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5.2 Projections of Timber and Timber Product Supply and Demand

Supplies of and demands for timber products in the South will depend heavily on national and world trends. Southern supplies and demands through 2040 were projected with the SRTS model, with national and international trends taken as given. What follows is a discussion of some of the world and national projections from the literature plus a description of how SRTS projects what will happen in the South in the coming decades.


5.2.1 World Supply and Demand Projections

World timber production is expected to rise steadily well into the 21st century. Projections by Trømborg and others (2000) show that timber production will increase by 1.2 percent per year through 2010, with likely continued increases beyond that year. Their analysis also projects: (1) that U. S. growth in production will be 0.4 percent, implying that the United States will remain a timber product importer; (2) that the U.S. share of exports on world markets may decline; and (3) that U.S. imports will rise. The United States experienced an average compound annual growth rate for timber products output of 1.4 percent from 1961-1999, so this lower rate of 0.4 percent appears to be a substantial departure from the past but closer to the realized compound annual growth rate since 1990, which has been essentially nil (0.04 percent).


5.2.2 United States Supply and Demand Projections: RPA

The Draft Forest and Rangeland Resources Planning Act (RPA) Assessment (Haynes and others 2001) projects that the character and location of timber and timber products output will change over the coming half century while timber product prices and forest area will remain stable. The Draft 2000 RPA projects that the area of forestland is expected to decline by 8.4 million ac in the North and to decline slightly elsewhere.


The Draft 2000 RPA Assessment projects that privately owned forests in the United States will be more intensively managed, partly as a response to declining forest area. It also projects that private forests will be expected to produce an increasing share of small-diameter materials for pulp and composite wood products. Timber production overall is projected to continue its shift toward the South, which contains a large share of the nation's private forests. Domestic consumption is projected to increase by two-thirds, while harvests are projected to increase nearly 40 percent over the coming 50 years. Per-capita consumption of roundwood, however, is projected to remain fairly stable, at slightly less than 1 ton per capita per year.


The shares of outputs going into various solid-wood products are projected by RPA to change over the next half-century, much of that driven by evolving technologies that result in rising technical efficiencies. Composite wood structural panels are projected to mostly displace plywood, while softwood lumber shares are projected to grow relative to hardwood lumber. Imports from Canada and elsewhere are projected to rise, especially in the short term. Softwood lumber, pulp, paper, and paperboard production are projected to increase most in the South, especially in the western portion of the region. Although manufacturing efficiency (units of output per unit of wood input) is projected to continue to increase, the rate of that increase is projected to slow, relative to that experienced in the 1900s. Between 2000 and 2050, the output:input ratio is projected to rise by 16 percent.


Hardwood and softwood timber harvests are projected to increase similarly, by over one-third, over the coming half-century. This rise will be made possible by improvements in timber growing technology. A small part of the hardwood production increase is projected to come from short-rotation hardwood plantations ("agrifiber") grown for pulp. This agrifiber is expected to become competitive with forest wood fiber production after 2030. Agrifiber is projected to supply about 5 percent of wood fiber in pulp and panel production by 2050.


The nation's softwood timber harvests are projected to continue to come mostly from the South, rising from 60 percent of U.S. timber harvests today to 67 percent by 2050 (Haynes and others 2001). The shares of softwood provided by the other regions of the country are projected to be steady or to decline over the coming 50 years. In hardwood, production in the Southern and Northern United States is projected to decline in importance while the West rises in importance. Nevertheless, the South and North are both projected to increase their hardwood outputs. By 2050, the South is projected to provide 60 percent of all U.S. fiber production. To a large degree, high productivity of southern softwood plantations is what makes this increase possible.


The RPA Assessment projects that the United States will decrease its dependence on foreign sources of wood fiber (logs, lumber, panels, residues, pulp, waste paper, etc.). The projection shows imports providing 18 percent of wood fiber consumed in 2050, compared to 21 percent in 1996. The relative increase in the use of domestic wood fiber comes at the expense of exports, which are projected to decline from 18 percent of production in 1996 to 11 percent in 2050. These findings are consistent with the shorter run projections of Trømborg and others (2000), which show that the value of United States net exports (exports minus imports) will become more negative by 2010.


