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.

Brighter notes

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.”