U.S. Forest Products

Annual Market Review 

and Prospects, 2004–2008

James L. Howard

Rebecca Westby

United States

Department of

Agriculture

Forest Service

Forest

Products

Laboratory

Research

Note

FPL–RN–0305
August 2007

Howard, James L.; Westby, Rebecca. 2007. U.S. forest products annual 

market review and prospects, 2004–2008. Research Note FPL-RN-0305. 

Madison, WI: U.S. Department of Agriculture, Forest Service, Forest 

Products Laboratory. 8 p.

A limited number of free copies of this publication are available to the 

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Abstract

This report provides general and statistical information 

on forest products markets in terms of production, trade, 

consumption, and prices. The current state of the U.S. 

economy is described. Market developments are described 

for sawn softwood, sawn hardwood, softwood log trade, 

wood-based panels, paper and paperboard, fuelwood, and 

forest product prices. Policy initiatives that can affect 

domestic markets and international trade in wood products 

are also discussed in some detail. Estimates are made 

through the end of the year 2007. 

Keywords: production, trade, prices

Acknowledgment

This publication contains contributions from Thomas 

Westcot, Trade Policy Coordinator, Foreign Agriculture 

Service, who prepared the Policy Initiatives Section.

Executive Summary

Economic activity in the United States is expected to 

weaken during the second half of 2007 as noted by the 

2.9% projected growth in gross domestic product during 

the fourth quarter. The U.S. economy will likely expand 

at a slower rate in 2007 than predicted earlier in the year, 

according to 53 forecasters surveyed by the Federal Reserve 

Bank of Philadelphia. Growth in U.S. real output over the 

near term looks a bit faster and inflation a bit higher than it 

did during the second quarter. Although forecasters expected 

a slight rise in the 2007 unemployment rate, measured on an 

annual-average basis, unemployment is expected to decrease 

to 4.6% in 2007. The forecasters see prices rising slightly 

higher in 2007 and then lowering in 2008. With rising 

mortgage rates, the expectation for returning strength in 

the housing sector has dampened. If the value of the dollar 

declines and lumber prices rise, this should bolster U.S. 

lumber and paper products production and exports. 

Contents

Page

General Economic and Major Market Trends.......................1

Timber Products Production, Trade, and Consumption........2

 Statistics and Prospects.....................................................2

 Sawn Softwood .................................................................2

 Sawn Hardwood................................................................2

 Softwood Log Trade .........................................................2

 Hardwood Log Trade ........................................................4

 Pulpwood ..........................................................................4

 Softwood Plywood............................................................4

 Oriented Strandboard........................................................4

 Hardwood Plywood ..........................................................4

 Particleboard and Medium Density Fiberboard................4

 Hardboard .........................................................................4

 Insulation Board................................................................4

 Fuelwood...........................................................................4

 Forest Products Prices.......................................................5

 Summary of Timber Products...........................................5

Policy Initiatives...................................................................6

 Climate Change.................................................................6

 Green House Gases...........................................................7

 Bioenergy..........................................................................7

 U.S.–Canada Softwood Lumber Dispute..........................8

Sources of Information .........................................................8
U.S. Forest Products Annual Market 

Review and Prospects, 2004–2008

James L. Howard, Economist

Rebecca Westby, Economic Assistant

Forest Products Laboratory, Madison, Wisconsin

General Economic and 

Major Market Trends

The U.S. economy will grow at a faster rate during the second half of 2007 compared with the first half before slowing 

slightly in 2008 according to 53 forecasters surveyed by 

the Federal Reserve Bank of Philadelphia. The forecasters 

expect real Gross Domestic Product (GDP) to grow at an 

annual rate of 2.9% in the fourth quarter 2007, for an annual 

average of 2.1% for 2007. Measured on an annual-average 

basis, unemployment is expected to be 4.6% for 2007, and 

forecasters expect unemployment to increase to 4.8% in 

2008. 

Inflation as measured by the Consumer Price Index is expected to average 3.2% in 2007 and fall to 2.4% in 2008. 

On an annual-average over annual-average basis, inflation 

in the GDP price index is projected to remain around 2.5% 

over the next 5 years (Federal Reserve Bank of Philadelphia 

2006).

With a large forest resource and high production and consumption of wood products, the United States continues 

to play an important role in world forest product markets. 

The United States has the world’s highest consumption 

of paper and paperboard (about 93 million metric tons in 

2006), which is mostly supplied by domestic production 

and imports from Canada (AF&PA 2005). The U.S. solid 

wood industry manufactured about 92 million cubic meters 

of lumber and 30 million cubic meters of structural panel 

products in 2006. The U.S. forest products industry annually 

harvests more than 482 million cubic meters of softwood 

and hardwood timber. 

