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Introduction

Timber production in the Southeastern United States has grown both in absolute terms and relative to that in other regions of the country since the 1970s. Over this period, the South has demonstrated strong comparative advantage in producing a renewable timber resource as management has shifted from mining of volunteer second-growth forests to intensive plantation forestry. Today, forest products remain an important part of southern rural economies, but recent changes in timber markets have raised questions about the future. This report examines these changes and assesses their implications for the future.

The coincidence of several factors has altered forest products markets since the late 1990s. Industry consolidations changed land ownership across a large portion of the region’s most productive timberland. Changes in domestic consumption patterns, coupled with shifts in international trade, shifted timber demands. Depreciation and closure of older processing facilities, especially in the paper industry, has accentuated many of these factors and changed the spatial arrangement of timber markets within the region. These developments have led many in the forestry community to conclude that the future of timber markets in the United States in general, and in the South in particular, is one of decline.

At the same time, other developments seem to bode well for southern forest products industries. Production of newer, engineered wood products continues to grow. Timber supply is strong and appears to have expanded throughout the 1990s in spite of competing land use pressures. Intensive forest management continues to expand yields and the potential for growth appears to persist. Indeed, long-run forecasts of general economic and timber market activity predict expanding domestic timber demand over the coming decades. Any expansion in timber production is expected to be concentrated in the South. Forecasts reported in the “Southern Forest Resource Assessment” (Wear and Greis 2002) and the 2000 RPA timber assessment (Haynes 2003) suggest that southern forest landowners, facing strong future markets, will continue to invest in and expand their timber production capacity.

The objective of this report is to provide an assessment of long-run trends and recent (5-year) changes in timber markets in the Southern United States. Such an assessment is necessary to reconcile the recent decline in prices and production of some wood products and long-run optimism about the prospects for timber demand and productivity in the South. This assessment relies strictly on the interpretation of historical data and not on forecasting models. The focus is exclusively on understanding the most recent historical experience and placing it in the context of other developments in world markets for wood products.

This report is organized as follows. We start by charting the most basic timber market indicators: price and harvest quantity. Patterns of change in price and quantity provide insights into overall market direction. We then explore a set of factors that affect the demand for timber products, including domestic conditions and forest products trade. This analysis of demand is followed by an analysis of timber supply fundamentals, which focuses on land use, forest investment, and timberland ownership. We conclude by synthesizing these findings and discussing implications for the future of southern timber markets.