Soft lumber prices, driven by a surplus of standing timber and declining housing demand, are squeezing margins for timber companies in Arkansas and the Deep South. Despite a strong timber supply, low prices and reduced demand, especially since the 2008 recession, have made landowners hesitant to harvest. This situation could worsen as housing starts decrease, further impacting the timber market.
According to Woodcentral, a huge increase in standing timber (which has doubled in 45 years) and declining housing demand is to blame for persistently soft lumber prices, which are now crunching margins for timber companies in Arkansas and several swing states in the Deep South.
That is according to leading economists from the Arkansas Center for Forest Business, which reports that one of the United States’ most timber-dependent economies is grappling with an increasingly tricky lumber market – and could get worse before it get’s better.
Last week, Wood Central reported that the housing crisis – specifically in low- and middle-income detached, semi-detached, and multifamily residential areas – is poised to shape the presidential elections, with the American building and construction market now flooded with lumber.
Now Freddie Mac, one of the United States’ largest home loan mortgage government-sponsored enterprises (GSEs), has reported that “net timber growth (in the American South) continues to exceed harvests by 25 million tons annually,” with total standing timber in the state (of Arkansas) nearly doubling since 1978.
According to Nana Tian, an economist and associate professor at the University of Arkansas at Monticello, “the strong supply of timber in the South—including Arkansas—has existed for a long time. (However) the decreased timber prices—especially after the Great Economic Recession of 2008—have made many landowners hesitant to harvest.”
“The predicted housing starts decrease contributes to a relatively decreased demand in timber, so combined with a downward trend in demand and market price, the timber supply is very strong.”
