Montana's Forest Products Industry.

• Author: Keegan III, Charles B.

Market Conditions

Wood and paper products markets in 1999 were substantially improved over 1998 (Figure 1). With a stronger than expected U.S. economy and modest improvements in the global economy, wood and paper product prices increased dramatically during the first half of 1999. In July 1999, lumber prices were near record levels and 40 percent higher than they were in July 1998. Lumber and plywood markets remained extremely volatile, and in late July, prices turned sharply downward and fell steadily before rebounding in November and December. On balance, however, lumber and plywood prices were 10 to 20 percent higher in 1999 than in 1998.

1999 Employment, Production, and Sales

Driven by higher prices, value of production and output from Montana's mills increased from 1998 levels. Total sales value of primary wood and paper products in 1999 was nearly $1.3 billion, up from $1.2 billion in 1998 (Figure 4).

Estimated forest industry employment for 1999 was 11,000 workers--down about 100 workers from 1998 (Figure 2). The decline was due primarily to the shutdown at the Darby Lumber mill in 1998. Remaining mills increased production, leading to an overall statewide rise in production. The rise is due primarily to increased recovery and capacity utilization at remaining mills.

Montana's lumber production was 1,361 million board feet (MMBF) in 1999, up from 1,304 MMBF in 1998 (Figure 3).

Plywood production has increased from 618 million square feet to 632 million square feet (Figure 3). Production from paper, log homes, and most other manufacturers was higher in 1999 than in 1998.

Outlook

Because of somewhat lower levels of U.S. housing starts, lumber and plywood producers expect slightly lower, but more stable, prices in 2000. With a still strong domestic economy and increased international demand, other producers believe prices will be equal to, or slightly higher than 1999 prices.

Timber availability remains the major concern of Montana's industry. For example, American Timber, a large sawmill in northwestern Montana, recently announced a July 2000 closure due to a lack of national forest timber sales.

Montana's increased production in 1999 was fueled in part by importing raw logs. Even with much stronger markets, national forest timber offerings have fallen to their lowest level since...