—U.S. broad dollar index. (Source: United States Federal

Reserve.) ...........................................................................................................12

Figure 22—U.S. trade in wood pulp and the balance of trade (BOT). (Source:

U.S. International Trade Commission.)..............................................................12
vi

Figure 23—Wood pulp imports into the United States. (Source: U.S.

International Trade Commission.) .....................................................................13

Figure 24—Wood pulp imports into southern customs districts. (Source: U.S.

International Trade Commission.) .....................................................................13

Figure 25—Wood pulp imports into southern customs districts. (Source: U.S.

International Trade Commission.) .....................................................................14

Figure 26—Wood chips imports into the United States. (Source: U.S.

International Trade Commission.) .....................................................................14

Figure 27—Wood chips imports into southern customs districts in dollars.

(Source: U.S. International Trade Commission.)................................................15

Figure 28—Wood chips imports into southern customs districts in tons.

(Source: U.S. International Trade Commission.)................................................15

Figure 29—Wood chips imports into the United States and the balance of

trade (BOT). (Source: U.S. International Trade Commission.) ...........................16

Figure 30—U.S. wood chips exports. (Source: U.S. International Trade

Commission.)....................................................................................................16

Figure 31—U.S. wood chips exports from southern customs districts in

dollars. (Source: U.S. International Trade Commission.)....................................17

Figure 32—U.S. wood chips exports from southern customs districts in tons.

(Source: U.S. International Trade Commission.)................................................17

Figure 33—Sawnwood imports and the balance of trade (BOT). (Source:

U.S. International Trade Commission.)..............................................................18

Figure 34—Exports of U.S. hardwood lumber to various regions (1989–

2004). Source: Foreign Agricultural Service web site (www.fas.usda.gov)..........18

Figure 35—U.S. lumber exports from southern customs districts. (Source:

U.S. International Trade Commission.)..............................................................19

Figure 36—Particleboard, oriented strand board, and wafer board

imports and the balance of trade (BOT). (Source: U.S. International Trade

Commission.)....................................................................................................19

List of Figures, cont.
vii

Figure 37—Total timberland area in the South. ..................................................20

Figure 38—Change in forest area 1945–92 by State. (Source: U.S. Department

of Agriculture Forest Service, Forest Inventory and Analysis survey data.).........20

Figure 39—Projected change in percent of forest between 1992 and

2020 by county in the Southeastern United States. (Source: Wear and

Greis 2002.) ......................................................................................................21

Figure 40—Acres by forest management type. (Source: U.S. Department of

Agriculture Forest Service, Forest Inventory and Analysis data summarized

by Conner and Hartsell 2002.)..........................................................................22

Figure 41—Real prices of hardwood and softwood pulpwood in the U.S.

South. (Source: Timber Mart-South.).................................................................22

Figure 42—Total area planted in trees in the U.S. South, all ownerships

(industry, nonindustrial private, and public) and the industry ownership.

[Sources: 1945–99: Robert F. Moulton (2000); 2000–04: Steve Chapman,

Georgia Forestry Commission (2005).]..............................................................23

Figure 43—Total tree planting in the U.S. South with estimates of both

expansion and replacement planting (see appendix)..........................................23

Figure 44—Forecast of the percent of industry timberland in a land

conversion-value class in Georgia, 2010. (Source: Wear and Newman

2004.) ...............................................................................................................25

 The U.S. South’s Timber 

Sector in 2005: A Prospective 

Analysis of Recent Change

David N. Wear, Douglas R. Carter, and Jeffrey Prestemon

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.

Keywords: Demand and supply factors, 

forest products markets, investment 

climate, long-term demand, paper 

production capacity.

Introduction

Timber production in the

Southeastern United States has grown

both in absolute terms and relative to

that in other regions of the country

since the 1970s. Over this period,

the South has demonstrated strong

comparative advantage in producing

a renewable timber resource as

management has shifted from mining

of volunteer second-growth forests to

intensive plantation forestry. Today,

forest products remain an important

part of southern rural economies, but

recent changes in timber markets have

raised questions about the future. This

report examines these changes and

assesses their implications for

the future.

The coincidence of several factors has

altered forest products markets since

the late 1990s. Industry consolidations

changed land ownership across a large

portion of the region’s most productive

timberland. Changes in domestic

consumption patterns, coupled with

shifts in international trade, shifted

timber demands. Depreciation and

closure of older processing facilities,

especially in the paper industry, has

accentuated many of these factors

and changed the spatial arrangement

of timber markets within the region.

These developments have led many in

the forestry community to conclude

that the future of timber markets in

the United States in general, and in the

South in particular, is one of decline.

At the same time, other developments

seem to bode well for southern forest

products industries. Production of

newer, engineered wood products

continues to grow. Timber supply is

strong and appears to have expanded

throughout the 1990s in spite of

competing land use pressures. Intensive

forest management continues to

expand yields and the potential for

growth appears to persist. Indeed,

long-run forecasts of general economic

and timber market activity predict

expanding domestic timber demand

over the coming decades. Any

expansion in timber production is

expected to be concentrated in the

South. Forecasts reported in the

“Southern Forest Resource Assessment”

(Wear and Greis 2002) and the

2000 RPA timber assessment

(Haynes 2003) suggest that

southern forest landowners, facing

strong future markets, will continue

to invest in and expand their timber

production capacity.

The objective of this report is to

provide an assessment of long-run

trends and recent (5-year) changes

in timber markets in the Southern

United States. Such an assessment

is necessary to reconcile the recent

decline in prices and production of

some wood products and long-run

optimism about the prospects for

timber demand and productivity in the

South. This assessment relies strictly on

the interpretation of historical data and

not on forecasting models. The focus is

exclusively on understanding the most

recent historical experience and placing

it in the context of other developments

in world markets for wood products.

This report is organized as follows.

We start by charting the most basic

timber market indicators: price and

harvest quantity. Patterns of change

in price and quantity provide insights

into overall market direction. We then

explore a set of factors that affect the

demand for timber products, including

domestic conditions and forest

products trade. This analysis of demand

is followed by an analysis of timber

supply fundamentals, which focuses

on land use, forest investment, and

timberland ownership. We conclude
The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

by synthesizing these findings and

discussing implications for the future

of southern timber markets.

Recent Trends in the 

Timber Sector

Our objective in this section is

to show how timber markets have

changed in the U.S. South since

detailed records have been kept, with

emphasis on the most recent changes.

Our approach is to use timber harvests

and prices as compact, summary

indicators of the sector’s evolution over

time. We begin by examining how

harvest quantities and then prices have

changed. We put these changes into

context by decomposing quantity and

price changes into their root causes,

shifts in supply and demand.

Harvest Quantities

Forests in the U.S. South yield a

variety of hardwood and softwood

timber products. Softwood products

constituted 69 percent of harvest

output in 2001, the latest year for

which comprehensive data are available

(fig. 1). Saw logs and pulpwood

products accounted for 41 and 42

percent of total harvest, respectively.

Softwood saw logs are the largest

product class (30 percent), followed

by softwood pulpwood (27 percent)

and hardwood pulpwood (15 percent).

These three product classes represented

roughly 72 percent of harvests in 2001

and have represented at least 68 percent

of harvests since the 1970s (fig. 1).1

Timber harvests from southern forests

trended strongly upward during the last

half of the 20th century (fig. 1). Between

1962 and 1996, annual harvesting

more than doubled from about 4 billion

cubic feet to almost 10 billion cubic

feet, while the product mix remained

relatively constant. Pulpwood’s share

of production ranged from 39 to 44

percent and softwood’s share ranged

from 64 to 71 percent of production,

with no consistent trends.

Charting total production on an

annual basis reveals that growth in

harvests for all products was very

1 Harvest quantity data are derived from U.S.

Department of Agriculture Forest Service timber

product output reports. (See appendix for details

on data sources.)

steady, with only a few exceptions

(fig. 2). For example, output dipped

during a brief recession in the mid1970s. Growth in harvests was at its

strongest from 1982 through 1998,

with output expanding at a rate of 3.3

percent per year. After this long period

of strong growth, total harvest quantity

fell by approximately 9 percent between

1998 and 2002. Harvest quantity in

2002 was approximately equal to that

in 1995. This represents the largest and

longest downturn in harvesting over the

historical period (1952–2002).

Trends in the three largest product

classes (fig. 3) show that the harvest

decline between 1998 and 2002 was

largely explained by reductions in

pulpwood production. Softwood and

hardwood pulpwood harvests declined

by 11 and 21 percent, respectively,

while softwood sawtimber harvests

were stable. We are unable to construct

an annual time series of hardwood

saw-log production (the fourth largest

product class) using a comparable

technique, but the periodic data (fig.