New housing construction weakened during the second half 

of 2006. It has begun to slowly strengthen during the first 

quarter of 2007 but remains below year-ago levels. This 

construction accounts for more than a third of U.S. annual 

consumption of softwood sawn wood and structural panels 

and for substantial volumes of other softwood and hardwood 

products. Total housing starts increased 0.3% in March 2007 

to a seasonally adjusted annual rate of 1,491,000 units, continuing the slight increase that began in January. One of four 

regions in the United States contributed to the March 2007 

increase in housing starts. The largest decrease of 5.5% 

was recorded in the West (371,000 annual rate for March), 

followed by a loss of 4.1% in the South (765,000 annual 

rate for March), a loss of 3.7% in the Northeast (129,000 

annual rate for March), and a gain of 38.7% in the Midwest 

(226,000 annual rate for March). Authorizations for building 

permits increased in March by 1.8% to a seasonally adjusted 

1,569,000. Single-family starts totaled 259,000 through the 

first 3 months of this year, a 32.2% decrease from the same 

period one year earlier. Approximately 62,000 multifamily 

units were begun through March 2007, 24.4% below one 

year earlier. Both sectors are on course to fall below their 

2006 production levels. The housing market began to contract in May 2006, and with the exception of the Midwest, 

total starts for 2007 will have a difficult time improving in 

the 2006 performance level. 

In March 2007, the value of new construction was at a 

seasonally adjusted $887 billion, less than 0.5% below the 

February estimate of $889.7 billion. (This paper uses the 

customary U.S. definition of billion as 109.) Residential construction was $556 billion in March, 1.3% below the February estimate of $562.9 billion. Nonresidential construction 

was at a seasonally adjusted $331 billion in March, 1.4% 

above the February estimate of $326.7 billion. The National 

Association of Home Builders forecast calls for the housing sector to decline, with starts and sales for 2007 ending 

slightly below 2006 levels.

Investment in residential repair and remodeling remained 

strong, along with a slight increase, while new residential 

construction weakened during 2006. Expenditures for improvements and repairs of residential properties were at 

a seasonally adjusted annual rate of $228.2 billion in 

2006. This estimate is 6.1% below the 2005 estimate of 

$233.5 billion. Expenditures for maintenance and repairs 

to all properties amounted to a seasonally adjusted annual 

rate of $53.3 billion during 2006, increasing slightly over 

the $53.2 billion during 2005. Improvements amounted to 

$174.8 billion in 2006, above the $161.7 billion in improvements during 2005.

Two of the major indicators of demand for wood products—industrial production and furniture and related products—were lower, while paper products output was higher 

during the first 4 months of 2007 relative to 2006:

• Industrial production—an important demand determinant 

for pallet lumber, containerboard, and some grades of 

paper—decreased 14.1% over the first 4 months of 2007. 

The production for 4 months was down compared with 

one year earlier.

• Furniture and related products—a determinant of highgrade lumber production—decreased by 3.2% in the first 

4 months of 2007 compared with the 2006 average.
Research Note FPL–RN–0305

2

• Paper products output—a determinant of pulpwood and 

wood residue use, as well as recycled fiber availability 

and use—increased during the first 4 months of 2007 

compared with the 2006 average. The index (2002 = 100) 

of paper products output for the first 4 months of 2007 

was at 105.1, almost 4.7% ahead of the 2006 average.

In summary, the housing sector weakened during the third 

quarter of 2006, which has continued into the first quarter of 

2007. Starts in 2007 will probably fall below year-ago levels 

as a result of the expected continuation of the housing sector 

cool-down through the middle of 2007. Although the rate of 

growth is slowing, most analysts predict that conditions favorable to the growth of timber markets will continue. 

Selected U.S. economic indicators are shown in Table 1.

Timber Products Production,

Trade, and Consumption

Statistics and Prospects

Prospects for wood and wood products are show in Table 2. 

All volumes are reported in 1,000 cubic meters. Figures for 

2007 are estimates.

Sawn Softwood

Housing and other construction markets started off slightly 

weaker in 2007 but began to increase steadily during the 

first quarter. Housing is likely to finish the year at slightly 

lower levels than those recorded a year ago. The decline in 

the housing sector will have a negative impact on softwood 

lumber consumption. According to the Western Wood Products Association, during the first 3 months of 2007, softwood lumber consumption decreased 20% from last year, 

and shipments of softwood lumber from western mills decreased 18.1% during the first 3 months of 2007 compared 

with 2006 shipments (WWPA 2007). Production decreased 

during this period in the West as well as the South, 16.9% 

and 18.4%, respectively. Apparent consumption for the first 

3 months of 2007 was 29.9 million cubic meters, 20.3% below the apparent 37.6 million cubic meters for the first 

3 months of 2006. The U.S. housing construction industry 

is predicted to decline over the second half of 2006. Timber 

production therefore could also fall after its strong start this 

year.

