Timber Markets Mixed
Pulpwood markets in the Southeast have been weakened by several
factors. First, a recession in the United States and in other
countries that trade with the United States has weakened demand for
pulp and paper. Second, continued consolidation in the forest
products industry has reduced one of the cornerstones of
capitalism-competition. Third, three drought years with prospects
for a fourth have caused few seasonal interruptions in the supply
of wood fiber for mills. Finally, many pine trees planted under the
Conservation Reserve Program are now large enough to thin and have
increased the supply of pine pulpwood. Because the CRP program was
originally designed to take highly erodible cropland out of
row-crop production, many of the CRP sites are ones that can be
logged during wet weather, which has been lacking in most regions
of the Southeast. What is ahead for the pulpwood
market? Of course, no one knows for sure and in our global
economy, events halfway around the world can affect us in the
United States. Recent weather predictions show a wetter and cooler
pattern for the South. As we begin the spring, the economy appears
to be rebounding, although predictions are for a slow recovery.
Changes in Timber Markets Mixed weather patterns may help local
markets, but may provide only temporary relief. Consolidation in
the forest products industry will likely continue and markets will
likely be dominated by one or two mills in many regions. Markets
for both hardwood and pine saw timber have fared much better.
Housing starts have continued to be a bright spot in a lackluster
economy and have defied the usual recessional trend of falling. The
average size of new houses has continued to increase, thus
requiring more lumber. Demand for saw timber is expected to be good
for the next several months. Speaking of mergers, the latest
merger involved Mead Corporation and Westvaco Corporation.
Last August, the two companies announced a merger that would create
a global company with leading positions in packaging, coated and
specialty papers, consumer and office products, and specialty
chemicals. The enterprise value of the combined organization was in
excess of$10 billion. The new company is known as Mead Westvaco
Corporation, with $8 billion in annual revenues. The elimination of
the duplicate services and positions has begun in several areas of
the combined companies.