1) suggest that hardwood sawtimber

harvests were relatively stable over

this period.

Timber Prices

Timber prices can be considered an

indicator of the scarcity of timber as

Figure 1—Roundwood harvests in the U.S. South by product. (Sources: U.S. 

Department of Agriculture Forest Service timber product output reports.)

12,000

10,000

8,000

6,000

4,000

2,000

0

195219571962

1967

1972

1977

1982

1987

1991

1996

2001

Million cubic feet

Fuelwood

Veneer

Pulpwood

Saw logs

Other Other

Fuelwood

Veneer

Pulpwood

Saw logs

Hardwood Softwood

Softwood sawtimber

Softwood pulpwood

Hardwood pulpwood

Other

12,000

10,000

8,000

6,000

4,000

2,000

0

Million cubic feet

195319571961

1965

1969

197319771981

1985

1989

1993

1997

2001

Figure 2—Roundwood production in the U.S. South, all products. (Sources: U.S. 

Department of Agriculture Forest Service timber product output reports and see 

appendix for explanation of interpolation procedures.)
 

an input to production. If stumpage

prices are increasing, then timber

is becoming relatively more scarce.

Conversely, falling stumpage prices

indicate that timber is becoming more

abundant relative to demands for its

use. Prices for various wood products

demonstrated a variety of trends

between 1977 and 2004, the period for

which we have comprehensive data,

indicating an evolving story regarding

the scarcity of these natural resources.2

Between 1977 and the late 1980s,

timber prices were flat to declining for

hardwood and softwood products (fig.

4). Softwood sawtimber prices declined

very slightly between 1977 and 1991

and softwood pulpwood prices were

essentially flat between 1977 and 1989.

Hardwood pulpwood prices likewise

were flat between 1977 and 1988. (Our

price series for hardwood sawtimber

begins in 1992.) No indications of

increasing scarcity were apparent

through the late 1980s, while harvests

grew at moderate rates (fig. 3).

Price patterns for these products

started changing substantially between

1989 and 1992 (fig. 4). Real-dollar

prices turned upward for all four

products and increased through 1997

or 1998. Between 1988 and 1998,

hardwood pulpwood prices increased

at an average annual rate of 12 percent,

softwood pulpwood at 5 percent, and

softwood sawtimber at 8 percent.

Hardwood sawtimber prices increased

at a rate of 6 percent (over the period

1992–98). Price data, therefore,

indicate increasing scarcity for all

timber products over this decade.

Between 1998 and 2004, hardwood

pulpwood and sawtimber prices leveled

off, and softwood sawtimber prices

declined, returning to 1994 levels by

2004. Softwood pulpwood prices have,

however, followed a decidedly different

pattern. Prices for this product fell to

less than one-half of their 1998 level

and in 2004 were at their lowest levels

for the period examined (1977–2004).

2 To examine price trends we have constructed

regional price indices based on prices reported by

Timber-Mart South for all regions of the South.

Throughout this paper we report prices in real

terms, adjusted for inflation using the Consumer

Price Index price deflator with 2004 as the value

basis. We use indices of timber prices to allow easier

comparisons among product types. When indices

are used, we define 1952 as the base year, i.e.,

the index is set equal to 1 in 1952, and apply the

indexing to the real prices described above.

Summary of Changes

Changes in both harvest quantities

and timber prices since 1998 suggest

that the timber market is in the midst

of a transition. Prices have declined

from their peak levels but remain

relatively strong for hardwood

products and softwood sawtimber.

However, these moderate declines

and a precipitous decline in softwood

pulpwood prices suggest that returns

to timberland owners are now

substantially lower than they were in

the 1990s, when these returns peaked.

Especially for softwood pulpwood,

these patterns suggest a strong

contraction in pulpwood demand

coupled with stable to expanding

supplies of standing timber.

Looking jointly at price and harvest

changes for the three largest product

classes in the South (figs. 5, 6, and 7),

we can define three distinct periods of

development between 1977 and 2002:

Moderate growth phase

1977–86: During this period, harvests

of all products increased at a moderate

rate while timber prices stayed constant

or even declined for all three of the

major products. These trends are

consistent with expansion of both

supply and demand for the products.

Rapid growth phase

1986–98: During this period,

harvests of pulpwood and softwood

sawtimber continued to increase but

at a faster rate than between 1977

and 1986. Prices for these products

also increased during this period,

and at a higher rate than prices for

19571961

1965

1969

197319771981

1985

1989

1993

1997

2001

Million cubic feet

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Softwood sawtimber Hardwood pulpwood

Softwood pulpwood

1953

Figure 3—Roundwood production in the U.S. South, selected products. (Sources: 

U.S. Department of Agriculture Forest Service timber product output reports and see 

appendix for explanation of interpolation procedures.)

3.5

3

2.5

2

1.5

1

0.5

0

1977

19791981198319851987

1989

1991

1993

19951997

1999

2001

2003

Index (1977 = 1)

Hardwood sawtimber

Hardwood pulpwood

Softwood sawtimber

Softwood pulpwood

Figure 4—Real stumpage prices in the U.S. South by product. (Source: Timber 

Mart-South.)
The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

harvests. This pattern of change is

consistent with a strong expansion in

timber demand but doesn’t provide

conclusive evidence of changes in

timber supply. It is consistent, however,

with demand expanding faster

than supply. In contrast, hardwood

sawtimber production was stable, with

increasing prices signaling a tightening

of hardwood saw-log supplies.

Adjustment phase

1998–2002: During this period,

both harvests and prices declined for

pulpwood products. These patterns

of change are consistent with a

strong contraction in the demand for

pulpwood. For softwood sawtimber,

harvests leveled off with declining

prices. This is consistent with an

expansion in sawtimber supply, coupled

with a decline in demand. Limited data

for hardwood sawtimber indicate that

harvests and prices were stable over

this period.

In subsequent sections of this

paper, we examine various demand

and supply factors that have likely

influenced markets for timber products

in the South, with attention focused on

evaluating changes that occurred during

the adjustment phase (1998–2002).

Key Observations—

Recent Trends

■ Except during very brief periods, 

total timber production grew between 

1962 and 1998.

■ Between 1998 and 2002, total 

timber production declined by about 9 

percent, back to 1995 levels.

■ Prices for softwood products 

declined between 1998 and 2004. 

For softwood pulpwood, the price 

decline was dramatic. By 2004, 

inflation-adjusted prices for softwood 

pulpwood had fallen to their lowest 

levels since 1997.

■ Prices for hardwood products had 

not turned downward through 2004.

■ Based on price and quantity 

patterns, we identify three phases 

of development in southern timber 

markets: a moderate growth phase 

from 1977 to 1986, a rapid growth 

phase between 1986 and 1998, and 

an adjustment phase between 1998 

and 2004.

3.5

3

2.5

2

1.5

1

0.5

0

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

1977 1980 1983 1986 1989 1992 1995 1998 2001

Million cubic feet

Index (1977 = 1)

Harvest Price

Figure 5—Hardwood pulpwood harvest and price in the U.S. South. (Sources: 

Timber Mart-South and various Resources Planning Act timber product 

output reports.)

2

1.8

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

0

3,500

3,000

2,500

2,000

1,500

1,000

500

0

1977 1980 1983 1986 1989 1992 1995 1998 2001

Million cubic feet

Index (1977 = 1)

Harvest Price

Figure 6—Softwood sawtimber harvest and price in the U.S. South. (Sources: 

Timber Mart-South and various Resources Planning Act timber product 

output reports.)

1.8

1.6

1.4

1.2

1

0.8

0.6

0.4

0.2

0

3,000

2,500

2,000

1,500

1,000

500

0

Million cubic feet

Index (1977 = 1)

Harvest Price

1977 1980 1983 1986 1989 1992 1995 1998 2001

Figure 7—Softwood pulpwood harvest and price in the U.S. South. (Sources: 

Timber Mart-South and various Resources Planning Act timber product 

output reports.)
 

■ The moderate growth phase was 

characterized by expanding demand 

and supply. The rapid growth phase 

was dominated by growth in demand, 

which outstripped supply growth for 

wood products. The adjustment phase 

was dominated by declines in demand.

■ During the rapid growth period, 

hardwood sawtimber prices grew 

steadily but output grew only slightly. 

This suggests a possible contraction 

of available hardwood sawtimber 

inventories and supply.

Demand Factors

Demand is an economic concept

that relates the consumption of a

commodity to its price. Elementary

economic theory indicates that less of

a commodity is consumed at a higher

price and that charting all the possible

price-consumption combinations

defines a demand curve. This curve,

however, can be repositioned based

on many factors other than the

commodity’s price, e.g., income, prices

of substitutes for the commodity, and

changing tastes. Here we examine

demands for timber products by

examining various factors that can

reposition the demand relationships.