Sawn softwood imports decreased 23.2% during the first 

3 months of 2007 relative to the same time period a year 

ago. The volume of Canadian imports, which constituted 

92% of all sawn softwood imports, decreased by 19.3% over 

this period. Total sawn softwood imports were 53.8 million 

cubic meters in 2006, a decrease of 6.9% over 2005.

During the first 3 months of 2007, U.S. sawn softwood exports increased 2.6% compared with exports for the same 

period in 2006. Exports to Canada increased 0.2%, exports 

to Japan rose 81.3%, and exports to Mexico fell 31.9%.

Production of sawn softwood decreased 17.7% in the first 

3 months of 2007 compared with the same period in 2006. 

In 2006, 90.5 million cubic meters of sawn softwood were 

produced. Production of sawn softwood for 2007 is forecast 

to fall below 2006 levels.

Sawn Hardwood

Sawn hardwood production decreased by 1.1% to 26.0 million cubic meters in 2006. Imports in 2006 decreased by 

15.8% compared with 2005. During the first 3 months of 

2007, exports and imports fell 30.4% and 36.7%, respectively. Exports to European Union countries decreased by 6.6%, 

and exports to Pacific Rim nations decreased 31%. Given 

the small decrease in United States production, volatile trade 

figures, and a declining housing market, apparent consumption for 2007 is forecast to fall below the 2006 volume.

Softwood Log Trade

Softwood log exports to the Pacific Rim increased 23.9% in 

the first 3 months of 2007 when compared with exports in 

the same period of 2006. Softwood log exports to the European Union increased by 140%. Total softwood log exports 

from the United States increased 0.4% in the first 3 months 

of 2007 compared with 2006 exports; this level remains well 

below export levels throughout the 1990s. During 2006, the 

decline in timber harvest from National Forests slowed to 

Table 1. Selected U.S. economic indicators, 2003–2007 

 Actual Estimate 

Indicator 2003 2004 2005 2006 2007 

a Gross domestic product (billion 2000 dollars) 10,301 11,704 11,049 11,415 11,658.3 

b New housing starts(thousand units) 1.848 1.956 2.068 1.801 1.480 

b Mobile home shipments (thousand units) 131 131 147 117 105 

a Nonresidential investment in structures (billion 2000 dollars) 243.5 248.7 251.5 298.1 301.5 

c Total industrial production (Index: 2002 = 100) 100.6 104.7 108.2 107.5 113.3 

c Furniture and related products (Index: 2002 = 100) 101.3 101.9 100.7 104.7 103.2 

c Paper products (Index: 2002 = 100) 102.3 104.8 105.4 101.6 100.9 

a Economic Indicators, April 2007. b National Association of Home Builders, Housing Economics, July 2007. c

Federal Reserve Bulletin, August 2001 through May 2007.
3

U.S. Forest Products Annual Market Review and Prospects, 2004–2008

a

All volumes are reported in 1,000 cubic meters. Figures for 2007 are estimates. 

Table 2––Prospects for wood and wood productsa

Sawn softwood Oriented strandboard (OSB) 

2005 2006 2007 2005 2006 20

Production 69,187 65,549 62,007 Production 13,262 13,240 12,2

Imports 58,119 53,724 49,026 Imports 11,485 10,608 9,9

Exports 2,117 2,195 2,202 Exports 155 159 

Consumption 125,189 117,078 108,831 Consumption 24,592 23,689 22,0

Coniferous logs Particleboard 

2005 2006 2007 2005 2006 20

Production 165,976 157,259 154,879 Production 7,276 7,414 7,3

Imports 2,789 2,399 1,799 Imports 1,285 1,221 1,2

Exports 7,279 7,387 7,422 Exports 95 86 

Consumption 161,486 152,271 149,256 Consumption 8,466 8,549 8,4

Sawn hardwood Medium density fiberboard (MDF) 

