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A shrinking economy is the least of the lumber industry's worries. According to the U.S. Forest Service demand for wood products is expected to continue its decline as furniture manufacturing continues to move abroad and residential construction contracts. The trend is a long time in the making and in more recent years the decreasing demand from the furniture industry was masked by the booming housing market.

The lumber industry, like any other, experiences cycles and by some measure the current downturn is the worst in 20 years. Still that doesn't mean that the long term outlook for wood products shares a similar fate. In many ways the industry is like agriculture only with a very distant time horizon. The difficult task for those that manage forests is not the culling and raising of grade A stock but of speculating as to future demand trends and planting the appropriate type of trees many years in advance. This means that inevitably there will be winners and losers in the timber industry at any given time despite the state of the broader economy. On the other hand facilities that process the raw lumber are more vulnerable as they operate in a more cyclical space which is concerned primarily with the total demand for wood products and not the availability of raw materials.

Hard times hit U.S. hardwood lumber industry

Large furniture makers have abandoned the U.S., a growing number of raw logs are being shipped overseas for processing, and changing consumer tastes and construction downturns have slashed demand for hardwood flooring, trim and red oak, long the dominant species.

The result has been rising unemployment for forestry workers and a sharp decline in hardwood production. Government statistics show production has dropped from 12.6 billion board feet in 1999 to about 10.7 billion last year.

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