We look closely at substitution

possibilities, production capacity, and

international trade as indicators of

changes in domestic demand.

Wood products are one of the many

commodities that are used to produce

final consumer products such as

homes or paper and related products.

Therefore, the demand for wood

products is derived from the demand

for final products into which they are a

material input. Wood products compete

with other construction inputs such

as concrete, steel, aluminum, plastics,

or other fibers. We therefore need to

account for these commodities when

evaluating changes in wood products

markets. We also need to account for

the emergence of engineered wood

products, such as oriented strand

board (OSB), which can utilize smaller

diameter trees, as substitutes for

traditional wood products.

In this section, we examine the

structure of demand for timber in

the South. We start by examining the

position of wood products relative to

competing commodities in the United

States. This includes an examination

of trends in substitution and in the

prices of substitute products. We

then examine the demand for timber

derived from domestic demand for

solid wood products. Here, we focus

on sawtimber and pulpwood products

and use domestic production capacity

as an indicator of medium to longrun demand. We close this section on

demand by examining international

trade including exports and imports of

final goods and raw materials.

Competing Nonwood 

Products

The potential for substitution between

timber and other materials depends

upon the level of technology and

relative prices of alternative material

inputs. For instance, the possibility

for substitution away from wood to

produce paper and paper-related

products is low because there are

currently no economically viable and

widely available substitutes for wood

fiber. However, the potential

for substitution among alternative

materials in building construction is

much higher.

Even during the rapid growth phase

described earlier, the use of lumber in

the United States did not grow at the

same rate as housing starts. Increasing

prices of timber relative to steel and

cement allowed for substitution away

from lumber and toward these other

materials during the last few decades

of the 20th century. Very recent large

upturns in cement and steel prices may

portend a moderating or reversal of this

substitution of raw materials. Although

many factors contribute to price

differences among raw materials, energy

prices will have a strong influence

on the future competitive position of

wood. Generally, energy costs associated

with production of steel and cement

are higher than those associated with

production of solid wood construction

inputs. It is therefore possible that

recent upsurges in energy prices could

have a positive influence on demand

for domestically produced construction

wood, relative to its substitutes.

Changing shares of construction

inputs reflect shifting prices of

nonwood and wood substitutes relative

to solid wood inputs. Fleishman and

others (1999) report that lumber lost

market share in the construction market

between 1995 and 1998, with the share

in wall framing down from 93 to 83

percent. Most of the lost share in the

lumber market could not be attributed

to nonwood substitutes. Instead, most

replacement has been by engineered

wood products—laminated beams,

wood I-joists, and laminated veneer

lumber (LVL) (fig. 8)—with some

share also captured by steel, reinforced

concrete, and wood-plastic lumber. LVL

especially captured increasing market

share between 1991 and 2004, with

900

800

700

600

500

400

300

200

100

0

Million

1983 1987 1991 1995 1999 2003

Glulam (board feet)

I-joists (linear feet)

Laminated veneer lumber (cubic feet)

Figure 8—Engineered wood products production. (Source: The Engineered 

Wood Association.)
The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

no decline in its rate of growth (fig. 8).

Lumber has also lost market share in

roof and floor applications (Fleishman

and others 1999). The decline of

market share of lumber during the

1990s can be attributed mainly to

improvements in engineered wood

product quality, declining quality of

lumber, and perceptions that lumber is

not as environmentally friendly as some

alternative construction materials.

Substitution away from forest

products is only one explanation of

reduced market share for domestically

produced forest products (Fleishman

and others 1999; Zhang and

Buongiorno 1997, 1998). Imports,

technological change, and evolving

consumer preferences are also

determining factors. In the paper sector,

for example, information technology

continues to shift news provision from

newspapers and toward electronic

media, with important implications for

paper demand. In addition, declines

in demand for softwood pulpwood

products such as unbleached kraft

pulp are partially due to recent steep

declines in paper bag manufacture and

consumption domestically.

Domestic Demands

Pulp and Paper Sector

Hardwood and softwood pulpwood

make up 42 percent of the timber

consumed in the South. The region’s

paper mills are concentrated in a

few areas in which plentiful water

is available. These areas include

southeastern Georgia, northeastern

Florida, and southern Alabama and

Mississippi. Concentration of paper

production capacity organizes the

demand for pulpwood within the

South—demand for pulpwood is

strongest in the vicinity of mills and

weakens with distance from the mill

gate (fig. 9). While satellite chipmills

distributed the demand for pulpwood

over more of the region during the

1990s, pulpwood markets are still

much more concentrated geographically

than markets for solid wood products.

Raw material utilized for production

of paper products consists of pulpwood

and pulpwood residuals from other

wood product manufacturing. The

utilization of recycled fiber has

become increasingly important in the

production of paper products. Ince

(2000) shows that recycled material

N

W E

S

500 0 500 1,000 Miles

Pulpmills and chipmills distance (miles)

 1 – 50

 51 – 100

101 – 250

251 – 500

500 + 

Pulpmills and chipmills

Figure 9—Distance in miles by county from the forested center of the county to the closest pulpmill or 

chipmill. White dots are pulpmills and chipmills within the Southern States. Note that the universe of all 

pulpmills and chipmills within the United States and a circuity factor of 1.4 were used in the distance 

calculation. (Source: R. Huggett, preliminary findings, economics of biomass removals, U.S. Department 

of Agriculture Forest Service, Research Triangle Park, NC.)
 

comprised 23.9 percent of total fiber

used in the U.S. paper sector in 1985 to

37.9 percent in 1998. This has resulted

in a relative drop in the demand

for virgin wood fiber. He also finds

strong indications that the amount of

recycled material used in U.S. paper

manufacture has perhaps reached a

maximum, especially given strong

export demand for recovered paper.

So it is likely that expanding use of

recycled material mitigated demand and

price increases during the rapid growth

phase but that changes in demand for

recycled material have not been a major

influence in the adjustment phase.

Pulping capacity within the region

defines the upper limit of the demand

for pulpwood. Because capacity

expansion requires an enormous

commitment of capital (construction of

a typical paper mill costs approximately

$2 billion), trends in capacity provide

a strong indicator of current and

anticipated demands for pulpwood

within the region. In this section, we

examine dynamics in pulping capacity

and the implications for derived

demand for pulpwood in the region.

For several decades, the United States

has produced more wood pulp than any

other nation. Through 1998, total U.S.

pulpmill capacity, and the share of U.S.

pulpmill capacity located in the South,

trended upward (fig. 10). Since 1998,

U.S. pulping capacity has declined

slightly while southern capacity had

dropped by about 16 percent by 2003

(fig. 11). These declines in domestic

capacity occurred as other countries

expanded their capacity. For example,

Sweden, Finland, Chile, and Brazil

increased their capacity between 1995

and 2002 (figs. 12 and 13). While the

United States and the South continue

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

1961 1965 1970 1974 1983 2000

Capacity (short tons per day)

Survey year

West North-East North-Central South

80

60

40

20

0

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Tons (million)

Total U.S. South

Figure 10—U.S. pulp output processing capacity, 1961–2000. (Source: Smith and 

others 2004.)

Figure 11—Pulpmill capacity in the United States and the U.S. South, 1983–2003. 

(Sources: Forest Resources Association; U.S. Department of Agriculture Forest 

Service, Southern Research Station; Pulp & Paper North American Factbook; and 

Timber Mart-South.)
 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

Figure 13—Average annual rates of change in pulp production for various countries, 1995 

to 2002. (Sources: Pulp & Paper International and Paperloop.com.)

15

10

5

0

-5

Average annual percent change

U.S.A

Canada

Sweden

Japan

Finland

Brazil

Russia

Indonesia

Chile

Germany

N.Z.

400

350

300

250

200

150

100

50

0

Latin America U.S. South Europe U.S. West Canada

US$ per short ton

Personnel

Energy

Other Chemicals

Purchased fiber

Wood

Figure 14—Kraft linerboard mills manufacturing costs, 2003. (Source: Jaakko Poyry 

Management Consulting.)

to lead the world in pulpwood

production, their share of worldwide

capacity has declined since 1991. By

2003, Southern U.S. pulp capacity

had approximately returned to its

1985 level.

New pulpmill capacity and pulp

production is feeding increased

worldwide demand for paper products,

especially in Asia. With level to

declining capacity in the United States,

it is clear that new capacity is being

developed in other countries. There is

no evidence of expansionary activity

in pulp and paper manufacturing in

the Southern United States. These

changes are likely explained by shifts

in comparative advantage relative to

several factors, including labor costs,

raw materials costs, and proximity to

final product markets.

Manufacturing costs in kraft

linerboard mills in the United States

and abroad (fig. 14) provide an example

of differences in comparative advantage.