An effect of greater investment in manufacturing technology and rising fiber demand is a projected relative rise in the importance of recycled fiber in the paper sector. Use of recycled fiber has been increasing and will continue to do so (Ince 2000). Over the 50-year RPA projection, recycled fiber use is projected to more than double, while wood fiber from timber harvests is projected to increase by one-third.


Timber prices in the United States are projected by RPA to change differentially, depending on product and species. Timber prices for softwood sawtimber and pulpwood are projected to remain steady over the projection. Rising intensity of softwood forest management, especially in southern pine plantations, is expected to permit output to keep up with expanding demand. For hardwood sawtimber and pulpwood, prices are projected to rise significantly, by over two-thirds, by 2050.


5.2.3 Southern Supply, Demand, Management Intensity, and Land Use Projections: SRTS

We used 2000 RPA projections to provide national and global context, but we made projections for the South independently from RPA projections. SRTS projections of forest area, harvests (removals), growth, and inventory were done under all scenarios outlined in Table 1 and described in Section 3 of this Chapter. Starting point data on inventory, net growth, and removals used in the SRTS projections were obtained from the latest Forest Inventory and Analysis data available for download from the FIA website. The years of the latest surveys used are Alabama 1990, Arkansas 1995, Florida 1995, Georgia 1998, Kentucky 1988, Louisiana 1991, Mississippi 1994, North Carolina 1990, Oklahoma 1993, South Carolina 1993, Tennessee 1999, Texas 1992, and Virginia 1992. In States with relatively old surveys, large jumps in plantation areas caused by the large increase in tree planting on private lands since the early 1990s may have been missed (Figure 8). This problem may be most serious in Alabama, North Carolina, Louisiana, Virginia, and Texas. Kentucky, with a last survey date of 1988, has done relatively little planting, historically.


Forest area projections under the IH (Base Case) scenario for FIA Survey Units show the South losing timberland over the coming decades. This loss, amounting to 1 percent over the 1995-2040 projection, is net of an aggregate increase in the area of pine plantations and an aggregate decrease in the area of other forest types (Figure 15). A detailed map of forest area changes (Figure 16) shows that timberland area is projected to increase in the western parts of the South, while losses are projected in States along the southern Atlantic Seaboard. The gains in timberland area, facilitated by rising timber prices relative to agricultural rents, will be concentrated in Alabama, Arkansas, Louisiana, and Mississippi. Significant percentage losses are projected for Florida, North Carolina, South Carolina, Tennessee, Texas, and Virginia. Within States, losses are projected to be concentrated near urban areas, while some rural locations gain forest. This is not universally true, however. For example, all of Florida and South Carolina's FIA Survey Units are projected to lose forest. The South's population and State economies have grown quickly and are projected to continue to grow quickly. With such growth, the demand for land near the urban areas has been, and is projected to continue to be, met by some clearing of forests. Under the IL (Figure 17), EH (Figure 18), and EL (Figure 19) scenarios, aggregate timberland area in the South is projected to change, as well. What all of the figures 15 (IH), 17 (IL), 18 (EH), and 19 (EL) show is that the area of natural forest management types (all types except pine plantations) is projected to shrink, while the planted pine type increases. This trend would appear to be a continuation of that observed over the last 40 years, when little net forest loss was registered but plantation area increased substantially (see HLTH-1, Figure 12).


Common to the IH and IL scenarios, pine plantation areas are projected to increase by 21 to 26 million acres, or by about 67-80 percent from 1995 levels of pine plantations. The pine plantation projections by scenario are displayed together, along with historical amounts, in Figure 20. Increases in pine plantation acres differ among the scenarios considered. These projected increases are similar to the projected acreage of aggregate losses of the natural forest management types, keeping forest area largely unchanged over the projection, 1995 to 2040. Common to the EH and EL scenarios, however, is that pine plantation area is projected to increase by about 25 percent, insufficient to completely outweigh natural forest type losses, translating into a net loss in timberland area of just over 27 million ac (15 percent) between 1995 and 2040. These lower plantation acres are generated because prices, to which pine planting positively responds, do not increase as much under the elastic demand scenarios.


