150 



THE OUTLOOK FOR TIMBER IN THE UNITED STATES' 



low-cost substitutes for paper and board in most 

 end uses. Also, for many items such as books, 

 tissue paper, and various kinds of containers the 

 cost of paper or board to the final consumer is so 

 small in relation to the total price of the product, 

 or to consumer income, that even fairly large 

 percentage changes in paper and board prices 

 appear unlikely to have much impact on 

 consumption. 



Although such general relationships between 

 timber product prices and demand seem reasonably 

 clear, there are no valid quantitative measures of 

 the longrun impacts of price increases on demand. 15 

 Estimates were therefore developed on a judgment 

 basis to indicate the changes in demand expected 

 to result from changes in product prices, as 

 follows: 



Change in demand resulting from a sustained 

 1 percent rise in relative prices 



Lumber, plywood, and mis- Paper and board 

 Years after price increase cellaneous products (percent) (percent) 



1st -0.1 -0.05 



5th -0.3 -0.1 



10th -0.5 -0.2 



These assumptions mean, for example, that a 

 10 percent increase in lumber prices would result 

 in a 1 percent decrease in demand in the first year 

 after the price increase. At the end of the fifth 

 year, if the price increase were sustained, demand 

 would decrease 3 percent, with a further fall to 5 

 percent in the tenth year and thereafter. This 

 sequence recognizes that it takes time to change to 

 alternative materials and ways of producing 

 products. 



Actual changes in future consumption and in 

 equilibrium prices of timber products and stump- 

 age — in contrast to the selected price assumptions 

 presented in this chapter — will be determined 

 both by future trends in demands for timber 

 products and by availability of timber supplies. 



15 Several studies have examined demand-price relation- 

 ships of timber products. Examples of recent studies of 

 this kind include: 



Gregory, G. Robinson. A statistical investigation of 

 factors affecting the market for hardwood flooring. Forest 

 Science 11(2): 200-203. 1965. 



Holland, I. Irving. Some factors affecting the consump- 

 tion of lumber in the United States with emphasis on 

 demand. Ph.D. dissertation. Sch. For., Univ. Calif., 

 Berkeley. 1955. 



An explanation of changing lumber consumption 



and price. Forest Science 6(2) :171-192. 1960. 



McKillop, W. L. M. Supply and demand for forest 

 products — an econometric study. Hilgardia 38(1). Univ. 

 Calif., Berkeley. 1967. 



Mead, Walter J. Competition and oligopsony in the 

 Douglas-fir lumber industry. Univ. Calif., Berkeley and 

 Los Angeles. 1966. 



Mills, Thomas J. An econometric analysis of market 

 factors determining supply and demand for softwood 

 lumber. Ph.D. dissertation Dept. For., Mich. State Univ., 

 Lansing. 1972. 



Zivnuska, J. A. Supply, demand and the lumber market. 

 J. Forest. 53:547-553. 1955. 



Such comparisons of timber demands and supplies, 

 and related price implications, are presented in the 

 final chapter of this report. 



DEMAND FOR TIMBER PRODUCTS IN NEW 

 HOUSING 



In 1970 roughly a third of the softwood lumber 

 and plywood, plus substantial volumes of other 

 timber products such as hardwood plywood, 

 particleboard, and insulation board, were used in 

 the production of new housing. Future demand for 

 housing is also expected to be of great importance 

 in determining demand for timber products. 



This section begins with an analysis of the de- 

 mand for housing by source of demand, that is, 

 new households, vacancies, and replacements. 

 Because of the large variation in the average use 

 of lumber and other wood products per housing 

 unit, trends in the types of units produced, that 

 is, single-family, multifamily, and mobile units, 

 have also been evaluated. 16 This is followed by an 

 analysis of the use of various timber products per 

 unit produced, and by projections of total demand 

 for timber products in the housing sector. 



Household Formation 



New household formations have long consti- 

 tuted the major source of demand for housing. 

 Although showing considerable fluctuation over 

 the years, household formations have increased 

 from an average of about 556 thousand annually 

 in the 1920's to around 1 million in the 1960's 

 (table 115). 



Headship rates. — Household formations depend 

 both on total growth in population and on the 

 number of individuals willing and able to occupy 

 separate dwelling units. The latter in turn is 

 determined largely by the age structure of the 

 population and level of income, and is expressed by 

 headship rates, that is, the proportion of the 

 population in each age group that heads separate 

 households. 



There is a well defined relationship between age 

 and headship (table 116, fig. 59). Typically head- 

 ship rates rise abruptly from the 15-19 year age 

 class to the 25-29 year age class. Rates continue 

 to rise slowly until after ages 70-75 when individ- 

 uals reach the point where they can no longer 

 maintain separate households. 



Between 1940 and 1970, headship rates increased 

 significantly in every age class. The sizable in- 

 crease in headships among older and younger age 

 persons who have traditionally lived with relatives 



16 The material on demand for housing in this section 

 has been based largely on a detailed study by Thomas E. 

 Marcin (Projections of demand for housing by type of 

 unit and region. U.S. Dept. Agri., Agri. Handb. 428, 76 p. 

 1972). Marcin's study also presents a computer model 

 for estimating future demand for housing by type of unit 

 and region. 