The U.S. South is competitive in this

market compared to the U.S. West,

Canada, and Europe, but lags behind

Latin American countries (primarily

Brazil and Chile) in its cost structure.

70

60

50

40

30

20

10

0

U.S.A. Canada Sweden Finland Brazil Chile N.Z.

1995 2002

Metric tons (million)

Figure 12—Pulp production for various countries, 1995 and 2002. (Sources: Pulp & 

Paper International and Paperloop.com.)
 

Figure 16—Delivered nonconiferous pulpwood prices. (Source: Wood 

Resources International.)

Figure 15—Delivered coniferous pulpwood prices. (Source: Wood 

Resources International.)

160

140

120

100

80

60

40

20

0

US$ per dry ton

1999

2004

1995

3rd quarter

140

120

100

80

60

40

20

0

US$ per dry ton

1999

2004

1995

3rd quarter

Fiber and labor costs are significantly

higher in more industrialized countries

than in South America. The U.S. South

retains comparative advantage because

of its proximity to U.S. demand centers,

i.e., because of lower transportation

costs, but labor and wood input cost

differentials make Latin American

producers viable competitors.

In 1995, 1999, and 2004, both

Brazilian and Chilean producers

could deliver both coniferous and

nonconiferous (mostly eucalyptus)

pulpwood to mills at substantially

lower cost than could producers in

the U.S. South (figs. 15 and 16). In

2004, delivered fiber costs were 24

and 27 percent less in Brazil and Chile,

respectively, for coniferous pulpwood,

and were 21 and 27 percent less

for nonconiferous pulpwood. Price

differentials are not static, however, and

prices in Brazil and Chile have risen

since 1999, relative to those found

in the Southern United States. The

comparative advantage held by these

nations would decrease if this trend

were to continue.
10 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

N

W E

S

500 0 500 1,000 Miles

Sawmill distance (miles)

 1 – 50

 51 – 100

101 – 150 

Sawmills south

Solid Wood Sector

The large majority of the solid wood

produced in the region goes into

lumber and panel products. Panel

products and lumber utilize about 46

percent of fiber products generated in

the South. The region’s lumber mills,

unlike its pulp and paper mills, are

widely dispersed (fig. 17).

Unlike southern pulpwood capacity,

southern softwood sawmill capacity

has not declined. Softwood sawmill

capacity remained stable or increased

slightly between 2000 and 2003 (fig.

18), even as capacity in the Western

United States declined. Comparable

data are not available for hardwood

lumber capacity in the South, but

sustained production and prices

generally do not signal declines

in capacity.

Southern panel capacity expanded

significantly in the 1990s (fig. 19).

Southern pine plywood, which

dominated panel production through

the 1970s, peaked in the 1990s and has

since declined. Capacity for producing

OSB and medium-density fiberboard

grew strongly through the 1990s. More

recent data indicate that although

southern panel production has

remained stable, OSB production has

continued to grow (fig. 20). Expanding

OSB capacity coupled with declining

plywood capacity indicates increasing

demand for less expensive, smalldiameter timber, especially compared

to demand for the veneer logs used in

plywood production.

Figure 17—Average distance in miles by county from the forested center of the county to the closest five 

sawmills within 150 miles. White dots are sawmills within the Southern States. Note that the universe of all 

sawmills within the United States was used in the distance calculation. (Source: R. Huggett, preliminary findings, 

economics of biomass removals, U.S. Department of Agriculture Forest Service, Research Triangle Park, NC.)
 11

Figure 20—Southern panel production. (Source: The Engineered Wood Association.)

46

45

44

43

42

41

40

39

38

1997 1998 1999 2000 2001 2002 2003

Million cubic meters

U.S. West

U.S. South

40

35

30

25

20

15

10

5

0

1965 1970 1975 1980 1985 1990 1995 1996 1997 1998

Southern pine plywood

Oriented strand board

Particleboard

Medium density fiberboard

Capacity (million cubic meters)

25,000

20,000

15,000

10,000

5,000

0

1996 1997 1998 1999 2000 2001 2002 2003 2004

Total Plywood production Oriented strand board production

Million square feet

Figure 18—Softwood sawmill capacity. (Source: Spelter and Alderman 2003.)

Figure 19—Panel capacity in the U.S. South. (Source: McKeever and Spelter 1998.)
12 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

Figure 21—U.S. broad dollar index. (Source: United States Federal Reserve.)

International Trade in 

Wood Products

The United States is both the world’s

largest importer and producer and

the second largest exporter of wood

products. Imports and exports of both

raw and value-added wood products

can directly affect domestic demand

for timber. Increasing forest product

imports may correspond with reduced

demand for domestically grown timber,

thus helping to depress domestic

stumpage prices both in the short and

long run. In this section we examine

exports and imports for both raw

materials and finished wood products.

Trade in wood products needs to be

viewed in the context of international

economic conditions. While there are

many reasons for changes in trade

flows, the increase in imports and

expanding overall U.S. trade deficit in

forest products during the 1990s may

have been related to the rising value

of the U.S. dollar relative to foreign

currencies during that same period

(fig. 21). Economic doctrine suggests

that exports increase and imports

decrease when a domestic currency

weakens relative to currencies of a

nation’s trading partners. Since 2002,

the value of the dollar relative to the

value of other currencies has declined,

which suggests that the comparative

position of U.S. manufacturers may

be improving. However, changes in

exchange rates take time to play out in

terms of trade flows, and some evidence

suggests that exchange rate shifts make

little difference in the long run in

forest products trade, as other costs of

production and supply-and-demand

factors adjust to accommodate them

(Uusivuori and Buongiorno 1991). It is

too early to say definitively how recent

weakening in the dollar will affect forest

products trade.

Raw Material Trade

Wood pulp—The value of wood pulp

imports and exports demonstrated a

cyclical pattern with no strong trends

between 1989 and 2003 (fig. 22). The

U.S. balance of trade in wood pulp

has been roughly even in recent years,

i.e., imports have equaled exports.

However, U.S. southern ports exported

approximately seven times what was

imported. Between 1989 and 2003,

Canada was the largest and Brazil

the second largest source of wood

Nominal Real

140

120

100

80

60

40

20

0

1989

1990

1991

19921993

1994

1995

19961997

19981999

2000

200120022003

2004

Inde

x

-1,000

0

1,000

2,000

3,000

4,000

5,000

1989 1991 1993 1995 1997 1999 2001 2003

US$ (million) 

U.S. exports South exports South imports U.S. BOT

Figure 22—U.S. trade in wood pulp and the balance of trade (BOT). (Source: U.S. 

International Trade Commission.)

pulp imported into the United States

(fig. 23). For producers in the U.S.

South, the level of Brazilian imports—

primarily hardwood pulp—factors

mostly into local markets, and these

imports are used to meet specific

furnish demands. Brazilian imports into

southern ports have risen sharply since

the early 1990s (figs. 24 and 25). Still,

overall imports into Southern States in

2004 only accounted for between 2 and

3 percent of total southern wood pulp

consumption.

Wood chips—Unlike patterns of

trade in wood pulp, patterns of trade in

wood chips have changed substantially

since the late 1980s. Until 2003,

Canada was the leading source of

wood chips imported into the United

States, providing chips for Northern

U.S. producers. However, after peaking

in 1997, Canadian wood chip sales

to the United States have declined to

less than one-third of their peak level

(fig. 26). Producers in the southern

hemisphere have also supplied wood

chips to the United States at various

times. In the mid-1990s Chile provided

as much as one-third of total wood

chip imports into the United States. In

2004, imports from Brazil increased

more than fivefold compared to 2003,

and Brazil became the largest supplier

of wood chips imported into the United

States. Imports from Brazil are delivered

mainly to Southern U.S. ports (figs. 27

and 28). Southern chip imports in 2004

represented only about 0.9 percent of

total southern pulpwood consumption

and about 3 percent of total southern
 13

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1989

19901991199219931994

19951996

1997

1998

1999

2000200120022003

2004

US$ (million)

Total Canada Brazil

19891990

1991

1992

1993

1994

1995

1996

1997

199819992000

2001

2002

2003

2004

0

50

100

150

200

250

300

350

400

US$ (million)

Total Brazil

Figure 23—Wood pulp imports into the United States. (Source: U.S. International 

Trade Commission.)

Figure 24—Wood pulp imports into southern customs districts. (Source: U.S. 

International Trade Commission.)
14 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

19891990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

20012002

2003

2004

0

100

200

300

400

500

600

700

800

900

Tons (thousand)

Total Brazil

Figure 25—Wood pulp imports into southern customs districts. (Source: U.S. 

International Trade Commission.)

