Timber markets provide barometers for economy


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Posted: 5/24/2013


Evidence of a healthy national economy may be found in the strength of the timber industry.

Forestry is a billion-dollar industry in Mississippi and the state's second-largest agricultural commodity. A depressed national economy in recent years had negative impacts on housing construction and furniture manufacturing, which hurt the forestry sector, but industry experts are seeing signs that a recovery is at hand.

"2013 is looking better than 2012 and much better than the last several years following the recession," said James Henderson, assistant Extension professor of forestry at Mississippi State University. "The recovery for Mississippi's timber markets will take time, but everything is finally heading in the right direction."

Henderson said housing starts are on the rise, and demand is exceeding supply for both housing and building materials.

"The composite price for framing lumber for May is up 13.6 percent from the same period last year, but stumpage prices for pine sawtimber are not rebounding as quickly," he said. "In the first quarter of 2013, Mississippi pine sawtimber average stumpage fell to $26.07 per ton. By comparison, pine sawtimber averaged $39.71 per ton in the first quarter of 2007."

Henderson said one issue that will keep prices from rising more quickly will be the accumulated inventory of standing timber. Since the decline in the U.S. housing market, the rate of timber harvesting has been much lower, resulting in accumulation of standing timber.

"The Mississippi Institute for Forest Inventory is estimating that standing pine sawtimber volume was up by more than 40 percent since the last statewide inventory was conducted starting in 2005," he said. "Housing is projected to be back at a production level of about 1.5 million units a year by 2015 or 2016."

At that point, stumpage prices for pine should reflect the resulting increase in demand with modest increases. Additionally, the reduction of standing inventories as timber harvesting increases will boost prices.

David Jones, assistant forest products professor with MSU's Extension Service, said all timber products follow housing starts.

"Mills in Mississippi have increased production, and some that were offline are operational again," he said. "The expansions are a significant change from the last five years, when most reports were closures."

Jones said opening new facilities, reopening existing businesses and expanding production can affect a whole community.

"We are hearing announcements of new mills opening, such as the plywood plant in Louisville and pellet mills in south Mississippi. The Port of Pascagoula is dredging the river for barges to carry wood pellets overseas," Jones said. "The communities closest to these mills will see a direct economic impact."

Because supplies are somewhat lower than demand, Jones said product prices have also increased. Additionally, natural disasters contribute to a bump in prices by putting a stress on supply.