2005 2006 2007 2005 2006 20

Production 27,355 25,986 25,122 Production 3,257 3,400 3,2

Imports 2,537 2,137 2,207 Imports 1,494 1,220 1,1

Exports 3,424 3,373 3,301 Exports 252 307 2

Consumption 26,468 24,750 24,028 Consumption 4,499 4,313 4,1

Hardwood logs Insulation board 

2005 2006 2007 2005 2006 20

Production 57,254 56,593 55,876 Production 2,755 2,755 2,7

Imports 428 252 322 Imports 360 360 3

Exports 2,493 2,205 2,099 Exports 201 201 2

Consumption 55,189 54,640 54,099 Consumption 2,914 2,914 2,9

Coniferous plywood Roundwood pulpwood 

2005 2006 2007 2005 2006 20

Production 12,682 11,884 10,799 Production 144,555 145,567 142,

Imports 2,143 1,635 1,561 Imports 933 940 

Exports 364 375 380 Exports 2,758 2,777 2,

Consumption 14,461 13,144 11,980 Consumption 142,730 143,730 140,

Non-coniferous plywood Hardboard 

2005 2006 2007 2005 2006 20

Production 1,767 1,602 1,542 Production 1,282 1,131 1,0

Imports 4,020 4,496 4,209 Imports 1,412 1,441 1,4

Exports 244 186 177 Exports 317 389 3

Consumption 5,543 5,912 5,574 Consumption 2,377 2,183 2,1

volumes are reported in 1,000 cubic meters. Figures for 2007 are estimates. 

ble 2––Prospects for wood and wood productsa

wn softwood Oriented strandboard (OSB) 

2005 2006 2007 2005 2006 2007 

duction 69,187 65,549 62,007 Production 13,262 13,240 12,277 

orts 58,119 53,724 49,026 Imports 11,485 10,608 9,976 

orts 2,117 2,195 2,202 Exports 155 159 165 

sumption 125,189 117,078 108,831 Consumption 24,592 23,689 22,088 

iferous logs Particleboard 

2005 2006 2007 2005 2006 2007 

duction 165,976 157,259 154,879 Production 7,276 7,414 7,362 

orts 2,789 2,399 1,799 Imports 1,285 1,221 1,201 

orts 7,279 7,387 7,422 Exports 95 86 88 

sumption 161,486 152,271 149,256 Consumption 8,466 8,549 8,475 

wn hardwood Medium density fiberboard (MDF) 

2005 2006 2007 2005 2006 2007 

duction 27,355 25,986 25,122 Production 3,257 3,400 3,201 

orts 2,537 2,137 2,207 Imports 1,494 1,220 1,196 

orts 3,424 3,373 3,301 Exports 252 307 290 

sumption 26,468 24,750 24,028 Consumption 4,499 4,313 4,107 

dwood logs Insulation board 

2005 2006 2007 2005 2006 2007 

duction 57,254 56,593 55,876 Production 2,755 2,755 2,755 

orts 428 252 322 Imports 360 360 360 

orts 2,493 2,205 2,099 Exports 201 201 201 

sumption 55,189 54,640 54,099 Consumption 2,914 2,914 2,914 

iferous plywood Roundwood pulpwood 

2005 2006 2007 2005 2006 2007 

duction 12,682 11,884 10,799 Production 144,555 145,567 142,230 

orts 2,143 1,635 1,561 Imports 933 940 899 

orts 364 375 380 Exports 2,758 2,777 2,780 

sumption 14,461 13,144 11,980 Consumption 142,730 143,730 140,349 

n-coniferous plywood Hardboard 

2005 2006 2007 2005 2006 2007 

duction 1,767 1,602 1,542 Production 1,282 1,131 1,089 

orts 4,020 4,496 4,209 Imports 1,412 1,441 1,439 

orts 244 186 177 Exports 317 389 395 

sumption 5,543 5,912 5,574 Consumption 2,377 2,183 2,133 
4

Research Note FPL–RN–0305

a lower rate than that in previous years. The largest volume 

of decline has been occurring in the Pacific Northwest. The 

U.S. South continues a steady increase in softwood log production, in part because of the private sector’s ability 

to respond to the harvest decline in the West.

Hardwood Log Trade

Hardwood log exports decreased as well as imports during the first 3 months of 2007. Exports decreased 11.5% 

and imports decreased 42.2%, compared with this period 

in 2006. During the first 3 months of 2007, exports to the 

Pacific Rim increased 13.7% and exports to the European 

Union increased 26.8%. During 2006, hardwood log imports 

from Canada decreased 45.4% from the previous year. In the 

first 3 months of 2007, hardwood log imports from Canada 

fell 41.0%, compared with the same period in 2006. Canada 

traditionally provides about 95% of U.S. imports.

Pulpwood

Roundwood production for pulp and wood-based panel 

mills was 177 million cubic meters in 2006, up from 2005. 