19891990

199119921993199419951996

1997

1998

1999

2000

2001

2002

20032004

0

5

10

15

20

25

30

35

40

45

50

US$ (million)

Total

Canada

Brazil

Chile

Figure 26—Wood chips imports into the United States. (Source: U.S. International 

Trade Commission.)
 15

Figure 28—Wood chips imports into southern customs districts in tons. (Source: U.S. 

International Trade Commission.)

198919901991

1992

1993

199419951996

1997

1998

19992000

2001

2002

2003

2004

Total Brazil

0

100

200

300

400

500

600

700

800

Tons (thousand)

Figure 27—Wood chips imports into southern customs districts in dollars. (Source: U.S. 

International Trade Commission.)

hardwood pulpwood consumption.

Most of these imports enter the United

States at Mobile, AL, and a few ports

in Florida, so localized impacts on

hardwood markets near these ports

could be significant.

The surge in Brazilian chip imports is

the expected response to domestic price

increases resulting from local scarcity

of hardwoods. In addition, eucalyptus

chips, a highly preferred fiber source for

some paper grades, may be preferred

over native hardwoods. The extent to

which hardwood chip imports from

South America might increase over the

coming years is unknown. However, it

is likely that prices of chip imports from

South America now define a ceiling for

domestic hardwood stumpage prices in

certain areas of the South.

Since the beginning of our time

series on wood chips, 1989, the United

States has had a large trade surplus

in wood chips (fig. 29), i.e., exports

have far exceeded imports. Since 1999,

however, the trade surplus in wood

chips has fallen steadily, from around

$515 million in the mid-1990s to $126

million in 2004.

Roughly 80 percent of wood chip

exports from the United States have

been shipped to Japan; the remainder

flows to Canada (fig. 30). While exports

to Canada have increased somewhat

in recent years, exports to Japan have

fallen off dramatically. Between 1991

and 2002, nearly all of the wood chips

exported from Southern U.S. ports

were shipped to Japan (figs. 31 and

32). Exports of wood chip exports from

southern ports essentially ceased

by 2002.

This decline in southern chip

exports—primarily hardwood chips—

to Japan was equivalent to 5 percent of

total southern pulpwood production in

2003 and nearly 16 percent of southern

hardwood pulpwood production. Most

of the imports and exports of wood

chips into and out of southern ports

have been through Mobile, AL, and we

might expect the economic impacts of

demand shifts to radiate outward in

declining fashion from this port

of entry.

1989

1990

1991

1992199319941995

1996

19971998

1999

20002001200220032004

US$ (million)

0

5

10

15

20

25

30

Total

Brazil
16 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

Figure 29—Wood chips imports into the United States and the balance of trade (BOT). 

(Source: U.S. International Trade Commission.)

1989

1990

1991

1992

199319941995

1996

19971998

1999

2000

2001

2002

2003

2004

US$ (million)

0

100

200

300

400

500

600

Total

Japan

Canada

Figure 30—U.S. wood chips exports. (Source: U.S. International Trade Commission.)

19891990199119921993

19941995

1996

1997

1999

2000

20012002

2003

2004

0

100

200

300

400

500

600

US$ (million)

Total

Canada

Brazil

Chile

BOT

1998
 17

Figure 31—U.S. wood chips exports from southern customs districts in dollars. (Source: 

U.S. International Trade Commission.)

1989

1990

1991

1992199319941995

199619971998199920002001

20022003

2004

 US$ (million)

0

50

100

150

200

250

300

350

Total Japan

1989

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Tons (thousand)

1990

1991

1992

19931994

1995

1996

19971998

1999

2000

2001

2002

2003

2004

Total Japan

Figure 32—U.S. wood chips exports from southern customs districts in tons. (Source: 

U.S. International Trade Commission.)
18 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

1989

1991

1993

1995

19971999

20012003

Cubic meters (thousand)

3500

3000

2500

2000

1500

1000

500

0

All other North America East Asia European Union

Final Products Trade

Lumber—The United States is a large

net importer of softwood lumber, and

the vast majority of its lumber imports

are from Canada (fig. 33). Lumber

imports from South America, although

relatively small between 1989 and

2004, have been rising steadily. The

United States exports some lumber, but

the balance of trade favors imports, and

the trade deficit is growing (fig. 33).

The importation of lumber from

Canada has an important influence on

domestic timber markets, but the effects

on southern markets are likely to be

indirect. Lumber from Western Canada

more directly substitutes for lumber of

species that grow in the Western United

States (Nagubadi and others 2004). The

lumber products that are now imported

into the United States are generally not

directly substitutable for treated lumber

produced in the South.

As it is in overall timber products,

the United States is the world’s largest

producer (60 percent) and its largest

consumer (52 percent) of temperate

hardwood lumber. About 8 percent

of domestic production is exported

to various countries. Hardwood

lumber is a much more heterogeneous

commodity than softwood lumber, so

its production and trade serves a wide

variety of end uses, from flooring to

furniture to shipping pallets. Aggregate

data provide only a very general

description of trends in this sector.

Also, we cannot split out trade data

for the Southeastern United States, so

we use data for the United States as a

whole to evaluate hardwood lumber

market changes. Note that about 10

percent of hardwood exports are from

the Pacific Northwest [especially red

alder (Alnus rubra Bong.)] and about

90 percent are from the Eastern

United States.

Exports of hardwood lumber

increased from about 2 million m3

in 1989 to just over 3 million m3 in

2004 (fig. 34). North America is the

destination for the greatest share of

hardwood lumber produced in the

United States, followed by East Asia

and the 25 countries of the European

Union. All other countries together

receive about 10 percent of hardwood

exports from the United States. The

US$ (million)

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

Total

Canada

South America

BOT

19891990

1991

19921993

1994

1995

1996

19971998

1999

2000

20012002

2003

2004

Figure 33—Sawnwood imports and the balance of trade (BOT). (Source: U.S. 

International Trade Commission.)

Figure 34—Exports of U.S. hardwood lumber to various regions (1989–2004). 

Source: Foreign Agricultural Service web site (www.fas.usda.gov).

distribution of exports among these

destinations has changed somewhat

since 1989, with shipments to

Europe declining and shipments to

other countries in North America,

i.e., Canada and Mexico, increasing

substantially (fig. 34). Shipments to

East Asia have been essentially constant

in aggregate, with a changing mix of

destinations. Specifically, shipments to

China have increased by a large amount

since the 1990s while shipments to

other countries in Asia have declined by

a comparable amount.

Southern exports of softwood lumber

have been relatively small and have

declined over the last decade (fig.

35). Softwood lumber exports in

2004 were only about one-third the

amount exported in 1992. Southern

softwood lumber exports account for

only between 1 and 2 percent of total

southern softwood lumber production.

Panels—Trade in panel products is

weighted toward imports. For example,

the United States imported about 15

percent of plywood consumption and

38 percent of OSB consumption in
 19

1992 1994 1996 1998 2000 2002 2004

0

50

100

150

200

250

300

350

400

450

500

Million board feet

Figure 35—U.S. lumber exports from southern customs districts. (Source: U.S. 

International Trade Commission.)

Figure 36—Particleboard, oriented strand board, and wafer board imports and the 

balance of trade (BOT). (Source: U.S. International Trade Commission.)

1989

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

US$ (million)

Total Canada BOT

1990

1991

1992

19931994

1995

1996

19971998199920002001200220032004

Key Observations—

Demand

■ Consumption of lumber in the 

United States has grown at a lower 

rate than housing starts, indicating 

some substitution away from lumber 

as a building material.

■ Both nonwood and engineered 

wood products have substituted for 

lumber in many applications. For 

example, the share of floors, walls, 

and roofs made with wood is about 

constant but there is a shift toward 

greater use of engineered wood 

products.

■ Electronic media are substituting 

for paper.

■ A majority of pulping capacity in 

the United States is located in the 

South, but this share has declined 

since the mid-1990s.

■ Pulping capacity in the South, an 

indicator of long-term demand, has 

declined by 16 percent since 1998.

■ Increasing world demand for paper 

products is leading to expansion in 

paper production capacity in countries 

other than the United States. 

■ Shifts in capacity indicate that the 

United States has lost some of its 

comparative advantage for producing 

paper for the world market. Possible 

causes of this decrease in comparative 

advantage are disadvantageous 

resource and labor costs and location 

of the United States relative to major 

world demand centers.

■ Overall, there is no indication 

that domestic demand for southern 

pulpwood will increase. 

■ Softwood lumber production 

capacity in the South has increased 

steadily in recent years (1997–2003).

■ Softwood lumber production 

capacity in other regions of the 

United States outside of the South has 

declined.

■ There is no indication of declining 

demand for softwood sawtimber and 

some indication of increasing demand.

■ Expansion in panel capacity 

indicates ongoing strong demand for 

low-quality hardwood and softwood 

material for engineered wood panels.

