Mississippi Timber Market Conditions

James Henderson

Timber demand remains weak and timber prices continue to decline due to continuing effects of the worsening housing market and global economic recession. The oversupply of housing resulting from the continuing effects of the subprime mortgage crises has contributed to a decrease in U.S. monthly housing starts, which are now down to an all time recorded low of 466,000 units as of January 2009. By way of comparison, housing starts were in excess of 2 million units a month during most of 2006. This massive decline in new home construction has greatly reduced demand for sawtimber sized timber products. Reflecting this decreased demand, the 2008 Mississippi average standing price for pine sawtimber decreased by 35% from 2006 price levels.

Pulpwood demand increased throughout 2007 and well into 2008; however, pulp and paper market conditions have since changed drastically as the global recession has reduced orders for paper products starting early in the 4th quarter of 2008. While increased demand for pulpwood was one of the few bright spots in 2008, demand for mixed hardwood sawtimber was also greater in 2008. This resulted in part from increased oil drilling spurred by record crude oil prices in 2008. Wood products such as board road and mats produced from hardwood timber are used at oil drilling sites, and demand for these products increased in 2008 as did demand for mixed hardwood sawtimber.

The outlook for timber demand during the first half of 2009 remains dim as both the residential construction and pulp and paper industries reduce production. Demand for newly constructed homes declined over the course of 2008 as the sale of new homes plunged to the lowest on record and were down 37.8% from the previous year. Elevated inventories of both new homes and existing homes will continue to put downward pressure on new home sales and reduce residential construction. However, the current downturn in residential construction is expected to improve slightly during the latter half of 2009, which may improve demand for sawtimber later in the year. Pulpwood prices will continue to decline from recent highs seen over much of 2008 as the pulp and paper industry continues to downsize as a result of the global recession. Wood energy projects are expected to increase over the next several years which should help improve pulpwood demand.

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