Roundwood pulpwood is expected to continue to increase 

slightly during 2007. Pulpwood supplied from residues is 

decreasing relative to roundwood. The roundwood portion 

of pulpwood was 147 million cubic meters in 2006, a 1.4% 

increase from 2005 (based on pulpwood receipts data from 

the Forest Resources Association). Trade patterns have 

continued to have a significant impact on paper and paperboard production and have affected pulpwood use. Exports 

of paper, paperboard, and converted products decreased by 

0.6% in 2006. Imports of paper and paperboard decreased 

by 1.4% during 2006. With a strong dollar and the renewed 

strength of the U.S. economy, paper and paperboard production increased 0.8% in 2006. 

Softwood Plywood

Softwood plywood production was 11.9 million cubic meters in 2006, according to APA–The Engineered Wood Association (2007). This level of production was 6.3% below 

2005. The volume of softwood plywood production fell 

throughout the 1990s, and the decline has continued through 

2006. Softwood plywood production for the first quarter of 

2007 decreased by 10.6% compared with the first quarter of 

2006. The APA–The Engineered Wood Association’s forecast that plywood production would decrease in 2007 is supported by the decline in production during the first quarter 

of this year.

Softwood plywood imports decreased in 2006 compared 

with 2005 data, while softwood plywood exports increased. 

Imports fell by 23.7% and exports rose by 3.2%. Softwood 

plywood imports decreased 55.3% while exports increased 

15% during the first 3 months of 2007. Plywood exports 

to Canada decreased by 21.8% during the first 3 months of 

2007, and plywood imports from Canada increased 43.2%. 

Apparent consumption of softwood plywood is expected to 

increase in 2007, even as more market share for structural 

panels continues to be taken by oriented strandboard (OSB).

Oriented Strandboard

According to APA–The Engineered Wood Association, 

OSB production for the first 3 months of 2007 was 9.4% 

below production, compared with this same period in 2006. 

In 2006, 13.2 million cubic meters of OSB were produced, 

compared with 13.3 million cubic meters in 2005. 

In 2006, structural panel consumption decreased 4.6% 

to 35.2 million cubic meters. OSB consumption totaled 

22.1 million cubic meters, just below its record of 

22.5 million cubic meters, and constituted 63% of the 

structural panel total, a 2% share increase from 2005. Because OSB now accounts for 63% of structural panel consumption (2% rise from 2005), OSB consumption is expected to continue to exceed plywood consumption. Structural 

panel production over the first 3 months of 2007 was 19% 

below the year earlier level.

Hardwood Plywood

Hardwood plywood production, including core material 

such as softwood plywood and OSB, was estimated at 

1.6 million cubic meters in 2006, down from 2005 production. Hardwood plywood imports increased 14.6% in 2006, 

compared with 2005. If this trend continues, hardwood plywood imports will likely exceed 4.0 million cubic meters in 

2007.

Particleboard and Medium 

Density Fiberboard

Information from the Composite Panel Association (2007) 

indicates that particleboard and medium density fiberboard 

(MDF) production increased during 2006. Particleboard 

production was 7.4 million cubic meters, an increase of 

1.9%, and MDF production was 3.4 million cubic meters, an 

increase of 4.4%. During 2006, particleboard imports decreased by 75.7% and MDF imports decreased by 6.1% on 

a volume basis, compared with 2005. Particleboard exports 

decreased by 9.1% while MDF exports increased by 22.0%.

Hardboard

Based on data from the Composite Panel Association, 

1.1 million cubic meters of hardboard were produced in 

2006; this level of production is expected to remain steady 

in 2007. Hardboard imports decreased 6.7% in 2006 while 

hardboard exports increased 22.5% in 2006, compared with 

2005. 

Insulation Board

Information from the AF&PA showed that 2.7 million cubic meters of insulation board was produced in 2006, unchanged from 2005. Production of insulation board has been 

flat for several years, resulting in a stable level of apparent 

annual consumption of about 3.0 million cubic meters.

Fuelwood

Using data from a 2005 Department of Energy survey and 

adjusting for the 2005 winter weather and a declining trend 
5

in fuelwood use per household, fuelwood consumption was 

estimated to be 43.8 million cubic meters in 2005—an increase of less than 1.0% from 2004. Households use most 

fuelwood for heating and aesthetic enjoyment. Industry 

uses mill residues rather than roundwood for fuel. A small 

portion of roundwood fuelwood is used for electric power 

production. Use for electric power is limited by the low cost 

of coal and natural gas alternatives. Fuelwood consumption 

for 2006 is estimated to be above the level for 2005 due to 

rising alternative fuel costs.

