"Timber famine" or "Wall-of-wood" ? One opinion

A report on bioenergy demand and the southern forest resource that was presented at the annual Mulch & Soil council in the last quarter of 2012 draws this conclusion: the planting peak in the late 1980s + the economic recession in 2010 = some states have BOTH a "timber famine and a wall-of-wood." Bob Abt is a professor of natural resource economics and management in the Department of Forestry and Environmental Resources at NC State University. Abt explains that the full supply of trees in South Carolina comes from sawtimber that has remained unharvested because of the slowdown in the housing and construction markets. At the same time in South Carolina, one of the most important timber states, there has been a failure to plant new trees that has resulted in a "famine" of smaller trees needed for the pulp, paper, mulch, and bioenergy industries, which have been using larger trees to meet industry demand.

"First, plant a lot of trees, then stop planting trees. Next, have a big housing recession when all those trees we planted reach sawtimber size, then start using biomass when the trees we didn't plant reach pulpwood size," Abt ​says to describe the current situation in South Carolina. Did you get that?

The factors that impact the future of pricing in the wood industry are numerous. Increasing demand for biomass in the form of fuel chips and wood pellets competes with the same forest resources that paper mills need.​ Abt predicts that even if the U.S. housing market makes a strong comeback, prices for sawtimber are not going to increase because of the excess supply of trees. "The huge bubble of older trees sitting out there means that even when demand for housing goes up, you still have more supply sitting out there... so that's going to dampen that recovery. Prices will certainly go up, but they won't go up as much as you would normally expect."

Prices for sawtimber fell 40% between 2007 and 2011, according to market analyst Forest2Market. It notes that sawtimber harvests have been depressed since 2007 which will likely continue through the middle of this decade. Abt says that one possible game-changing factor for sawtimber demand might be a shift in sawmill capacity from British Columbia, because of beetle kills reducing the resource base.​

Abt says projecting out 10-20 years, he remains concerned about the timber situation. "I'm worried that even when demand comes back, sawtimber prices will remain depressed and people who are harvesting trees may choose not to replant because they're not getting the revenues they were expecting. So I'm worried there will be a continued depression in planting even when housing comes back."​

This blog post represents an overview of an article from Soil and Mulch Producer News by P.J. Heller, and not necessarily the view of Johnson Land & Timber, LLC.​