Apparent in the IH (Base Case) and IL scenarios is that pine plantation area is increasing at the "expense" of other forest types, but this trade-off is only partial. As pointed out in HLTH-1, during the 1980s and 1990s, about 30 percent of new pine plantation acres in the South derived from agricultural land, while around 70 percent came from conversion of natural forest management types. Further, part of the loss of natural forest has historically been, and is projected to be, due to conversions to urban uses (see SOCIO-1 for details). Similarly, in the IH and IL projections, a share of the pine plantation acreage increase is projected to be at the expense of agricultural land. In practice, this means that Gulf Coast States and the Coastal and Piedmont regions of Atlantic Coast States will gain the most pine plantations, while northern and interior regions will gain the least plantation area.


A notable actual trade-off, however, exists when comparing the plantation pine and natural forest management type projections done by the IH (Base Case) and IL scenarios. In the IL scenario, softwood prices are projected to rise at a faster rate than they are for the IH scenario; the higher prices in the IL scenario serve as the economic stimulus to landowners to plant even more trees. The difference between the IH and IL pine plantation rates yields the marginal effect of higher plantation growth rates on the area of pine plantations and the area of natural forest types projected for 2040. In the IH scenario, pine plantations are projected to cover 53.6 million ac in 2040, while in the IL scenario the figure is 57.9 million ac. Each percentage point improvement in growth rate above a 50 percent improvement results in about 170,000 fewer acres of projected pine plantations by 2040. Similarly, because the IH scenario projects a natural forest management type area of 122 million ac and the IL projects that area to be 123 million ac, each percentage point improvement in pine plantation growth is projected to "save" about 50,000 ac of natural forest. Alternatively, if timber demand is elastically responsive to timber price, as laid out in the EH and EL scenarios, the effects of pine plantation growth rate changes on areas by management type are very small.


Figure 21 details the changes by State in pine plantation area projected in the IH (Base Case) scenario. Pine plantation area changes vary among Southern States mostly due to differences among States in the area of industry-owned forests, the amount of natural pine forests relative to other types (natural pine stands are converted more frequently to plantations), and land use changes to and from nonforest. The amounts of these plantations projected in the Base Case scenario vary by State and trend upward. All States except Kentucky are projected to gain at least 45 percent in pine plantation area by 2040 compared to 1995, with the largest percentage gains in Tennessee (120 percent), Arkansas (117 percent), and Alabama (89 percent). Georgia, the state with currently the most pine plantations, (6.4 million ac) in 1995, is projected to have the most in 2040 (9.3 million ac). Alabama, with the second most in 1995 (4.0 million ac), is projected to have the second most (7.5 million ac) in 2040.


Under the Base Case scenario, the increases in pine plantations are projected to be largest on an acre basis on the Gulf and Atlantic Coastal Plain and Piedmont ecoregions and smallest in other ecoregions of the South (Figure 22). In 1995, the Southeastern Mixed Forest and the Outer Coastal Plain Mixed Forest each contained about 15.4 million ac of pine plantations. They are projected to have 25.6 and 25.4 million ac, respectively, in 2040. The eastern broadleaf forest ecoregions together accounted for about 0.6 million ac of pine plantations in 1995 and are projected to contain a total of 1.2 million ac of such plantations in 2040.


State-level projected changes in timberland area for natural forest management types under the Base Case scenario are shown in Figure 23. All States are projected to lose acreage in natural forest types under this scenario. States projected to lose most natural forest types between 1995 and 2040 under this scenario are Florida (58 percent), South Carolina (35 percent), and North Carolina (30 percent). These losses can be ascribed to a combination of pine plantation expansion and a loss of forests to residential and urban uses. In other scenarios, the losses projected for natural forest management types in those States are of similar sizes, and those same States are projected to lose most. Arkansas, Louisiana, and Mississippi are projected in other scenarios to either gain no natural forest management type acres or to lose some (up to 14 percent by 2040 for Arkansas, compared to 1995 levels).