Forest Products Prices

Recent trends in the wholesale price of forest products are 

different across two broad categories: lumber and wood 

products (such as lumber and wood-based panels) and pulp 

and paper products (Fig. 1). Throughout the late 1990s, the 

producer price of lumber and wood products as reflected by 

the Producer Price Index (PPI) continued to fluctuate around 

a level reached by the mid-1990s before peaking during the 

second half of 1999. The PPI for lumber and wood products has continued to increase through the first quarter of 

2007. Changes in the price of softwood lumber accounted 

for much of this change and most of the volatility in the index. In 1999, the deflated composite price index reached an 

all-time high (at a level more than 50% higher than that of 

the base year, 1982), followed immediately by a sustained 

decline that continued throughout 2000 and into 2004. The 

PPI reached its lowest level in 5 years during this period. In 

spite of these sustained low prices, U.S. demand for lumber 

and wood products during 2000 and into 2005 remained 

near record levels. In contrast, the PPI of prices in the pulp 

and paper sector has exhibited considerably less short-term 

volatility. The period of declining prices from the previous 

peak (1994–1995) ended in 1997, and by early 1998 the 

composite index had reached the level of the mid-1990s. In 

deflated terms, the composite index has had little volatility 

and a flat to declining trend.

Summary of Timber Products

Economic activity in the United States was strong in 2005 

and during the first half of 2006, as evidenced by the predicted year-over-year growth of 3.4%, signaling continued 

strength in major sectors of the economy. Although GDP 

growth slowed during the second half of 2006, a number of 

U.S. Forest Products Annual Market Review and Prospects, 2004–2008

Figure 1—Recent trends in real producer prices of forest products (deflated with all-commodity producer price index).
6

Research Note FPL–RN–0305

factors, such as a weakening housing sector and less favorable monetary policy, are likely to continue to erode activity 

as the economy moves through the second half of the year. 

With rising mortgage rates, the expectation for continued 

strength in the housing sector has declined. The future 

strength for other domestic and foreign trade sectors of the 

wood products industry depends on future lumber prices, 

which have been strong so far this year; the declining housing sector; and the value of the dollar. A decline in the value 

of the dollar should bolster U.S. wood and paper products 

exports. 

The U.S. furniture industry, in retreat since 1999, continued 

its decline in 2006 as low-cost furniture imports continue 

to erode the domestic industry market share. Employment 

in the domestic furniture industry has fallen by nearly 50% 

since 1999 (Fig. 2).

Policy Initiatives

Climate Change 

The United States has taken a leading role in addressing the 

issue of climate change and is on track to cut greenhouse 

gas intensity by 18% by 2012. Greenhouse gas intensity 

(the amount emitted per unit of economic activity) in the 

United States declined by 2.0% in 2003 and by 2.5% in 

2004. During 2001 through 2006, the U.S. government will 

have devoted more than $29 billion to climate programs, 

more than any other nation. President Bush announced the 

Advanced Energy Initiative, which proposed a 22% increase 

in funding for clean energy technology research, supporting 

new biofuels such as cellulosic ethanol and biodiesel. The 

United States is also leading the global effort to promote 

clean development, enhance energy security, and reduce 

harmful air pollution worldwide. Multilaterally, the United 

States provides the most funding of any country for activities under the United Nations Framework Convention on 

Climate Change and the Intergovernmental Panel on Climate Change. 

The 2002 Farm Bill provides nearly $40 billion in funding 

over 10 years for conservation on working lands, enabling 

the federal government, largely through the U.S. Department of Agriculture (USDA), to provide targeted incentives 

to encourage wider use of land management practices that 

remove carbon from the atmosphere or reduce emissions of 

greenhouse gases. 

The U.S. federal government supports an extensive array 

of scientific and technological research on climate change 

in addition to domestic and international actions to address 

greenhouse gas emissions and carbon sequestration. The 

2003 Strategic Plan for the United States Climate Change 

Science Program identified 21 synthesis and assessment 

products that represent principal responses to the toppriority research, observation, and decision support needs 

Figure 2—Employment in wood household furniture industry, 1978 to 2005.
7

U.S. Forest Products Annual Market Review and Prospects, 2004–2008

of society. The Climate Change Science Program (CCSP) 

Synthesis and Assessment Product 4.3 (SAP 4.3) will address the effects of climate change on agriculture, land 

resources, water resources, and biodiversity. These areas 

are addressed under the ecosystems, land use, and water 

research elements of the CCSP. One of the primary goals 

of these research elements is to enhance understanding and 

ability to estimate impacts of future climate change on these 

systems. 

