North Carolina timber delivered to wood-using mills was valued at $775 million in 2013 (Jeuck and Bardon 2014). A key driver affecting a landowner’s decision to invest in forest management is industrial demand for the timber crop. That demand motivates the production of mature, sawtimber-sized trees suitable for producing lumber.
Softwood tree species, primarily the southern yellow pines (Pinus spp.) in North Carolina, supply lumber for use in residential and commercial construction. The lumber sawn from North Carolina’s higher quality hardwood trees is often the primary raw material for many other secondary wood products industries, including the state’s wood furniture cluster in Hickory and High Point. Lower grade hardwood sawtimber produces lumber for upholstered furniture frames, mats, and board roads for energy exploration, along with pallets for shipping goods across the country and around the world.
This publication provides information regarding lumber production by North Carolina manufacturers over a 16-year time series, 1998 through 2013, along with consumption statistics by downstream sectors and final users. Estimated values of lumber revenues are provided as well and are based on posted market prices. Partnered with timber or other forest product market trends, the information presented here can assist production forestry clientele—landowners, loggers, and mills—in their decision-making. These estimates will be revised periodically as new data become available.
Data were gathered from several sources. Historical national lumber production and consumption statistics, both softwood and hardwood, from 1965 to 2011 were obtained from the US Forest Service (Howard and Westby 2013). Lumber production and consumption estimates for the United States in 2012 and 2013 were derived statistically using multiple linear regression models with real US gross domestic product (GDP) and housing starts as explanatory variables.
Lumber consumption and production in North Carolina were estimated using an income-based approach (Laaksonen-Craig et al. 2003). State annual lumber consumption was calculated as the product of national lumber consumption times the ratio of real GDP by State for North Carolina to real US GDP.
Yearly lumber production in North Carolina was determined by first calculating the ratio of annual payroll for the Sawmills sector (NAICS 321113) in North Carolina to its national equivalent (US Census Bureau 2012). The payroll ratio was next weighted by mill receipt data for softwood and hardwood sawlogs from North Carolina’s timber product output reports. The weighted payroll ratio was then multiplied by national lumber production. This calculation was done separately for both softwood and hardwood lumber.
Softwood lumber production revenues were calculated using the annual average price for No. 2 and better southern yellow pine lumber. The values of hardwood lumber production were determined using a weighted average price for the following species (sold as rough green or partially air dried): No. 1 common red and white oak, yellow-poplar, and soft maple. Weights were the proportional species representation in the North Carolina sawtimber inventory. Revenues reported should be considered as those paid to the producers.
Real US GDP, national housing starts, and real GDP by State data were downloaded to Excel using the Federal Reserve Bank of St. Louis Economic Data Add-In (FRED®). Sawmill payroll statistics for the United States and North Carolina were obtained from the US Census Bureau’s County Business Patterns (2015). Both state and national payrolls were adjusted for inflation using the Producer Price Index—Lumber (US Bureau of Labor Statistics 2015). Lumber prices were based on those published by RISI Inc. (1998 through 2013) and Hardwood Review (1998 through 2013) and were adjusted to 2013 constant dollars using the Producer Price Indexes for softwood and hardwood lumber respectively (US Bureau of Labor Statistics 2015).
Combined softwood and hardwood lumber production averaged around 2.500 billion board feet (BBF) from 1998 to 2003 before peaking in 2005. Effects from the housing sector fallout and subsequent global recession began taking shape soon after the 2005 peak. Statewide production fell 38.4% from 2005 (2.716 BBF) to 2009 (1.672 BBF). From the 2009 low point, production had increased 35.3% to 2.262 BBF by 2013. (Figure 1.)
It is logical that lumber consumption has followed a trend similar to that of production. Consumption peaked in 2005 at just over 2.000 BBF of softwood and hardwood lumber before falling to 1.047 BBF in 2009. Falling demand by downstream users linked to housing was largely responsible for this falloff. Neither production nor consumption had returned to pre-recession levels by 2013.
Overall, North Carolina has been a net producer of lumber since at least 1998. Annual production has generally exceeded annual consumption by 0.700 BBF, with the exception of the years 2008 to 2010. Lumber exports from the state are destined for several markets, both domestic and foreign.
North Carolina is primarily a manufacturer of softwood lumber. More than two-thirds of the state’s total annual production volume is accounted for by softwood species, and this trend has held for every year of the time series. Much of this production comes from large southern pine sawmills located in the state’s piedmont and coastal plain.
Over the time series, softwood lumber production has annually exceeded 1.2 BBF; prior to 2008, softwood lumber production annually exceeded 1.6 BBF. Aside from 2003, production steadily increased until 2005, peaking at nearly 2.0 BBF. Production declined moderately in 2006 (2.3 % decline from 2005) and 2007 (9.0% decline from 2006) before falling an additional 24.9% in 2008 from 2007. Since 2009, production has increased annually at an average rate of 5.3%. Production volume in 2013 was estimated at 1.579 BBF (Figure 2.)