An effect of the projected increase in timberland area in planted pine under the Base Case and the IL scenarios is a rise in timber inventories. Under the Base Case scenario, softwood growth is projected to exceed removals during the entire 40-year period (Figure 24). This finding holds for the IL (Figure 25), EH (Figure 26), and EL (Figure 27) scenarios, as well. In the 1990s, in many parts of the South, softwood removals slightly exceeded growth. The projections shown here reflect a turnaround in this situation, although for some States this may take another two decades. The turnaround is attributable to large investments in pine plantations that are growing faster than they are being harvested. Under the Base Case scenario, softwood harvests are projected to increase most in percentage terms in the northern reaches of the South Kentucky, Tennessee, Arkansas, and Oklahoma and least in southeastern parts (Figure 28). In absolute terms (volume per year), the story is more mixed (Figure 28). Large volume increases are projected in some places that have always been major producing regions (Georgia, Alabama, and Louisiana) and in some that have not (parts of the Piedmont and mountains of North Carolina and Virginia, central Tennessee, and the Ozarks of Arkansas). Even parts of the South projected to lose forest area will have rises in softwood harvests. Other places are projected to have decreases in harvests even while forest areas might be stable to rising (parts of Mississippi, Arkansas, and Louisiana). The divergent trends in the Piedmont and in Florida are in some part due to rising productivity of pine plantations and also in part to urbanization. Opposite trends in parts of Louisiana, Arkansas, and Mississippi are mainly attributable to timing: many of the new acres of pine plantations projected in those areas would not be harvested until after 2040.


In aggregate, softwood harvests are projected to increase by 56 percent between 1995 and 2040 under the Base Case scenario. This increase is made possible by the combination of the increase in the area of pine plantations and the projected rise in productivity of those plantations. Nearly half of all southern timber volume growth today occurs in pine plantations, which yield wood at least 50 percent faster than natural pine. Rising productivity over time means that more wood can be produced on a smaller land base.


For hardwoods, the lack of a technology that substantially increases growth means that growth is projected to stay ahead of removals for only two to three decades, after which hardwood inventory is projected to decline. This finding is common to all scenarios and is displayed graphically in Figure 29 (IH), Figure 30 (IL), Figure 31 (EH), and Figure 32 (EL). In the Base Case scenario, growth is projected to exceed removals until about 2025, when removals overtake growth. Much of the high rate of removals increases can be ascribed to a growing demand for hardwood fiber for engineered wood products, especially structural and nonstructural wood panels (Haynes and others 2001).


Hardwood harvests are projected to change unevenly across the South. In percentage terms, projected increases are largest for northern and western parts of the South (Kentucky, Tennessee, northern Alabama, northern Arkansas) and for southern Florida. In the northern portions, these harvests are mostly from areas not projected to lose forests. In Florida, however, much of these harvests are projected to be associated with conversion from forest to urban uses (Figure 33). In volume terms, the story is more complex, reflecting a combination of hardwood volumes entering the market during conversion from forest to nonforest uses, volumes entering the market during conversion of hardwood types to pine plantations, and higher harvesting rates in hardwood forests that are projected to remain hardwood forests (Figure 33).


Across all States and species combined, projected trends for growth and removals differ by ownership in the IH (Figure 34), IL (Figure 35), EH (Figure 36), and EL (Figure 37) scenarios. In both the IH and the IL scenarios, until about 2030, growth is projected to exceed removals on nonindustrial forestland. On industry land, growth is projected to exceed removals throughout the projection period. Under both elastic (EH, EL) scenarios, growth is projected to exceed removals for both NIPF and industry ownership groups in aggregate throughout the projection. The different trends on NIPF and industry land in the inelastic scenarios occur because forest industry landowners are projected to invest heavily enough in plantations that their higher growth would keep up with the relatively inelastic and increasing demand. NIPF owners, however, have more land in natural forest management types, which are projected to decline in area over time, and their pine plantations are not projected to improve in productivity as much as industry plantations.


