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United States

Department of

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U S Forest Service

 Southern Forest

Research Note

so-333

Experiment Station March 1987

Midsouth Pulpwood Prices, 1985

Dennis M. May

SUMMARY

In 1985, the average price for a cord of Midsouth

roundwood was $50.12, a decrease of less than 1 percent from the 1984 price. In contrast, the average price

for a green ton of chipped residues decreased to $21.97,

14 percent below the price paid in 1984. The average

price for a green ton of sawdust also fell in 1985, dropping 2 percent to $10.60. The 1985 expenditure for Midsouth pulpwood fell 10 percent to $1,470 million.

Keywords: .roundwood, chipped residues, sawdust.

In response to the principle of supply and demand,

Midsouth pulpwood prices decreased in 1985. A strong

American dollar in 1985 restrained pulp and paper export markets while it intensified competition within domestic markets. The result was a decline in the demand

for pulp and paper products with a consequential decline

in the demand for pulpwood, as evidenced by the 4-

percent drop in Midsouth pulpwood production in 1985.

Further aggravating the impact of lower demand on Midsouth pulpwood prices was an oversupply of roundwood

available as pulping fiber. Overcapacity in the lumber

and veneer sectors, spurred by an exchange rate favoring Canadian imports, caused saw and veneer mills to

reduce or cease production, thus releasing additional

amounts of roundwood onto the pulpwood markets. In

addition, the salvaged roundwood from southern pine

beetle spots in Texas, Louisiana, and Mississippi overwhelmed local pulpwood markets. This oversupply of

pulpwood, in combination with the reduced demand for

pulp and paper products, explains the slip in Midsouth

pulpwood prices in 1985.

The prices associated with the three major sources of

Midsouth pulpwood (roundwood, chipped residues, and

sawdust) generally reflect the down market for Midsouth

pulpwood in 1985. On the whole, the price of Midsouth

roundwood pulpwood (the source of 64 percent of the

Midsouth’s fiber needs) fell slightly in 1985, down 1 percent from the 1984 price. Softwood and hardwood

roundwood prices fluctuated within 1 percent of 1984

prices (table 1). Similarly, the prices for roundwood delivered by truck and rail also hovered at 1984 levels, fluctuating by plus or minus 2 percent (tables 2,3). The difference between truck and rail prices reflects the additional

costs of transporting pulpwood from the rail siding to the

Table 1 .-Trends in average price per cord for Midsouth roundwood

All

Year species Softwood Hardwood

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Do//ars - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1977 30.35 31.42 28.10

1978 32.10 33.15 30.35

1979 38.11 40.09 33.92

1980 41.23 43.31 38.89

1981 48.45 50.44 39.48

1982 48.12 52.89 39.79

1983 48.38 53.03 40.09

1984 50.55 55.28 41.10

1985 50.12 54.44 41.88

Table 2.-Average price for truck delivey of roundwood and chipped

residues

Year

softwood Hardwood

Roundwooda Chipsb Roundwooda Chipsb

_______________________ Dollars ____________________

1977 31.47

1978 33.15

1979 41.33

1980 45.38

1981 52.12

1982 54.33

1983 54.35

1984 57.10

1985 58.84 (21.37)b

aPrice per cord.

bPrice per green ton.

13.82 29.43 10.57

1<28 30.94 12.09

19.22 35.21 14.89

21.75 38.81 15.80

28.21 40.38 20.08

28.38 40.10 20.77

25.55 41.02 17.15

28.01 43.24 20.79

23.18 44.07 (18.03)b 19.54

Southern Forest Experiment Station/l-10210 U.S. Postal Services Bldg., 701 Loyola Avenue, New Orleans, La. 70113

Forest Service, U.S. Department of Agriculture.

Serving Alabama, Arkansas, Louisiana, Mississippi, E. Oklahoma, Tennessee, E. Texas, Puerto Rico, U.S. Virgin Islands

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Table 3.-Average price fqr rail siding delivery of roundwood and

chipped residues’

Softwood Hardwood

Year Roundwooda Chipsb Roundwooda Chipsb

_______________________Dollars ____________________

1977 31.38

1978 33.18

1979 38.90

1980 41.95

1981 48.27

1982 50.19

1983 50.85

1984 52.31

1985 51.57 (19.48)b

aPrice per cord.

bPrice per green ton.