■ Wood pulp imports are a relatively 

small portion of wood products 

consumption in the South (between 2 

and 3 percent).

1999 (Spelter 2001). Nearly all of these

panel imports came from Canada.

Particleboard, wafer board, and OSB

imports from Canada grew strongly

in recent years, increasing from $1.53

billion in 1999 to $3.16 billion in

2004. U.S. exports in this category are

negligible (fig. 36).

OSB markets are in a period of rapid

expansion, and new mills in Canada

and the United States are planned

(Spelter 2001). North America will

continue to dominate world production

in this commodity class, but the trade

balance within North America—

especially between Canada and the

United States—could change as the

sector expands. A decline in pulpwood

demand in the South may give the

United States additional comparative

advantage for the siting of new North

American mills.
20 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

■ Although small, wood pulp imports 

to southern customs districts, and 

especially imports from Brazil, have 

increased since 1998.

■ Up to 8 percent of domestic 

demand for pulpwood has been 

displaced by changes in trade, the 

majority (5 percent) by loss of wood 

chip export markets.

■ Almost all lumber imports are from 

Canada, with a small but increasing 

share from South America.

■ Imports from Canada do not 

displace demand for treated southern 

pine lumber.

■ Exports of southern pine lumber 

are very small and have declined 

substantially since 1998.

Supply Factors

Timber supply defines how

landowners deliver timber to market

in response to timber prices and,

in the longer run, a variety of other

signals. Several factors make it

difficult to analyze the timber supply

situation. These factors include the

long production period involved in

growing trees, the multiple benefits

that landowners can derive from

standing forests, and constant change

in the land base from which timber

is produced. It is tempting to think

of supply as simply the relationship

between harvests and prices or, even

more simply, the amount of standing

timber inventory, but these other

factors need to be accounted for. In this

section, we examine several factors that

influence supply. We start by examining

the area of timberland in the South,

focusing especially on recent trends in

and projections of forest area. We then

examine the structure of timberland

ownership in the region, which in

many ways describes the management

intent applied to the timberland base.

Next we evaluate changes in inventory

over time and investment activities that

provide insights into future changes in

production.

Competing Uses of Land

The area of timberland provides

the starting point for an analysis of

timber supply. Total timberland area

within the South was relatively stable

throughout much of the 20th century,

with about a 5-percent reduction in the

1970s tied to agricultural expansion

(fig. 37). This stability in overall area

reflects many offsetting changes, as land

has shifted from marginal agricultural

uses to forest cover at about the same

rate as forests have been converted

to developed uses. Changes have not

been distributed across the region

evenly. Since the 1950s, forest losses

tied primarily to agricultural expansion

were concentrated in Texas, Florida,

Oklahoma, Louisiana, and Arkansas.

Alabama, Georgia, Mississippi,

and South Carolina saw the largest

gains in forest area over this period.

Modest changes were observed for the

remaining States (fig. 38).

1630 1907 1938 1953 1963 1982 1989 1999

Million acres

Year

400

350

300

250

200

150

100

50

0

Figure 37—Total timberland area in the South.

Figure 38—Change in forest area 1945–92 by State. (Source: U.S. Department of 

Agriculture Forest Service, Forest Inventory and Analysis survey data.)

4,000

2,000

0

-2,000

-4,000

-6,000

-8,000

Change in thousand acres

AL AR FL GA KY LA MS NC SC TN VA

Research conducted for the “Southern

Forest Resource Assessment” (Wear

and Greis 2002) indicates that the

South’s forests have been and will

continue to be subjected to strong

pressure resulting from population and

economic growth in the region. Future

losses of forest area are, therefore,

projected to be greatest in areas where

growth is most rapid: the Southern

Appalachian Piedmont in the Carolinas

and Georgia. Other areas of projected

high forest loss include counties

located along the Atlantic and Gulf of

Mexico coasts (including nearly all of

Florida), the Southern Appalachian

Mountains, and zones surrounding
 21

Change in percent forest (1992–2020)

 < -10

-10 – -5

 -5 – .5

 -.5 – .5

 .5 – 5

 5 – 10

 > 10

some metropolitan areas, including

Washington, DC, Birmingham, AL, and

Nashville, TN. About 12 million acres

are projected to be lost to urbanization

between 1992 and 2020 and another

19 million acres between 2020 and

2040, continuing trends observed in

the 1990s (fig. 39).

The total change in timberland area

depends on whether rural areas of

the South will experience increases

in forest. While urbanization could

eliminate about 12 percent of current

forested areas in the region by 2020,

forecasts of forest investment indicate

that nearly the same amount of land

might be converted from crop and

pasture to forest uses over the same

period. The key factors in determining

this change are the relative returns to

agricultural and forest uses. Moderate

increases (about 0.5 percent per

year) in timber prices combined

with unchanging agricultural returns

would yield a “no net loss” scenario

for forestland. Unchanging prices for

both agricultural and forest products

yield no offsetting gains in forests from

agricultural land and, therefore, a net

loss of about 31 million acres by 2040.

Changes in agricultural policy could

also affect this margin. Decreases in

agricultural subsidies could lead to

increases in forestland uses.

Figure 39—Projected change in percent of forest between 1992 and 2020 by county 

in the Southeastern United States. (Source: Wear and Greis 2002.)
22 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

Timberland Area

Forestland use can be split into

two distinct subcategories based

on forest origin and management

type. Naturally regenerated forests,

consisting of natural pine, mixed pinehardwood, and various hardwood forest

management types, can be viewed

as largely a residual land use—most

were not established with the intent

of producing timber, and are located

where neither development nor

agricultural uses could be justified.

Forest plantations are the other major

subcategory of timberland. Establishing

these forests requires a direct

application of financial capital, which

generally implies intent to harvest

timber at some time. Plantation

forestry, which has been limited to pine

species in the South, is an agricultural

style of forest management that is

displacing harvests from naturally

regenerated stands.

Pine plantations have expanded

steadily, from practically none in 1950

to more than 30 million acres in the

late 1990s (fig. 40). They now account

for about 16 percent of all timberland.

On a per-acre basis, these forests can

produce up to three times the quantity

of timber products that naturally

regenerated forests produce. Perhaps

the strongest signal of the market’s

perspective on future timber supplies

is current efforts to establish and

intensively manage pine plantations.

Steady gains in the price of hardwood

pulpwood over the past 25 years (fig.

41) have not triggered investment in

hardwood plantations. This indicates

that current and anticipated prices are

not high enough to justify the capital

costs of establishing these plantations.

This can be explained either by

strong supplies of hardwood timber

from naturally regenerated forests,

limited growth rate improvements for

hardwood plantations compared to

naturally regenerated hardwood forests

or competing planted pine investments,

the unavailability of a profitable

technology for intensive management

of hardwoods, or the ready availability

of low-cost hardwood chips, e.g., from

South America.

Figure 41—Real prices of hardwood and softwood pulpwood in the U.S. South. 

(Source: Timber Mart-South.)

Figure 40—Acres by forest management type. (Source: U.S. Department of Agriculture 

Forest Service, Forest Inventory and Analysis data summarized by Conner and 

Hartsell 2002.)

1980 1985 1990 1995 2000 2005

40.00

30.00

20.00

10.00

0.00

US$ per cord (2004 = 100)

Softwood Hardwood

1975

0

50

100

150

200

250

1950 1960 1970 1980 1990 2000

Acres (million)

Nonplanted Planted 

0

10

20

30

40

50

60

70

80

1950 1960 1970 1980 1990 2000

Acres (million)

Planted pine

Natural pine Oak–pine

Upland hardwood

Lowland hardwood
 23

Timberland Investments

Investment can be thought of as

the dedication of today’s capital to

tomorrow’s production. In forestry,

there are two principal types of

investment. One is the investment of

financial capital in forest establishment

and direct management activities such

as site preparation and precommercial

thinning. The other is simply the

decision to let forests grow. This latter

type of investment in forest growing

represents a much higher capital

cost than direct investments (Wear

1994). Still, tree planting is a strong

indicator of the degree of expansionary

investment in the forest sector and,

therefore, of how private landowners

perceive future markets.

Planting in the South appears to

be strongly influenced by market

signals, i.e., anticipated returns to the

planting investment (see Newman

and Wear 1993). However, it has also

been influenced by governmental

programs that reduce the costs of

forest establishment for nonindustrial

forest owners. Federal programs

have encouraged tree planting on

nonindustrial private forest lands with

the objective of enhancing future timber

supplies (for example, the Forestry

Incentives Program) or achieving

conservation objectives by planting

agricultural fields (for example, the

Conservation Reserve Program, or

CRP). In addition, several States

have employed similar tree planting

programs for private landowners.