Green House Gases 

On April 17, 2006, the U.S. Department of Energy issued 

revised guidelines for the voluntary reporting of greenhouse 

gas emissions, sequestration, and reductions and implemented the 1605(b) program during 2007. The initial program 

guidelines were issued in 1994, and over 200 utilities, industries, institutions, and other entities now report annually. The 

USDA provided the technical methods for estimating greenhouse gas emissions, carbon sequestration, and emission 

reductions on farm, forest, and grazing lands. The revised 

guidelines include “state-of-the-science” guidance and tools 

for estimating emissions from agricultural, forestry, and 

conservation activities important for carbon sequestration 

efforts, as well as from other sources of greenhouse gases. 

As noted in the Forest Appendix of the revised guidelines, 

international agreements recognize forestry activities as 

one way to sequester carbon, and thus mitigate the increase 

of carbon dioxide in the atmosphere; this may slow possible climate change effects. Forest ecosystems and forest 

products represent a significant carbon dioxide sink in the 

United States. Over 90% of the sequestration in agriculture 

and forests occurs in the forest sector, with an additional 7% 

sequestered in urban trees. Total carbon stocks in forest ecosystems of the conterminous United States are estimated at 

184,800 Tg CO2 eq. The net amount of carbon stored in forest ecosystems in the conterminous United States increased 

by an estimated 547 Tg CO2 eq. This estimate does not include increases in biomass harvested from a portion of U.S. 

forests, used largely as lumber, panels, paper, and fuelwood. 

Total net sequestration, or gain in carbon storage, by forest 

ecosystems and harvested wood products for 2001 was 

759 Tg CO2 eq. 

Carbon is sequestered in growing trees, principally as wood 

in the tree bole. However, accrual in forest ecosystems also 

depends on the accumulation of carbon in dead wood, litter, and soil organic matter. When wood is harvested and 

removed from the forest, not all of the carbon flows immediately to the atmosphere. In fact, the portion of harvested carbon sequestered in long-lasting wood products may not be 

released to the atmosphere for years or even decades. If carbon remaining in harvested wood products is not part of the 

accounting system, calculation of the change in carbon stock 

for the forest area that is harvested will incorrectly indicate 

that all the harvested carbon is released to the atmosphere 

immediately. Failing to account for carbon in wood products 

significantly overestimates emissions to the atmosphere in 

the year in which the harvest occurs. Tables of estimates of 

forest carbon stock are provided for common forest types 

within each of 10 U.S. regions. Six distinct forest ecosystem 

carbon pools are listed: live trees, standing dead trees, understory vegetation, down dead wood, forest floor, and soil 

organic carbon. The Forest Appendix can be found at: http://

www.usda.gov/oce/global_change/Forestryappendix.pdf.

Bioenergy 

Several recent key laws, Executive Orders, and regulations 

are helping to drive bioenergy production and use in the 

United States. This legislation includes the following: Presidential Executive Order 13101, Greening the Government 

Through Recycling and Waste Prevention (which required 

federal agencies to give preference in their procurement and 

grant programs to the purchase of specific recycled content 

products); Presidential Executive Order 13134, Developing 

and Promoting Biobased Products and Bioenergy (which set 

a goal of tripling the U.S. use of bioenergy and bioproducts 

by 2010); the Biomass Research and Development Act of 

2000, (Title III of the Agricultural Risk Protection Act of 

2000, P.L.106-224); and Section 9002 of the Farm Security 

and Rural Investment Act of 2002 (FSRIA), the first farm 

legislation containing a separate title (Title IX) devoted to 

energy (which creates a federal government preferential 

purchasing program for biobased products to help promote 

emerging markets for these products). 

On August 8, 2005, the Energy Policy Act of 2005 (Public 

Law 109-58) was signed into law. The act promotes investments in energy conservation and efficiency, including provisions for promoting residential efficiency, reducing federal 

government energy usage, modernizing domestic energy 

infrastructure, diversifying the nation’s energy supply with 

renewable sources (wind, solar, and biomass energy), and 

supporting energy-efficient vehicles. 

The FSRIA created the U.S. Federal Biobased Products Preferred Procurement Program (FB4P). The FSRIA provides 

for development of a preferred procurement program for 

biobased products under which federal agencies are required 

to purchase biobased products. Research is currently under 

way on biodiesel fuels, ethanol fuels, and other sources of 

biomass energy. Associated research is under way on the 

measurement of atmospheric emissions associated with renewable energy and the potential effects of deregulation of 

electric utilities on rural communities. On August 17, 2006, 

the USDA announced two proposed rules under the FB4P 

that designate 20 items that must receive special consideration by all federal agencies when making purchases. The 

designation of these 20 biobased items is a major step in 

advancing the federal preferred procurement program for 

biobased products. The 20 biobased items include adhesive 

and mastic removers, insulating foam for wall construction, hand cleaners and sanitizers, composite panels, fluidfilled transformers, biodegradable containers, fertilizers, 
8

Research Note FPL–RN–0305

metalworking fluids, sorbents, graffiti and grease removers, two-cycle engine oils, lipcare products, biodegradable 

films, stationary equipment hydraulic fluids, biodegradable 

cutlery, glass cleaners, greases, dust suppressants, carpets, 

and carpet and upholstery cleaners. When finalized, 1,500 

biobased products will be given procurement preference by 

federal agencies, generating new economic opportunities for 

biobased product producers while providing new choices 

for U.S. consumers. Federal agencies must give preference 

to designated biobased products in government purchases 

within one year of publication of the final designation rule. 