13.34 27.08 11.03

14.87 29.98 12.50

18.01 32.90 15.10

19.70 35.12 15.08

28.05 37.52 19.82

27.43 38.78 20.80

23.38 38.20 21.03

24.12 37.87 25.85

22.33 38.35 (13.95)b 18.74

mill yard. Notably, all softwood roundwood prices fell in

1985, and all hardwood roundwood prices gained in

1985. This may be attributed to the additional influx of

softwood roundwood from southern pine beetle salvage

operations, which compounded the existing softwood

pulpwood oversupply situation in the Midsouth.

In contrast to the minor fluctuations in roundwood

prices, the prices for chipped residues, which furnished

35 percent of the Midsouth’s fiber requirements, fell

sharply in 1985. The price declines since 1984 approached 14 percent for each chipped residue species

grouping (table 4). Both truck and rail delivery prices for

chipped residues also showed considerable losses, with

reductions ranging up to 28 percent for rail delivery of

hardwood chips (tables 2, 3). These dramatic price declines may have been due in part to an oversupply of

chips caused by sawmills chipping lower grade logs in

response to the oversupplied lumber markets in 1985.

When compared on an equivalent weight basis by truck

or rail delivery, chip prices are higher than roundwood

prices (tables 2, 3). The difference between the equal

weight prices for chips and roundwood is an indication of

the additional costs of debarking, chipping, handling,

and transporting chipped residues.

The average price of sawdust fell by 2 percent in 1985,

but the prices by species group showed gains (table 5).

The price of softwood sawdust climbed 10 percent

above the 1984 price and the price of hardwood sawdust

climbed 29 percent above the price paid in 1983, the last

year a hardwood sawdust price was reported. Although

these gains were substantial, sawdust and other

residues only constituted about 1 percent of the Midsouth’s pulpwood receipts and expenditures in 1985.

Table 4.-Trends in average price per green ton for Midsouth chipped

residues

Year

All

species softwood Hardwood

1977 12.98 13.48 10.93

1978 14.09 14.88 12.28

1979 17.49 18.37 15.02

1980 19.75 21.08 15.89

1981 24.31 28.12. 19.91

1982 25.72 27.95 20.78

1983 23.34 24.47 18.73

1984 25.44 28.81 22.31

1985 21.97 22.88 19.31

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Dollars_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Table B.-Average price per green ton for Midsouth sawdust, 1981-

1985

Year

All

species Softwood Hardwood

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Dollars _______-___--_____

1981 8.19 8.42 4.94

1982 9.17 9.96 8.42

1983 13.04 14.80 7.78 a

1984 10.79 10.79 . . . . . . . .

1985 10.60 11.92 10.00

‘Prices were not reported for hardwood sawdust in 1984.

Due to lower pulpwood demand and slumping prices,

the expenditure for pulpwood in the Midsouth fell to

$1,470 mjllion, a 1 O-percent decline from the 1984 expenditure of $1,641 million. Approximately threequarters of the total expenditure was applied toward the

purchase of softwood fiber. Roundwood purchases accounted for approximately two-thirds of the entire expenditure, twice the amount expended for chipped residues.

The average prices reported are based on an annual

survey of prices paid for pulpwood by Midsouth pulpmills. Forty-four mills, accounting for 75 percent of the

pulpwood receipts in the Midsouth region, responded to

the survey in 1985. All prices reported are for deliveries

to the pulpmill, mechanized yard, or rail siding and do not

include freight, woodyard, overhead, or similar expenses. All prices are in standard units-cords for

roundwood and green tons for by-products. When necessary, prices from mills reporting in nonstandard units

were converted to standard units using regional conversion factors.

Dennis M. May is forester, Southern Forest Experiment Station, Forest Service-USDA, Starkville, MS.

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