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Projections of 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.

World supply-and-demand projections—World timber production is expected to rise steadily well into the 21^st 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 to 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).

United States supply-and-demand projections: RPA—The Draft Forest and Rangeland RPA assessment (Haynes and others 2002) projects that the character and location of timber and timber products output will change over the coming half-century while timber product prices and land and timberland area will decline by 3 percent. The Draft 2000 RPA projects in its base projection that the area of forestland is expected to decline by 3.6 million acres in the South and to decline by 19.6 million acres elsewhere.

The Draft 2000 RPA assessment base projection also 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 and timberland. Domestic consumption of softwoods is projected to increase in the base projection by 47 percent and hardwoods by 29 percent between 1996 and 2050, while harvests are projected to increase 30 percent for softwoods and 17 percent for hardwoods between 1996 and 2050. Per capita consumption of roundwood, however, is projected to remain fairly stable, at 0.8 tons 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 partially 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, especially intensification through plantation management, fertilization, thinning, and genetic improvement.

The Nation’s softwood timber harvests are projected to continue to come mostly from the South, rising from 61 percent of U.S. timber harvests in 1997 to 65 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 Rocky Mountain West and Pacific Coast is expected to rise but remain small, while the Northern United States is projected to rise slightly in importance while the South declines slightly in importance. Nevertheless, the South and North are both projected to increase their hardwood outputs. By 2050, the South is projected to provide 50 percent of hardwood roundwood harvests and the North 44 per cent. In total, the South’s share rises only slightly, by less than 1 percent by 2050 compared to its 58-percent share of harvests in 1997. To a large extent, the high and rising productivity and area of southern pine plantations makes the rise in the southern share of softwood harvests possible.

The RPA assessment projects that the United States will increase its dependence on foreign sources of wood fiber (logs, lumber, panels, residues, pulp, waste paper, etc.) as a proportion of total consumption. The projection shows imports providing 27 percent of wood fiber consumed in 2050, compared to 20 percent in 2000. These findings are consistent with the shorter run projections of Trømborg and others (2000), which show that the value of U.S. 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 40 percent.

Timber prices in the United States are projected by RPA to change differentially, depending on product and species. Timber prices for softwood sawtimber are projected to rise over the projection in all regions of the United States by between 13 and 69 percent (39 percent in the South), while softwood pulpwood prices are projected to rise in the North and fall (by 29 percent) in the South. In hardwood, sawtimber prices are projected to rise slightly in the North and more than double in the South. Hardwood pulpwood is projected to nearly double in price in the South and decline in the North.

Southern supply, demand, management intensity, and land use projections: SRTS—We used the 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 13.1 and described in Methods in this chapter. Starting-point data on inventory, net growth, and removals used in the SRTS projections were obtained from the latest FIA data available for download from the FIA Web site. Projection data for States with relatively old surveys could be misrepresented if growth, removals, or land use changes including tree planting (fig. 13.8) have changed greatly between the survey and 1995. These problems may exist for projections of South Carolina (due to Hurricane Hugo’s effects on subsequent growth rate of trees in natural stands) as well as Alabama, Kentucky, Louisiana, North Carolina, Texas, and Virginia.

Area projections for private timberland under the IH (base case) scenario for FIA survey units show the South losing private timberland over the coming decades. This loss, amounting to 1 percent over the 1995 through 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 (fig. 13.15). A detailed map of forest area changes (fig. 13.16) shows that private 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 private 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. This is not universally true, however. For example, all of Florida and South Carolina’s FIA survey units are projected to lose private timberland. 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 (fig. 13.15B), EH (fig. 13.15C), and EL (fig. 13.15D) scenarios, aggregate timberland area in the South is projected to change as well. What figure 13.15A (IH), figure 13.15B (IL), figure 13.15C (EH), and figure 13.15D (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 (chapter 16, fig. 16.12).