Changes in management type acreages toward more pine plantations and fewer acres in natural forest management types will affect age structure of southern forests. Softwood forests are projected to become younger (Figure 38 shows this for the base case). Part of the increase in the younger age classes is caused by pine plantations being harvested by around age 30 years, while the natural pine (natural pine and the pine in mixed oak-pine) is harvested at a higher age. The amount of such natural pine is projected to decline. Hardwood forests are projected to become somewhat bifurcated in age structure, with a growing share of volume residing in older age classes and a shrinking share in the middle age classes (10-40 years) (Figure 39). The shrinking middle age classes in hardwood result mostly from relatively lower harvesting pressure (relative to pine) in this type. Much of the middle-aged volume therefore enters the oldest age classes over time.


Southwide changes in inventory resulting from forest land area changes, management type area changes, and plantation growth mask variations on those changes on smaller spatial units. For most States, inventories of both hardwood and softwood are projected to always exceed those present in 1995. This finding can be obtained by examining the differences between growth and removals for both hardwood and softwood. Figure 40 shows the growth and removals projections for Alabama, while analogous figures are offered for Arkansas (Figure 41), Florida (Figure 42), Georgia (Figure 43), Kentucky (Figure 44), Louisiana (Figure 45), Mississippi (Figure 46), North Carolina (Figure 47), Oklahoma (Figure 48), South Carolina (Figure 49), Tennessee (Figure 50), Texas (Figure 51), and Virginia (Figure 52). Across most States, growth and removals of both hardwood and softwood species are projected to increase through 2040. Some exceptions are in Mississippi and South Carolina, where hardwood removals outpace growth during the entire projection. The falling hardwood inventories can be ascribed primarily to vigorous conversion of natural forest management types to pine plantations. Softwood inventories in both States are projected to rise through 2040. Kentucky and Oklahoma, with large inventories relative to local demand, are projected to have steadily rising inventories of both hardwood and softwood throughout the projection.


Timber prices are useful indicators of timber scarcity or abundance. Prices are projected to go up in real (adjusted for inflation) terms between 1995 and 2040 under all scenarios and for both softwood (Figure 53) and hardwood species (Figure 54). Under both of the inelastic (IH, IL) timber demand scenarios, softwood timber prices are projected to increase by at least two-thirds between 1995 and 2040. Under the elastic scenarios (EH, EL), these prices are projected to increase by 8-10 percent. For hardwood, a similar story emerges: under IH and IL, prices are projected to rise by about 82 percent, while under the EH and EL scenarios, the increase is 10 percent. Thus, real price increases will serve as incentives for continued investment in intensive timber growing technologies. Rising prices therefore help to counteract the trend toward land conversion away from forest, while such price trends also encourage forest type conversions to plantations and, to a lesser extent, agricultural land reversions to forest.


The effects of rising timber prices may be felt in the timber product sector by inducing substitutions and technology changes. The SRTS model used in this Assessment does not have a mechanism for directly incorporating such dynamics. It is clear, however, that higher timber prices translate to higher incomes for timber producers. Timber price increases, on the other hand, mean that final product prices also will rise (though not necessarily in proportion) in a manner similar to that projected under the timber demand and supply scenarios outlined here. Consumers of these products will be encouraged, through price rises, to substitute nonwood products for wood products in the construction industry. Paper product manufacturers may also have a rising incentive to seek greater imports of pulp fiber, use more recycled fiber furnish, and further increase the efficiency of fiber use. It is also possible that the mix of timber products will shift over time, as timber is harvested at a younger age. Because smaller trees are generally less suitable for solid wood products, rising wood prices will continue the trend toward greater use of engineered wood products.


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