Tree planting in the South grew from

essentially none in 1945 to an average

of between 1.5 and 2 million acres per

year in the 1990s (fig. 42). The pattern

of tree planting shows distinct spikes

in the 1960s and 1980s corresponding

to the Soil Bank and CRP tree planting

programs, respectively. These programs

were restricted to nonindustrial

private forest lands. Except during

these two periods, tree planting has

been dominated by forest industry

and concentrated on the 20 percent

of timberland controlled by this

ownership. In the period between the

Soil Bank and CRPs, the industry share

of planting rose to about 70 percent

of the total. Since the CRP, industry

planting has constituted about 50

percent of total planting.

Industry share

Total

Industry

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

70

60

50

40

30

20

10

0

1945

1950

1955

1960

1965

1970

1975

1980

1985

19901995

2000

Acres (thousand)

Percent

Figure 42—Total area planted in trees in the U.S. South, all ownerships 

(industry, nonindustrial private, and public) and the industry ownership. 

[Sources: 1945–99: Robert F. Moulton (2000); 2000–04: Steve Chapman, 

Georgia Forestry Commission (2005).]

Tree planting has two components.

One is the replacement of harvested

plantations. There is a strong incentive

to replant harvested plantations since

a decision to postpone planting after

harvest allows for natural regeneration

and, therefore, increased costs for any

delayed planting. The other component

is expansionary investment—that is, the

establishment of new tree plantations

on agricultural fields or where naturally

regenerated stands have been harvested.

By comparing tree planting with

changes in the inventory of plantations

in the South, we can estimate the

3,000

2,500

2,000

1,500

1,000

500

Acres (thousand)

1950 1960 1970 1980 1990 2000 2010

Planting

Expansion

Replacement

0

Figure 43—Total tree planting in the U.S. South with estimates of both expansion 

and replacement planting (see appendix).

amount of expansionary investment

implied by planting activities (fig. 43).

Expansionary investment dominated

planting through the Soil Bank period

and up to 1970. Throughout the 1970s

and 1980s, however, replacement

investment far exceeded the amount

of expansionary investment as the first

wave of plantations came on line for

harvesting. Expansionary investment

started to grow again in the early

1980s and reached about 1 million

acres per year in the late 1980s. It

remained at this level through the

1990s. Total tree planting fell by about
24 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

30 percent between 2001 and 2004,

suggesting a reduction in the amount

of expansionary investment, perhaps

back to the levels observed in the late

1970s.3

Investment levels correspond with

market patterns described earlier.

During the growth phase, between

1986 and 1998, landowners sustained

the highest levels of market-driven

investment, both in terms of total

investment and expansionary

investment. With the onset of the

adjustment phase, tree planting fell

substantially. The amount of this

decline is roughly equivalent to the

level of expansionary investment,

which suggests that forest investment

has fallen to a level roughly equal

to replacement investment. At

a minimum, we can say that

expansionary investment was at

relatively low levels in 2003 and 2004.

Because timber growing is a very

lengthy process, the expansionary

investment activity that characterized

the 1986–98 growth phase will likely

result in an increase in the inventory

of standing timber for a long time to

come. Hence, even with the slowdown

in investment that began in 2002, the

supply of softwood products, especially

softwood pulpwood, should continue

to grow.

Land Ownership Changes

Research into the economics of

timber management has identified

important distinctions between different

ownership groups (e.g., Newman and

Wear 1993, Pattanayak and others

2004). In particular, these studies

have documented more productive

management focus on forest industry

lands compared to all other ownerships.

As a result of investment patterns

described in the previous section, the

20 percent of timberland managed by

industry in the late 1990s contains

more than 60 percent of the region’s

plantations. In effect, management

on industry lands has been the most

responsive to timber scarcity signals

since 1970.

3 We do not have a definitive estimate of

expansionary investment since 1999 because

comparable inventory estimates of plantation area

are not available. However, planting rates fell much

more than the rate of harvest, indicating a strong

contraction in expansionary investment.

Changes in the wood products

sector since 1999 have initiated a

restructuring of forest capital whose

implications for timber supply are

not yet understood. Forest industry

ownership, which stood at about 40

million acres in 1999, may have fallen

to about 20 million acres in 2005.4

An extension of ongoing trends and

plans announced by wood products

firms suggest that very little timberland

may be owned by the forest products

industry by 2010.

Sales of forest industry land may

have several causes and implications.

Some of these forests simply have much

higher value in a developed use, and

their sale is just a part of the general

urbanization process described earlier.

A recent study (Wear and Newman

2004) indicates that in 2002, about

6 to 7 percent of industry timberland

in Georgia was in a land value class

that could not be sustained by timber

production alone, i.e., a conversion

class. By the year 2010, 25 percent

of Georgia timberland will be in the

conversion class if the population grows

as expected (fig. 44). These estimates

are consistent with land use projections

from the “Southern Forest Resource

Assessment” (Wear and Greis 2002).

Who will own the timberland that is

not converted to another use and how

will that timberland be managed? Much

of the most productive timberland

is being sold to timber investment

management organizations (TIMOs),

which act largely as fiduciaries when

timberland is used as an investment

instrument. Many of these investments

are held by pension funds and are

tied to closed-end and other funds

that tend to trade frequently. The

implication of greater TIMO ownership

seems to be a more rapid turnover in

forest ownership and the potential for

ongoing parcelization of timberland

ownership into smaller sized properties.

TIMOs have strong incentives to

maximize returns and will draw

capital to forest investments in strong

markets. It seems clear, however, that

management will be characterized by

a shorter time horizon and that timber

4 Clutter, M.; Mendell, B.; Newman, D. [and

others]. Strategic factors driving timberland

ownership changes in the U.S. South. Manuscript in

preparation. Author can be reached at The Center

for Forest Business, University of Georgia, Athens,

GA 30602.

inventory and timber supply could be

less stable with this large-scale change

in forest ownership.

Another implication of industry

divestiture is the greater reliance by

industry on timber produced by private

landowners and the TIMOs. This

could increase the price sensitivity of

the timber owning sector to demand

changes, increasing the volatility of

timber prices. Furthermore, given that

industry has historically accounted

for a large share of the increase in

pine plantation area, the divestiture of

these lands by industry could foretell a

continued lower rate of pine plantation

growth. As Prestemon and Abt (2002)

indicate, reduction in the rate of pine

plantation expansion is connected to

greater total forest losses in the

long run.

Finally, we might speculate that the

loss of industry ownership in the South

could lead to reduced investment

in timber growing research and

development. The consequences of

such a pullback are difficult to foresee

but may leave the United States in a

worse position to compete globally

in the long run, if other countries

maintain or increase their research into

timber production technologies.

Key Observations—Supply

■ Timberland area within the South 

was relatively stable through the 

20th century.

■ Ongoing urbanization is focused 

in the Piedmont and along the coasts. 

Forest loss is projected by recent 

research to be highest in the Southeast 

(from Virginia to Florida).

■ Agricultural prices are such that 

increased timber prices or a reduction 

in agricultural subsidies could lead to 

an expansion of pine plantations on 

agricultural lands.

■ Timber sector studies project that 

the South could experience changes 

ranging from no net loss of forest to 

a net loss of 31 million acres by 2040 

(16 percent of forests), depending on 

the future price of timber.

■ In spite of strong growth in 

prices of hardwood pulpwood, 

there has been little investment in 

hardwood production, i.e., hardwood 

plantations.
 25

Figure 44—Forecast of the percent of industry timberland in a land conversion-value 

class in Georgia, 2010. (Source: Wear and Newman 2004.)

■ If planting that was subsidized 

under the Soil Bank and CRPs is not 

counted, planting of pines increased at 

a steady rate between 1945 and 1998.

■ Except during the Soil Bank and 

CRP periods, industry has done a 

disproportionately high share of 

tree planting (45 to 70 percent of 

planting with only about 20 percent of 

timberland).

■ Tree planting has served as both 

replacement and expansionary 

investment. In the 1990s, levels 

of expansionary and replacement 

investment were each about 1 million 

acres per year.

■ Recent declines in planting 

indicate a reduction in expansionary 

investment since the late 1990s.

■ The supply effects of recent 

reductions in expansionary investment 

will not be felt for some time.

■ Forest products firms, which hold 

a disproportionately high share of the 

forest capital, have been selling much 

of their lands, about 50 percent by 

2005, compared to 1999 levels.

■ Some industry land sales are 

explained by urbanization pressures, 

but most of the land sold is expected 

to remain in timber production in the 

near term.

■ The shift toward TIMO 

management may entail more 

parcelization and fragmentation of 

timberland ownership. The shift may 

also lead to a less stable supply of 

timber, more volatile timber prices, 

and a slower rate of increase in the 

area of pine plantations.

