DEMAND FOR TIMBER PRODUCTS 



149 



of recent studies, 13 it has been assumed that an 

 average of about 75 percent of future increases in 

 timber product prices would go to stumpage. The 

 remaining 25 percent of product price increases 

 would be available to cover higher costs of harvest- 

 ing and manufacture. 



General approximations of the percentage in- 

 creases in stumpage prices associated with the 

 above assumptions, and the assumptions on prod- 

 uct prices, are shown in the tabulation below: 



Relative stumpage price indexes 

 Product and price assumptions 1970 1980 1990 2000 2010 2020 



Sawtimber stumpage: 



(1) 19701evel 100 100 100 100 100 100 



(2) 30 psrcent increase 100 161 161 161 161 161 



(3) Rising prices 100 134 175 221 275 337 



Pulpwood stumpage: 



(1) 19701evel 100 100 100 100 100 100 



(2) 10 percent increase _. 100 318 318 318 318 318 



(3) Rising prices 100 212 329 453 582 720 



There would, of course, be widely varying 

 rates of increase in stumpage prices for different 

 species and kinds of timber. Where stumpage 

 prices are low and account for only a small 

 percentage of the price of processed timber 

 products, rising product prices would result in 

 very large percentage increases in stumpage 

 prices. 14 



On the other hand, where stumpage prices 

 comprise a substantial part of the price of the 

 product, rates of growth in stumpage prices 

 would be relatively low. For example, estimated 

 increases in Douglas-fir and southern pine stump- 

 age prices associated with the third price assump- 

 tion average about 2.7 percent per year — somewhat 

 below the average rate between 1910 and 1970. 



The assumed relationships between product 

 and stumpage prices also mean that stumpage 

 in the future would account for an increasing 

 proportion of product prices. For example, under 

 the third price assumption, Douglas-fir and 

 southern pine stumpage prices would rise to 

 about 50 percent of the price of lumber by 2000 — 

 compared to roughly one-third in the 1965-70 



Stumpage prices as a percent 

 of lumber prices 



13 Anderson, Walter C. Determinants of southern pine 

 pulpwood prices. USDA Forest Serv. Res. Pap. SO-44, 

 10 p. 1969. 



Guttenberg, Sam. Economics of southern pine pulpwood 

 pricing. For. Prod. J. 20(4) :15-18. 1970. 



and Clyde A. Fasick. What decides southern 



pine stumpage prices? For. Ind. 92(13) : 45-47. 1965. 



Holley, Daniel L., Jr. Factors in 1959-69 price rise in 

 southern pine sawtimber analyzed. For. Ind. 97(4):40-41. 

 1970. 



14 This can be illustrated as follows: In 1970 the stump- 

 age price of lodgepole pine sold from the National Forests 

 averaged about $4 per thousand board feet while lodge- 

 pole pine 2X4's sold for about $70 per thousand board 

 feet. Given the assumptions on rates of increase in the 

 price of lumber (e.g., 1.5 percent per year) and the pro- 

 portion passed on to stumpage, the projected price of 

 lodgepole pine stumpage and 2X4's in 2000 would be 

 $33 and $109 respectively. The annual rate of increase 

 in stumpage prices would average 7.8 percent in the 1970's, 

 with a fall to 3.3 percent in the 1990's. 





Douglas-fir ! 



authern pine A 



■\M I' 



v 



onderosa pir 



1990 2000 



1940 1950 1960 1970 1! 



Figure 58 



period, and 10-15 percent in the early 1900's 

 (fig. 58). 



Pulpwood stumpage prices under the third 

 price assumption specified earlier would rise 

 from around 5-10 percent of the price of the 

 lowest priced grades of paper and board in 1970 

 to over 20 percent by 2000. 



Effects of Price Increases on Timber Demands 



In preparing projections of demand for lumber 

 and other timber products under these alternative 

 price assumptions it has been necessary to make 

 certain assumptions about the quantitative effects 

 of price increases on projected demands. 



General observation of timber markets indicates 

 that in the shortrun price changes may have only 

 limited effects on quantities of timber products 

 that consumers will buy. For example, the spec- 

 tacular rise of lumber and plywood prices in 1968- 

 69, and a similar rise in 1971-72, appears to have 

 had very limited initial impacts on consumption 

 of these products in most end uses. Over the 

 longer run, however, sustained upward shifts in 

 prices of timber products relative to the wholesale 

 price level and to competing products would un- 

 doubtedly lead to reduced demands for timber. 



Longrun trends in lumber consumption and 

 relative prices appear to illustrate this effect. 

 Despite the very large expansion of major markets 

 in construction, manufacturing, and shipping 

 during the present century, lumber consumption 

 in 1970 approximated the consumption level of 

 the early 1900's. Presumably the increase in 

 relative lumber prices — averaging 1.6 percent 

 per year in this period — was an important factor 

 leading to increased use of substitutes and other 

 changes affecting lumber uses. 



In contrast to lumber, the demand for paper 

 seems to be rather insensitive to price changes. 

 This is believed to reflect the lack of acceptable 