The USDA has assembled a list of biobased items that will 

be used for designation under the FB4P. The USDA has 

previously issued final guidelines for the biobased procurement program and developed a model procurement program 

of training and education to help federal procurement officials and users of biobased products identify and purchase 

qualifying biobased products. Information on the guidelines 

and the model program are available at http://www.usda.

gov/biobased. 

U.S.–Canada Softwood Lumber Dispute 

On July 1, 2006, United States Trade Representative Susan 

Schwab and Canadian Trade Minister David Emerson initialed the text of a softwood lumber accord. The agreement 

reflects a balance of concessions made by both countries to 

resolve a two-decade old dispute. Under the terms of the 

agreement, the United States and Canada will end all litigation over trade in softwood lumber and provide for unrestricted trade in favorable market conditions. When the lumber market is soft, Canadian exporting provinces can choose 

either to collect an export tax that ranges from 5% to 15% 

as prices fall or collect lower export taxes and limit their 

export volumes. The agreement will also include provisions 

to address potential Canadian import surges, provide for effective dispute settlement, distribute the antidumping and 

countervailing (anti-subsidy) duty deposits currently held by 

the United States, and discipline future trade cases. Most of 

the estimated $5 billion in duties collected since 2002 will 

be returned to Canadian interests (the importers of record), 

but $1 billion will remain in the United States. The U.S. 

companies that brought the trade complaints will receive 

$500 million, $450 million will be used to fund meritorious 

initiatives, and $50 million will be used to establish a bi-national industry council. Since July 1, 2006, the United States 

and Canada have undertaken a legal review of the text and 

have been engaged in discussions regarding clarifications to 

the agreement. 

Sources of Information

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and Paper Association.

AF&PA. 2005. Wood Statistical Roundup—Monthly and 

Quarterly Statistical Supplement. Washington, D.C.: American Forest and Paper Association.

APA. 2005. American Plywood Association Economics Report. Tacoma, WA: APA–The Engineered Wood Association.

BEA. 2005. U.S. Bureau of Economic Analysis. International Economic Accounts. Council of Economic Advisors. 

2005. Economic Indicators. Washington, D.C.: U.S. Government Printing Office. June 2005.

CPA. 2004. Particleboard and medium-density fiberboard 

annual production and shipments. [Annually]. Gaithersburg, 

MD: Composite Panel Association.

DOE. 2005. Monthly Energy Review. DOE/EIA-0035 

(2004/04). Washington, DC: Energy Information Administration, U.S. Department of Energy. http://www.eia.doe.

gov/emeu/mer/contents.html

Economic Indicators, Council of Economic Advisors. 2006. 

United States Government Printing Office [Monthly]. September 2006. Washington, DC.

Economic Report of the President. Council of Economic 

Advisors. 2004. Washington, D.C.: United States Government Printing Office. 

Federal Reserve Bank of Philadelphia. 2006. Economic 

Research, Survey of Professional Forecasters, Third Quarter 

2006. www.phil.frb.org/files/spf/survq306.html

Federal Reserve Board. Federal Reserve Bulletin. 2001-

2007. http://www.federalreserve.gov/pubs/bulletin/

FRA. 2005. Annual Pulpwood Statistics Summary Report 

1999–2003. Rockville, MD: Forest Resources Association.

NAHB. 2005. Housing Economics. Washington, D.C.: National Association of Home Builders. July 2005. www.nahb.

org/

Random Lengths. Random Lengths Publications. [Weekly]. 

Volume 62. February 2006. Eugene, OR.

U.S. Department of Labor, Bureau of Labor Statistics. Producer Prices and Price Indexes. [Monthly and annual] 2005. 

Washington, D.C. http://www.bls.gov/ppi. 

U.S. Federal Reserve System, Board of Governors. 2005. 

Federal Reserve bulletin [Monthly]. July 2005. Washington, 

D.C.

WWPA. 2007. Lumber Track. March 2007. Portland, OR: 

Western Wood Products Association.