Common to the IH and IL scenarios, pine plantation areas are projected to increase by 21 to 26 million acres, or by about 67 to 80 percent from 1995 levels of pine plantations. The pine plantation projections by scenario are displayed together, along with historical amounts, in figure 13.17. 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 under private ownership, keeping private timberland 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 private timberland area of just over 27 million acres (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 private timberland in other forest types, but this tradeoff is only partial. As pointed out in chapter 16, 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 chapter 6 for details). Similarly, in the IH and IL projections, a share of the private pine plantation acreage increase is projected to be at the expense of agricultural land as well as private timberland that is currently in natural forest management types. 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 direct tradeoff, 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 private pine plantations and the area of timberland in private natural forest types projected for 2040. In the IH scenario, pine plantations are projected to cover 53.6 million acres in 2040, while in the IL scenario the figure is 57.9 million acres. Each percentage point increase in growth rate above a 50-percent increase for industry [and each 0.5 percentage point increase above 25 percent for nonindustrial private forests (NIPF)] results in about 170,000 fewer acres of projected pine plantations by 2040. Similarly, because the IH scenario projects private timberland area in natural forest management types of 122 million acres and the IL projects that area to be 123 million acres, each percentage point (for industry and 0.5 percent for NIPF) increase in pine plantation growth rate is projected to save about 50,000 acres 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 13.18 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 the most pine plantations in 1995 (6.4 million acres), is projected to have the most in 2040 (9.3 million acres). Alabama, with the second most in 1995 (4.0 million acres), is projected to have the second most (7.5 million acres) in 2040.

Under the base case scenario, the increase in pine plantation area is projected to be largest on the Gulf and Atlantic Coastal Plain and Piedmont ecoregions (fig. 13.19). In 1995, the southeastern mixed forest and the outer Coastal Plain mixed forest each contained about 15.4 million acres of pine plantations. They are projected to have 25.6 and 25.4 million acres, respectively, in 2040. The eastern broadleaf forest ecoregions together accounted for about 0.6 million acres of pine plantations in 1995 and are projected to contain a total of 1.2 million acres of such plantations in 2040.

State-level projected changes in private timberland area in natural forest management types under the base case scenario are shown in figure 13.20. All States are projected to lose acreage in natural forest types under this scenario. States projected to lose most privately owned 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 (fig. 13.21A). This finding holds for the IL (fig. 13.21B), EH (fig. 13.21C), and EL (fig. 13.21D) 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. (We note here, however, that the FIA surveys upon which 1990s harvest levels were estimated were old, deriving from FIA surveys of the 1980s and early 1990s. Hence, differences between the projected levels of private timber harvests from timberland between 1995 and today may represent the result of the inaccuracies generated from old surveys.) 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 (fig. 13.22A). In absolute terms (volume per year), the story is more mixed (fig. 13.22B). 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. This is made possible not only by rising growth rates on plantations but also because some forest that is projected to be converted to nonforest uses provides volume that enters timber markets at the time of conversion; the Piedmont and Florida are examples of this. Other places are projected to have decreases in harvests even while forest areas might be stable to rising (parts of Mississippi, Arkansas, and Louisiana). 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 from private lands 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 13.23A (IH), figure 13.23B (IL), figure 13.23C (EH), and figure 13.23D (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 2002).

Hardwood harvests from private lands 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, many of these harvests are projected to be associated with conversion from forest to urban uses (fig. 13.24A). 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 (fig. 13.24B).

Across all States and species combined, projected trends for growth and removals differ by ownership in the IH (fig. 13.25A), IL (fig. 13.25B), EH (fig. 13.25C), and EL (fig. 13.25D) scenarios. In both the IH and the IL scenarios, until about 2030, growth is projected to exceed removals on NIPF timberland. On industry-owned 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 acres in pine plantations and fewer acres in natural forest management types on private lands will affect age structure of southern forests. Softwood forests are projected to become younger (fig. 13.26A 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) will be harvested at a higher age. The amount of such natural pine in private ownership 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 to 40 years) (fig. 13.26B). 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 private timberland 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: when growth exceeds removals, inventory increases; when removals exceed growth, inventory declines. Figure 13.27A shows the growth and removals projections for Alabama, while analogous figures are offered for Arkansas (fig. 13.27B), Florida (fig. 13.27C), Georgia (fig. 13.27D), Kentucky (fig. 13.27E), Louisiana (fig. 13.27F), Mississippi (fig. 13.27G), North Carolina (fig. 13.27H), Oklahoma (fig. 13.27I), South Carolina (fig. 13.27J), Tennessee (fig. 13.27K), Texas (fig. 13.27L), and Virginia (fig. 13.27M). 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 (fig. 13.28A) and hardwood species (fig. 13.28B). The prices reported here are the aggregate of all size classes of timber (pulpwood, sawtimber). 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 to 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.