Softwood Markets

Softwood sawtimber is a major component of timberland value and returns for most institutional timberland investments.

The US is a major consumer of softwood lumber (See for example, Forest Research Notes Vol 13 No 1, Wood Use in US Housing.) This has been the case for a long time (Figure 1).

Figure 1. US Softwood Lumber Consumption as a Percent of World Consumption

Source: UN FAOStat

About 2/3 of US softwood lumber consumption goes to housing, both new houses (40-50%, depending on the year) and repair and remodeling of existing homes (20-30%). So, we can get a pretty good idea of what the demand for softwood lumber is by looking at US housing, especially housing starts (Figure 2).

Figure 2. US Housings Starts

Source: US Census Bureau

US softwood lumber production and imports from Canada are highly correlated with housing starts (Figure 3 and Table 1).

Figure 3. US Housings Starts, US Softwood Lumber Production and Imports from Canada

Source: US Census Bureau, Random Lengths

Table 1. Correlation Coefficients for Softwood Lumber and Housing Starts