MISSISSIPPI STATE -- Forestry easily maintained its hold as Mississippi's second largest agricultural commodity, despite a 10-percent decline in value.

The 2001 farm value of forestry is estimated at $1.1 billion -- second to poultry's $1.5 billion level. Bob Daniels, forestry specialist with Mississippi State University's Extension Service, said 2001 was harder on the forest industry than it was on landowners.

"The industry continued to work through consolidations and mergers that have been underway for two years. Many Mississippi landowners who didn't like the market, simply held their timber for more suitable prices," Daniels said.

The state has about 18.5 million acres of timberland. Of these, 70 percent are held by private, non-industrial owners. Mississippi's forest types are about 30 percent pine, 25 percent oak/pine mix and 45 percent hardwood.

"Timber severance tax collections in 2001 indicate harvested volume was 12 percent lower. Prices were down on saw timber and remained low on pulpwood as the market corrected itself," he said. "In the late 1990s, we saw strong lumber markets, and the South increased its southern pine lumber and panel production. Southern pine lumber production grew from 12.9 billion board feet in 1990 to 16.1 billion board feet in 2000. We outproduced market demand in 2000, so we saw cutbacks in 2001, which accounts for the reduced timber harvest."

Daniels said jobs were lost as some Mississippi mills closed in 2001.

"The paper industry also has been in overcapacity for about two years, so paper companies have continued consolidating and cutting back on production in 2001. U.S. paper production was 7.3 percent lower in August 2001 than the previous year," Daniels said. "Paper companies were hit extra hard by slowing demand, energy costs and a strong U.S. dollar that limited export sales. While exports are important to lumber producers, the paper industry is in a more global market."

In 2001, the industry dealt with added uncertainty in the markets. The softwood lumber agreement with Canada expired in March. Lawsuits were filed, and the U.S. Department of Commerce ruled in favor of U.S. lumber producers who charged that Canada practiced unfair trade by subsidizing their timber industry and unlawfully dumping lumber on the U.S. market. The rulings imposed preliminary duties on Canadian lumber coming into the United States, but lumber demand was already slowing.

Another source of economic uncertainties in 2001 was the attacks of Sept. 11 that caused declines throughout the general economy.

"As we look to 2002, uncertainty remains, but general economic improvement is forecast for the second half of the year. Interest rates are the lowest in decades, and that should be good for the housing industry," Daniels said. "About 49 percent of the housing starts in the United States are in the South. As interest rates continue low, Mississippi should be able to take advantage of the market.

"Prices for standing timber in Mississippi have likely bottomed, so I'm inclined to be cautiously optimistic. Still, prices are likely to remain level rather than move up in 2002," Daniels said.