November-December 2016

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24 PalletCentral • November-December 2016 allet production has contributed to the strong performance of U.S hardwood sawtimber. Southern hardwood sawtimber prices for both stumpage and delivered products are at historically high levels. To understand why, we must take a look at sawtimber markets, pricing trends, and their drivers. The main drivers of timber production in the United States have been new home construction and the demand for industrial forest products. During the past two decades, the increase in imported forest products and manufacturers of pulp and paper and furniture moving operations overseas have led to the decline of wood manufacturing sectors. The recent Great Recession and housing market crash have further exacerbated this decline. Hardwood Supply and Demand The aforementioned effects can be seen in U.S. hardwood supply and consumption in Figure 1, which shows supplies from all sources: Eastern U.S. production, Western U.S. production and imports. Overall domestic U.S. hardwood lumber consumption decreased to 8.4 billion board feet (-3%) in 2015 from 8.7 billion board feet (bbf) in 2014 ii (Figure 1). In 2015, hardwood lumber supply continued to exceed demand. An active crosstie market alleviated some of the downward pressure in consumption, but both consumption and supply were more than 25% lower in 2015 than in 2005. When comparing consumption of various hardwood lumber products over time, the effect of the housing market collapse and growth of industrial lumber consumption is evident (Table 1). Overall hardwood consumption in 2015 dropped nearly 27% since 2005. The biggest declines in consumption were in furniture, millwork, cabinets, and flooring, which consumed about 50% (5.6 bbf) of all hardwood lumber in 2005 to about 20% (2.0 bbf) in 2015. Pallets, however, made up about 32% (3.8 bbf) of all hardwood consumption in 2005 and more than 40% (3.6 bbf) of hardwood domestic consumption in 2015. Railway ties also showed strong consumption, growing from 7% (0.9 bbf) to nearly 13% (1.1 bbf) of all hardwood consumption. Export volumes deteriorated in 2008 and 2009, along with hardwood consumption from U.S. residential construction; however, by 2014, exports had not only fully recovered but also reached record levels. Exports in 2015 were down from 2014 but remained above levels in 2005 through 2013. Hardwood and Softwood Stumpage and Delivered Prices Price trends examined over time can provide valuable information to inform future business decisions. TimberMart-South has continually tracked timber prices in 11 southern U.S. states since 1976. Figure 2 shows South-wide softwood and hardwood sawtimber stumpage prices for the past 10 years. Hardwood sawtimber has been more expensive than pine sawtimber for the third year in a row and is the only major product that was up in 2015 compared to 2014, as well as five and 10 years ago. Whereas stumpage prices represent the prices landowners are paid for the timber, Figure 3 shows the information from a different vantage point: sawtimber delivered prices, or mill delivered prices, which are the timber prices paid by mills. The delivered prices MARKETS P Southern Hardwood Sawtimber Markets and Pricing Trends By Yenie L. Tran, Thomas G. Harris, and Sara Baldwin

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