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How Will The COVID-19 Pandemic Affect The Forest Products Industry

Matthew Pelkki, George Clippert Endowed Chair of Forest Economics

College of Forestry, Agriculture, and Natural Resources

The University of Arkansas at Monticello

With millions of Americans already out of work and continued job losses exceeding that of the Great Recession of 2009, US GDP is projected to decline by 8% in 2020.  There are projections that it could take up to three years for the US economy to recover from the COVID-19 coronavirus pandemic, according to a report by McKinsey & Company.  With strong containment procedures, the recovery could happen as early as 2021; recovery is dependent on the development of vaccines for the virus and mild or no reoccurring outbreaks in 2021.  The forest products industry is heavily integrated with the greater economy through housing, manufacturing, and consumer goods.  Some likely impacts over the next 2-3 years are:1. Housing starts will fall off, slowing lumber demand and production in the second half of 2020 and first three quarters of 2021.2. Tree planting and other silvicultural operations will be severely curtailed as immigrant (H2B visa) workers are restricted in number and those that are available for work in the USA will be used for critically needed food production.3. 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.4. 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.5. Pulp demand should be mixed, with sanitary paper markets being exceptionally strong and finished paper, containers, and packaging markets markedly weaker than 2019.6. 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, and then possibly a slow recovery that could take as long as 2 years.

The effects will be delayed for the forest products industries, 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.  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.  In the very long-term, the additional 2-3 trillion dollars of debt that all Americans have taken on could influence economic growth in the future for decades to come.

For more information

Dr. Matthew Pelkki- UAM Forest Economics

Office-870-460-1949

Cell Phone 870-723-3779

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.

Wesley is the owner of South Ark Weather, LLC which owns and operates searkweather.com You may contact him at wesley@searkweather.com

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