Softwood lumber consumption peaked in 2005 at just over 1.7 BBF and reached a series low of 0.864 BBF in 2009. Consumption had generally trailed production by approximately 0.290 BBF from 1998 to 2007. Note that consumption nearly approached production in 2008, when the difference between the two was only 0.150 BBF. Since 2011, production has exceeded consumption by at least 0.360 BBF annually. Nearly all of the softwood lumber exported from North Carolina is destined for domestic markets in other states.
The hardwood lumber industry consists of two primary product categories—appearance grade lumber and industrial products. Higher quality hardwood trees, which are capable of producing greater volumes of appearance grade lumber, are located more so in the western part of the state than elsewhere. The hardwoods of eastern North Carolina are more commonly manufactured for use in industrial grade products.
Hardwood lumber production and consumption in the United States have been in overall decline since the late 1990s, and the trends in North Carolina have been no different. Production peaked in 2000 at 0.815 BBF before falling to a low of 0.453 BBF in 2010. Movement in consumption over the time series was similar to that of production, but year-on-year changes were largely of lesser magnitudes (Figure 3.)
North Carolina, on average, has annually produced 2.67 times more hardwood lumber than it has consumed since 1998. This differs from the national trend, in which hardwood lumber consumption has been largely equivalent to production since 1965 (Howard and Westby 2013). Further, the hardwood product mix has undergone a dramatic shift in the United States in recent years. The relative volume of appearance grade lumber manufactured has lessened, while industrial products now comprise approximately 60.0% of total hardwood production. The proportions of appearance grade and industrial hardwood products manufactured and consumed in North Carolina were unknown over the 1998 through 2013 time period.
The state’s wood furniture industry was historically the largest consumer of appearance grade lumber. The decline of that industry nationally contributed to a global shift in demand for appearance grade lumber away from domestic markets to foreign destinations. North Carolina hardwood lumber in recent years has been shipped primarily to China, Vietnam, Italy, and Canada. In fact, most of the total lumber volume exported from the state to foreign markets—both hardwood and softwood—is hardwood lumber (USDA FAS 2015).
Plotting lumber revenues over the time series reveals three distinct time periods. From 1998 to 2005, annual production averaged1 $1.095 billion in value and fluctuated no more than 6.0% from the mean. The small declines in overall sales for these years appeared related to the long-term decline in hardwood lumber production. In the four-year period from 2005 to 2009, the value of North Carolina lumber fell by half. Since the low point of 2009, state lumber revenues had increased by $419 million. The overall annual average1 value of production from 1998 to 2013 was $948 million. (Figure 4.)
In 2013, total lumber sales had recovered to surpass their pre-recession level of 2007 and at the same time exceeded $1.000 billion for the first time since 2006. The 2013 value of softwood lumber was $593 million, which was $43 million more than the 2007 pre-recession year. Likewise, hardwood lumber, which was valued at $423 million in 2013, had moved $30 million beyond its 2007 value.
1 As measured by the geometric mean.
Lumber product value is a significant contributor to North Carolina’s economy. Even at the lowest point of the time series, the state produced well in excess of 1.500 BBF of softwood and hardwood lumber. Approximately 70.9% of that production has been softwood lumber, with 29.1% being hardwood. This split has held relatively constant over the 1998 through 2013 time period.
Lumber consumption in North Carolina has primarily been centered in the sectors of residential and commercial construction; engineered wood products manufacturing; wood windows, doors, and millwork manufacturing; and upholstered wood furniture manufacturing. The consumption mix of lumber has also remained relatively constant in the state since 1998. Approximately 84.0% of total lumber consumption has been softwood species, while 16.0% has been hardwood species.
The figures in this fact sheet highlight how global events and trends have affected local lumber production and consumption activities. Recoveries in residential and commercial construction in the United States have been gradual, albeit sporadic, since 2009. This trend advanced both softwood and hardwood lumber revenues above pre-recession levels in 2013. The rise of world markets for US lumber has pushed gains in net exports. And with the rise in markets, the global competitiveness of North Carolina hardwoods has improved.
In the near term these factors should offer cautious optimism. Improved construction and remodeling markets offer business opportunities for North Carolina manufacturers but also low-cost competing imports. Lumber exports from North Carolina to China have comprised more than 40.0% of total foreign export sales for the state since 2011. Recent events regarding the Chinese stock market and valuation of its yuan should therefore be observed prudently. Further, any continued strengthening of the US dollar in the world market makes American exports more expensive and foreign imports less so. The expiration of the Softwood Lumber Agreement between the United States and Canada in October 2015 could offer an additional level of uncertainty for the state’s softwood manufacturers. The duration of that uncertainty is unknown.
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Publication date: Feb. 19, 2016
Last updated: Oct. 12, 2016
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