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Summary of Changes

Changes in both harvest quantities and timber prices since 1998 suggest that the timber market is in the midst of a transition. Prices have declined from their peak levels but remain relatively strong for hardwood products and softwood sawtimber. However, these moderate declines and a precipitous decline in softwood pulpwood prices suggest that returns to timberland owners are now substantially lower than they were in the 1990s, when these returns peaked. Especially for softwood pulpwood, these patterns suggest a strong contraction in pulpwood demand coupled with stable to expanding supplies of standing timber.

Looking jointly at price and harvest changes for the three largest product classes in the South (fig. 5, fig. 6, and fig. 7), we can define three distinct periods of development between 1977 and 2002:

Moderate growth phase

1977–86: During this period, harvests of all products increased at a moderate rate while timber prices stayed constant or even declined for all three of the major products. These trends are consistent with expansion of both supply and demand for the products.

Rapid growth phase

1986–98: During this period, harvests of pulpwood and softwood sawtimber continued to increase but at a faster rate than between 1977 and 1986. Prices for these products also increased during this period, and at a higher rate than prices for harvests. This pattern of change is consistent with a strong expansion in timber demand but doesn’t provide conclusive evidence of changes in timber supply. It is consistent, however, with demand expanding faster than supply. In contrast, hardwood sawtimber production was stable, with increasing prices signaling a tightening of hardwood saw-log supplies.

Adjustment phase

1998–2002: During this period, both harvests and prices declined for pulpwood products. These patterns of change are consistent with a strong contraction in the demand for pulpwood. For softwood sawtimber, harvests leveled off with declining prices. This is consistent with an expansion in sawtimber supply, coupled with a decline in demand. Limited data for hardwood sawtimber indicate that harvests and prices were stable over this period.

In subsequent sections of this paper, we examine various demand and supply factors that have likely influenced markets for timber products in the South, with attention focused on evaluating changes that occurred during the adjustment phase (1998–2002).