by Matt King
Arkansas Farm Bureau

   It seems like everywhere we look today, people are talking about the downturn in the U.S. economy. At the heart of the issue is the sub-prime mortgage crisis. Foreclosures are happening at a breakneck pace because a large number of homeowners are “upside down” on their mortgage, meaning they owe more than their house is worth, and their adjustable rate mortgages have become more than they can afford.

   The foreclosures combined with tightening in the credit market have put the brakes on the U.S. housing market. New housing starts in 2007 were down more than 25 percent from 2006 levels, coming in at just under 1.4 million permits. This slow down has caused a ripple affect through the rest of the economy ultimately reaching the forestry industry in Arkansas.

   According to the American Forest and Paper Association, housing starts and remodels are a key-driver of the timber market utilizing approximately two-thirds of the nations lumber and wood products.

    In 2007, Southern Pine shipments only totaled 16.6 billion board feet, down more than 10 percent from a year earlier.  As demand for lumber slowed many mills were left with a backlog of lumber supplies. 

   Over the past year, a number of sawmills in the state have suspended operations laying off thousands of Arkansans in the process. Arkansas is not alone; as sawmills across the United States have suspended operations in an effort to clear out the backlog of lumber supplies.

   The weak demand for lumber is reflected in the sharp decline in saw-timber prices, which declined from more than $45/ton in early 2007 to around $38/ton today in southeast Arkansas. 

   The silver-lining, if there is one, is the pulpwood market. As saw-timber prices plummet, pulpwood prices continue to remain strong and in many cases, rise. The reason is that paper mills and others who depend heavily on sawdust and chips from the sawmills are now having to buy pulpwood to fill the void left by the sawmills.

   Strong demand for pulpwood has led to a more than 20 percent increase in pulpwood prices. There are reports that strong pulpwood prices have even led to premature clear-cutting of pine stands.

   The question most people are asking is: “How long will this last?” Industry representatives say we will likely see the lending issue worsen before it gets better. Problems in the lending industry mean housing-starts will likely slow even more in 2008 as it becomes more difficult for individuals to get financing.

    Many experts forecast it will take until at least 2010 to see any kind of significant increase in saw-timber prices. As for pulpwood, prices are likely to remain strong as long as sawmills are unable to operate at full capacity. 

   To help navigate landowners through these changes in the forestry market, Arkansas Farm Bureau is proud to team with Reynolds Forestry in presenting the 5th Annual Magnolia Landowners Conference on June 28, 2008 in Magnolia.  This year’s conference Changing Markets: The New World of Forestry includes concurrent sessions to allow landowners to focus on issues and topics most pertinent to their operations.

     Topics to be covered include:

• Market Situation and Outlook

• Taxation

• Land Management Plans

• Biofuels

• Harvesting & Selling     Techniques

• Tree Farm Certification

• Reforestation

• Soil Nutrition

• Wildlife Management

• Carbon Credits, Vendor/Sponsor Presentations

     The registration fee, which covers all conference materials and lunch, is $35 for Arkansas Farm Bureau Members and $50 for non-members. Brochures and registration forms are available at your county Farm Bureau office or by contacting Matt King at 501-228-1297 or matt.king@arfb.com.