Pulp & Paper and sawmill production in the U.S. South, following demand, fell in 2009, according to Forest2Market, Charlotte, N.C., USA. Pulp and paper mill production was down 4.5% overall. Pine pulp and paper mill production fell 3.5%, and hardwood pulp and paper mill production was off 7.2%. Sawmill production fell by 21.3% in 2009, according to Forest2Market's Delivered Price Benchmark, the only pricing service based on transaction-level data.

"To put these numbers in context, we developed a production volume index (see index) for the forest products industry," said Daniel Stuber, who oversees analytics and data quality at Forest2Market. "What the index shows is that, by December 2009, pulp and paper mill production had returned to its January 2008 level. For sawmills, production in 2009 peaked in March and then continued its downward trend. The news for sawmills is particularly bad. The 21% drop in 2009 follows a 23% decline in 2008."

Prices were also down in 2009 throughout the South (see price summary table). Pine saw timber prices experienced the largest decline, down more than 12% from 2008 levels—off $5.63 per ton. A 3% increase that occurred in the fourth quarter of 2009 moderated the loss to a degree, said Stuber, "We all knew the forest products industry was suffering in 2009. The benchmark results allow us to quantify the extent of the pain."

Raw material prices for pulp and paper mills, including pulpwood, primary chips, and secondary chips, also declined in 2009. Pine fiber fell by $2.11 per ton or 5.7%, and hardwood fiber fell by $1.17 per ton or 2.7%. Prices regained 8% in the last three months of the year, stemming a more substantial drop.

Biomass (or fuel-wood) was the only class of wood fiber to increase in price in 2009, gaining 3.6%. "This increase can be attributed in part to decreased sawmill production, since sawdust and other mill residues make up part of this category. Scarcity means higher prices," said Stuber. "Increased interest in biomass is also a factor. The Biomass Crop Assistance Program (BCAP) has incented loggers to remove tops, limbs, and other residues during harvest and deliver them to companies where they are used to produce heat and electricity."

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