Parris Kane – LITTLE ROCK (KATV) — Arkansas is the ninth leading producer of timber in the nation, harvesting more than 24 million tons per year, worth an estimated $445 million to landowners. But a University of Arkansas at Monticello professor fears the market could have a long road to recovery from the coronavirus pandemic.
Like just about every other industry, COVID-19 has caused a major ripple effect in the timber market, and forestry professor Matthew Pelkki believes it could take at least two years to recover.
Pelkki became a professional forester in Michigan in 1985 and has been working in Arkansas’ timber industry for 20 years. But he said 35 years of experience couldn’t have prepared him for this.
“I don’t think anyone could have anticipated the amount of impact that the COVID-19 virus has had on our economy, and on so many aspects of our way of life, it’s really rippled through everything,” Pelkki said.
It’s a ripple effect, he said, that started with layoffs and unemployment.
“So when people are worried about their employment, they don’t go out and buy the most expensive thing that most Americans buy, which is a new home,” Pelkki said.
Sixty percent of the softwood pine lumber that’s milled in the state goes to new homes, according to Pelkki. The start of 2020 was anticipated to be the best housing market since the recession from 2009-2012. Since the COVID-19 pandemic, Pelkki said housing starts have dropped 22 percent, which is the fastest one-month fall since March of 1984.
Since people aren’t buying new homes, Pelkki said lumber orders are dropping, mills are slowing down, and less standing timber is being bought and harvested.
“What takes time is, in terms of processing, the wood we’re going to buy today and harvest today, it takes two years to get into the market,” Pelkki said.
Because less wood is being bought and harvested, new trees aren’t able to grow in their place. On top of that, the trees that would already be in the process of converting to lumber are still standing, slowing the production process. Pelkki said if the general economy recovery is V-shaped and the re-opening of the economy in May and June is successful and persists afterward, stronger markets for landowners will be pushed back at least two years. That means trouble for both the forestry workers, and the state as a whole.
“When markets are good, that’s great for Arkansas, when markets decline, as they have because of COVID, that really hurts Arkansas,” Pelkki said.
Overall, there are about 30,000 workers in the wood products industry, according to Pelkki, but their economic contribution supports close to 70,000 total jobs in the state. Pelkki said Arkansas is the most timber-dependent economy in the South, and ranks third nationally. However, timber prices have dropped to less than half their value 15 years ago, and Pelkki said slowdowns in the mills have already caused huge layoffs.
“We’ve already seen Anthony Timberlands layoff about 50 percent of its workforce, the Weyerhaeuser Corporation has reduced its production of softwood products anywhere from 20 to 50 percent,” Pelkki said.
Pelkki suspects about 10 percent of jobs will be lost, at least temporarily, because of shutdowns, which will have a big effect on rural communities.
“It’ll affect everything from their ability to buy groceries and pay their rent and pay, make their car payments, to even their healthcare options,” Pelkki said.
On a positive note, Pelkki said trees continue to grow and add value, but the silver-lining has its limits.
Pelkki said every year we allow existing crops to grow is another year we’re not planting faster-growing, more disease-resistant trees for the future, which reduces the long-term value. Additionally, holding off on harvesting can lead to overcrowding.
“That invites forest fires, insect outbreaks and disease to be transmitted much more quickly,” Pelkki said.
But there is good news. Trees are a durable crop, and Pelkki says what can’t be harvested today, should be available to be harvested within the next couple of years, as long as it’s taken care of.
“Should forest health issues come, even if prices are depressed, it’s time to go ahead and act and get a forester in there and manage your timberlands as quickly as possible,” Pelkki said.
While right now times are tough, Pelkki said once unemployment drops back down to normal levels, the housing industry should also bounce back. Forestry has faced similar setbacks before. For example, he said in the 2009 financial crisis, home starts declined from $2 million per year, to about $400,000 per year, and the industry recovered.
“Arkansas landowners grow trees better than anywhere else on the planet that I’ve seen,” Pelkki said. “So I really think that it’s a matter of being patient and holding the course.”
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