April 10, 2020
COVID-19’s impact on forest products industry could linger into 2021
By the U of A System Division of Agriculture
- Timber a top 10 Arkansas commodity, at $405 million
- Arkansas is the third most timber-dependent economy in the nation
- Sanitary paper markets bright spot
- Home remodeling may rebound when lockdowns disappear
MONTICELLO, Ark. — Fewer housing starts, and less tree planting because of migrant labor restrictions are two ways the COVID-slowed economy may affect the Arkansas timber industry, Matthew Pelkki, economist for the University of Arkansas System Division of Agriculture, said.
Pelkki, based at the University of Arkansas at Monticello, is the George Clippert endowed chair of forest economics, and part of the Arkansas Forest Resources Center.
Forestry is one of the state’s top commodities in terms of cash farm receipts, valued at $405 million. Arkansas is the third most timber-dependent economy in the nation.
Delayed effects, delayed recovery
“The effects will be delayed for the forest products industries,” Pelkki said. “And since demand for wood is derived from manufactured products, the recovery will be slower, particularly for landowners who will likely see very weak stumpage markets in 2021 and 2022.”
The forest products industry is heavily integrated with the larger economy through housing, manufacturing, and consumer goods. Pelkki said some likely impacts over the next two to three years are:
- Housing starts will fall off, slowing lumber demand and production in the second half of 2020 and first three quarters of 2021.
- Tree planting and other silvicultural operations will be severely curtailed as immigrant workers with H2B visas are restricted in number and those that are available will be working in food production.
Pelkki wasn’t looking for any quick economic rebounds.
“A likely national and global recession will last at least through 2020 and may last until the third quarter of 2021 which will affect demand for consumer goods and manufacturing of high-value products so consumption of pallets and ties will decline,” he said, adding that “global trade in wood products will likewise be curtailed until at least mid-2021, with the most severe declines in the second and third quarters of 2020 lasting through the first quarter of 2021.”
What follows is “possibly a slow recovery that could take as long as two years,” Pelkki said.
The outlook wasn’t all gloom and doom.
“Home remodeling may actually rise in portions of 2020 and 2021 when stay-at-home orders are relaxed, thus helping ease the decline in softwood and hardwood consumption,” he said.
Then there’s one of the pandemic’s most infamous ripples, the mass panic-buying of toilet paper, paper towels and other household paper goods.
Pelkki said that pulp demand should be mixed, “with sanitary paper markets being exceptionally strong.”
However, finished paper, containers, and packaging markets looked markedly weaker than in 2019.
“U.S. fiscal policy will likely be to maintain extremely low-interest rates to speed the recovery; this will greatly benefit the forest products industry as well,” he said. “In the very long-term, the additional $2-3 trillion of debt that all Americans have taken on could influence economic growth in the future for decades to come.”
To learn more about Arkansas’ agriculture industry see the Agricultural Profile of Arkansas athttp://bit.ly/19ArkAgProfile.
For information and resources on COVID-19 for families, businesses and others, visit https://uaex.edu/covid-19.
About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system.
The Division of Agriculture is one of 20 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.
The University of Arkansas System Division of Agriculture offers all its Extension and Research programs to all eligible persons without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
About the College of Forestry, Agriculture and Natural Resources
The mission of the University of Arkansas at Monticello College of Forestry, Agriculture and Natural Resources is to nurture the intellectual and personal development of students, enlarge the body of knowledge in forestry, agriculture, and natural resource management, disseminate new ideas and technology, and promote the use of creative, science-based solutions that enhance the quality of life of people and communities.
The University of Arkansas at Monticello offers all its programs to all eligible persons without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
Media Contact: Mary Hightower
Director of Communications
University of Arkansas System Division of Agriculture