■ Divestiture of industry lands could 

lead to lower overall investments in 

timber research and development, 

leaving producers in the U.S. South 

less able to compete against foreign 

producers in the long run.

Conclusions and 

Implications

Our focus in this assessment of

timber markets in the Southeastern

United States has been on understanding the demand and supply

factors that have played out in the

markets for various timber products.

Below, we synthesize our findings into

a listing of the significant forces driving

change in markets for timber products

in the South.

1. The demand for domestically 

produced timber products has shifted 

downward in the United States. 

Consumption of solid wood products 

has not grown at the same pace as 

housing starts, and the per capita 

consumption of paper has declined 

over the past 10 years, after being 

relatively stable for many years. These 

declines in domestic production 

and per capita consumption of some 

timber products have been coupled 

with a substantial decline in the 

off-shore demand for U.S.-produced 

timber products. Exports of wood 

chips fell from its peak in 1998 to 

nearly zero exports in 2003.

2. The supply of domestically 

produced timber products has 

continued to expand outward since 

the late 1990s. Timber supply is 

a function of the amount of land 

dedicated to forest growing and the 

intensity of management. The area 

of timberland has remained fairly 

constant since the 1970s, and the 

area of intensively managed (planted) 

forests continued to expand through 

the 1990s (that is, expansionary 

investment continued even after 

production and prices fell). Because 

timber is a long-lived asset, supply 

could continue to move outward and 

dampen prices for years. The effects of 

recent declines in planting may not be 

felt for several more years.

3. Fundamentals of economics 

indicate that a substantial downward 

shift in demand coupled with a 

constant to increasing supply leads 

to (a) a decline in output and (b) a 

disproportionately strong decline in 

prices. This is exactly what has been 

observed in pulpwood markets—

especially softwood pulpwood 

markets—since 1998.

0.0 – 0.2

0.2 – 0.4

0.4 – 0.6

0.6 – 0.8

0.8 – 1.0

No data

Interstates

2010 probability
26 The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change

4. An evaluation of investment of 

wood products firms in manufacturing 

capacity within the region provides 

insights into futre production 

potential. Capacity for lumber 

production has remained strong, 

while capacity for paper production 

has declined since the late 1990s. 

Indications are, therefore, that 

demand for pulpwood to produce 

paper may not rebound to early 1990s 

levels in the foreseeable future. Longterm demand for solid wood products 

appears strong, however.

5. Persistent low prices for softwood 

pulpwood may indicate opportunities 

for the manufacture of other products 

from this product class. Indeed, 

several firms have recently announced 

plans to build plants to produce OSB 

in many of the areas where pulpmills 

have closed. Announced plants are 

not always built, but the number 

of announcements indicates that 

expansion in this sector will provide 

additional demand for pulpwood in 

the next 5 years.

6. Upward pressure on hardwood 

pulpwood prices and downward 

pressure on softwood pulpwood 

prices combine to provide incentives 

to shift industrial production toward 

utilization of softwoods. Indeed, 

after a long period of substituting 

hardwood for softwood in paper 

production, we might expect to 

see an increase in the share of 

softwood inputs.

7. Imports of hardwood chips into 

the South remain relatively small 

compared to the total consumption. 

However, it appears that if hardwood 

chip prices rise above thresholds 

already reached in parts of the region, 

e.g., in Florida, then imports from 

South America become a viable 

alternative to domestic production. 

The existence of this backstop supply 

of plentiful eucalyptus chips indicates 

that future hardwood pulpwood prices 

may have a ceiling in the region.

Concerns about southern timber

markets have necessarily shifted from

a focus on supply issues to a focus on

demand issues. Forest investment,

driven by both market forces and

tree-planting programs, has produced

plentiful and sustainable timber

supplies and supported a more than

doubling of timber production over

a 30-year period. Forecasting models

(e.g., Prestemon and Abt 2002) indicate

that the region can readily supply even

more timber. While some uncertainties

regarding supply may be indicated by

the divestiture of forest industry lands,

they are at least partially quelled by

a surge of investment capital into the

sector from pension funds and

other sources.

The big question is, how will demand

respond in the future? We find little

evidence that there will be a strong

rebound in demand for pulpwood for

paper production or a return of chip

export markets. Increased production

of OSB and other engineered wood

products may increase demand for

pulpwood-sized materials, but this

effect has not yet fully offset declines

in demand from the paper sector. This

means that softwood pulpwood prices

are not likely to rebound to mid-1990s

levels anytime soon. Emergence of

biomass energy markets may affect

demand in the future but this is highly

uncertain at this time.

Acknowledgments

The research reported here was

supported by the Southern Group of

State Foresters and the U.S. Department

of Agriculture Forest Service through

the Southern Region and the Southern

Research Station. The issues addressed

in this report were initially raised by

an expert panel convened to examine

changes in timber markets in the U.S.

South. Members of the expert panel

were: Robert Abt, North Carolina State

University; Douglas Carter, University

of Florida; Michael Clutter, University

of Georgia; Jim Gan, Texas A&M

University; Ian Munn, Mississippi

State University; David Newman,

University of Georgia; Jeff Prestemon,

Forest Service; Jacek Siry, University

of Georgia; and David Wear, Forest

Service.

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through of exchange rates on prices

of forest product exports from the

United States to Europe and Japan.

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 29

Appendix: 

Data Notes

Throughout this report, we 

document the sources of data upon 

which discussions are based. In this 

section we document cases where 

additional analysis was applied to 

the published data.

Recent Trends in the 

Forest Sector

Harvest quantities

Roundwood output for the U.S. South

is taken from the U.S. Department

of Agriculture Forest Service Timber

Product Output system maintained

by the Forest Inventory and Analysis

Research Work Unit. Reports of

roundwood output for the region have

been developed for the RPA National

Inventory Database for the years 1952,

1962, 1977, 1981, 1996, and 2001

(see, e.g., Smith and others 2001,

2004). Comparable annual pulpwood

production data have been compiled

for the region (see, e.g., Johnson and

Steppleton 2005). We constructed

an annual series of softwood saw-log

production by interpolating between

the RPA reporting years based on the

production of softwood lumber within

the region.

Prices

We constructed price indices by

product class for the U.S. South based

on prices reported for substate regions

by Timber Mart-South. The index is an

average weighted by inventory volumes

of the respective regions. Prices are

adjusted for inflation by the consumer

price index for all urban consumers.

Demand Factors

No entry for this section.

Supply Factors

Tree planting data—area of planting

activity—were obtained from various

reports (see Prestemon and Abt 2002

for a compilation) and personal

communications with analysts

who have tracked the data for the

final 4 years of the time series.1 To

separate expansion from replacement

investment, we compared planting with

changes in the inventory of plantations

reported for various years in Conner

and Hartsell (2002). The increase in

reported plantations was assumed to

equal the amount of expansionary

investment for the period. This amount

was assigned to individual years for

the period based on gross planting.

The remainder (total planting minus

expansionary investment) was defined

as replacement investment.

1 Personal communication. 2005. S. Chapman,

Georgia Forestry Commission, Macon, GA.



Wear, David N.; Carter, Douglas R.; Prestemon, Jeffrey. 2007. The U.S. 

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

Gen. Tech. Rep. SRS-99. Asheville, NC: U.S. Department of Agriculture, 

Forest Service, Southern Research Station. 29 p.

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.

Keywords: Demand and supply factors, forest products markets, 

investment climate, long-term demand, paper production capacity.
The Forest Service, United States Department of 

Agriculture (USDA), is dedicated to the principle 

of multiple use management of the Nation’s forest 

resources for sustained yields of wood, water, 

forage, wildlife, and recreation. Through forestry research, 

cooperation with the States and private forest owners, and 

management of the National Forests and National Grasslands, 

it strives—as directed by Congress—to provide increasingly 

greater service to a growing Nation.

 The USDA prohibits discrimination in all its programs and 

activities on the basis of race, color, national origin, age, 

disability, and where applicable, sex, marital status, familial 

status, parental status, religion, sexual orientation, genetic 

information, political beliefs, reprisal, or because all or part of 

an individual’s income is derived from any public assistance 

program. (Not all prohibited bases apply to all programs.) 

Persons with disabilities who require alternative means for 

communication of program information (Braille, large print, 

audiotape, etc.) should contact USDA’s TARGET Center at (202) 

720-2600 (voice and TDD).

 To file a complaint of discrimination, write to USDA, Director, 

Office of Civil Rights, 1400 Independence Avenue, SW, 

Washington, D.C. 20250-9410, or call (800) 795-3272 (voice) or 

(202) 720-6382 ( TDD). USDA is an equal opportunity provider 

and employer.

United States Department of Agriculture

Forest Service

Southern Research Station

General Technical Report SRS-99