Softwood Lumber and Stumpage Market Shifts

An eight equation econometric model was used to quantify shifts in the demand and supply of Douglas-fir and southern pine lumber and stumpage by holding the shifters in the respective equations constant at their 5-year average values for the period 1947-1951 and 1963-1967. The results show that the decrease in supply of stumpage for both species far exceeded the other market shifts. The declines were 1.5 and 4.3 billion board feet for Douglas-fir and southern pine stumpage supply respectively. There was very little change in the demand for Douglas-fir stumpage, but southern pine stumpage declined by 1.8 billion board feet. Similar shifts occurred in the lumber market. Douglas-fir lumber demand declined by 200 million board feet while southern pine demand declined, by 2.6 billion board feet. The domestic supply of Douglas-fir lumber declined by 700 million board feet. This was compensated for by a nearly equal increase in imports from Canada, leaving the total supply virtually unchanged. The model estimate suggests a 300 million board foot decline in the supply of southern pine lumber, but this estimate fails to account for the change in the industry’s capacity. When the change in capacity was accounted for, a 1.9 billion board foot decline in supply was indicated for southern pine lumber. These shifts were measured at the prices prevailing in the initial period. A comparison of the economic forces operating in the lumber and stumpage markets revealed the agony the lumber industry underwent between these two time periods. The shifts caused lumber prices to fall and stumpage prices to rise. This created a price-cost squeeze on the sawmills. While the Douglas-fir market shifts were a great deal milder than those that occurred in southern pine, the squeeze on the Pacific Northwest sawmills was more severe than that felt in the South due to the more inelastic short run demand and supply curves.

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