The Changing Southern Forest Economy: What It Means for Forest Landowners

A recent Wall Street Journal article highlighted something those of us working in forestry across the South have been watching develop for some time: the forest products industry is going through a significant period of change.

Mill closures and reductions in manufacturing capacity have affected timber markets across much of the region. In some areas, the impact has been particularly noticeable in pulpwood and other lower-value products, where fewer outlets and reduced competition can make it increasingly difficult to conduct traditional thinning operations economically.

For forest landowners, this is about much more than today's timber prices.

A Forest Economy Built Around Markets

Southern forestry has historically benefited from a strong and diverse forest products industry. Landowners could grow timber with reasonable confidence that markets would exist for different products as their stands developed. Pulpwood markets were especially important because they provided an outlet for smaller trees removed during thinning operations.

Those thinnings did more than generate income. They allowed landowners and foresters to improve spacing, remove poorer-quality trees and concentrate future growth on the better trees that remained.

When markets for those products weaken or disappear, forest management becomes more complicated.

What We Are Seeing in the Field

The changes described nationally are consistent with what many of us are experiencing locally. In parts of the Carolinas and surrounding Southern markets, we have seen mills close, fewer outlets for certain products and considerably weaker competition for some classes of timber.

That doesn't mean there isn't value in Southern timberland or that every timber market is poor. Timber markets are highly localized, and conditions can vary considerably depending on location, species, product mix, tract size, access and proximity to active mills.

It does mean that management decisions that made sense ten or fifteen years ago may need to be reconsidered under today's conditions.

Don't Manage a Forest Based Solely on Today's Price

Forestry has always been a long-term business.

A pine stand planted today may be managed through several different timber-market cycles before the final harvest. That makes it important to avoid allowing one unusually strong—or unusually weak—market to dictate an entire management strategy.

The right decision may sometimes be to harvest. In another situation, it may make more sense to wait, modify a thinning prescription, invest in another management activity, or simply allow the stand additional time to grow.

There isn't one answer that applies to every property.

Timberland Still Has More Than One Source of Value

Another important consideration is that the value of forestland has never been limited entirely to the timber growing on it.

Recreational use, wildlife habitat, hunting, privacy, water resources, conservation opportunities, rural residential demand and long-term land appreciation can all contribute to the value of a property.

In some locations, these non-timber attributes have become increasingly important even as traditional timber markets have faced challenges.

That makes understanding the entire property—and the owner's objectives—more important than simply calculating the value of the standing timber.

Good Forestry Still Matters

Difficult markets don't eliminate the value of good forest management. If anything, they make thoughtful management more important.

Landowners should understand what they own, what markets are available, what their stands are capable of producing and how today's decisions affect the property twenty years from now.

Forestry has always required patience. Markets will continue to change, mills will open and close, and new uses for wood will develop. The landowner who maintains flexibility and makes decisions based on sound forestry principles is generally in a much better position to respond when opportunities arise.

At Frontier Forestry Group, our focus is helping landowners evaluate those decisions in the context of their individual property and long-term objectives.

The Southern forest economy may be changing, but well-managed forestland remains a valuable and renewable resource.