By Virginia McDaniel Southern Research Station
May 13, 2022 – In the first year of the COVID-19 pandemic, prices for processed wood products, such as softwood lumber and plywood, nearly quadrupled. Wholesale plywood prices increased from $400 to $1,500 per thousand square feet (roughly equivalent to retail plywood prices increasing from approximately $12.80 to $48.00 per sheet).
Jeffrey Prestemon, Senior Research Forester and Forest Service Project Manager, studies the market factors behind the rising prices of these important consumer products.
“As researchers, we study the reasons for a problem, quantify its impacts and look for solutions,” explains Prestemon. “The knowledge we develop in the Forest Service can lead to more mutually beneficial solutions and decision-making, both in government and private industry.”
The pandemic has triggered labor shortages in many sectors, including the forest products industry, resulting in limited availability of wood products, such as softwood lumber and structural panels (plywood softwood and oriented strand board). The domino effect continued with supply chains further disrupted by a lack of truckers to move materials. On the phone were those of us who were housebound under travel restrictions, wanting to spend more money on home improvements.
“Factories wanted to increase production, but they couldn’t find workers,” explains Jeff Prestemon. “It’s basic economics: when the supply curve moves backwards and demand increases, prices go up.”
Another result of worker absences and departures has been an increase in average industrial wages. However, the higher wages did not bring in enough additional workers to compensate for the increased demand and the limited supply. High-level skills are increasingly required to work with advanced machinery in wood processing facilities.
“As work in the wood products industry is increasingly mechanized, the workforce now needs to be more technically competent and highly skilled,” says Prestemon. “It takes time to develop these skills, so increasing production in a short time is not as easy as it used to be.”
Overall, wood supplies from Canada and other countries have not been enough to depress US prices. Canada, historically the largest source of wood imports to the United States, increased its shipments of wood products to the United States in 2020 and 2021. However, imports have been slow to arrive due to shipping constraints .
Other factors also limited supply from Canada. Annual allowable cuts in some Canadian provinces have been lowered due to an outbreak of the mountain pine beetle, which has attacked half of the total commercial lodgepole pine volume since the 1990s. The Effects of U.S. Timber Tariffs Canadian softwood industry are not fully known, but they could have further limited timber imports during the pandemic.
Prestemon pointed out that the supply and demand of products determine the price of goods.
“Together, increasing employee wages and increasing the number of technically competent employees will help increase production and lower prices,” he said. “Expanding plant capacity, perhaps through greater foreign direct investment in U.S. production, can also contribute to a supply chain solution.”
Ultimately, consumers demand wood products for home construction, renovation projects and other uses. High prices discourage consumption. But now, with apparent profits to be made in the manufacture of wood products, the industry could respond to these incentives.