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Demand Factors

Demand is an economic concept that relates the consumption of a commodity to its price. Elementary economic theory indicates that less of a commodity is consumed at a higher price and that charting all the possible price-consumption combinations defines a demand curve. This curve, however, can be repositioned based on many factors other than the commodity’s price, e.g., income, prices of substitutes for the commodity, and changing tastes. Here we examine demands for timber products by examining various factors that can reposition the demand relationships. We look closely at substitution possibilities, production capacity, and international trade as indicators of changes in domestic demand.

Wood products are one of the many commodities that are used to produce final consumer products such as homes or paper and related products. Therefore, the demand for wood products is derived from the demand for final products into which they are a material input. Wood products compete with other construction inputs such as concrete, steel, aluminum, plastics, or other fibers. We therefore need to account for these commodities when evaluating changes in wood products markets. We also need to account for the emergence of engineered wood products, such as oriented strand board (OSB), which can utilize smaller diameter trees, as substitutes for traditional wood products.

In this section, we examine the structure of demand for timber in the South. We start by examining the position of wood products relative to competing commodities in the United States. This includes an examination of trends in substitution and in the prices of substitute products. We then examine the demand for timber derived from domestic demand for solid wood products. Here, we focus on sawtimber and pulpwood products and use domestic production capacity as an indicator of medium to long-run demand. We close this section on demand by examining international trade including exports and imports of final goods and raw materials.