MISSISSIPPI STATE -- Mississippi's timber industry is feeling the effect of Japan's economic crunch even though most Southern pine lumber rarely makes the voyage across the Pacific.

Dr. Bob Daniels, forestry specialist with Mississippi State University's Extension Service, said Japan is North America's largest wood products trading partner, principally buying softwood lumber from the western United States and Canada.

"The Asian recession has significantly hurt the export market of softwood lumber. Wood that was once sold to Pacific Rim countries like Japan is now competing with Mississippi's lumber," Daniels said. "That is causing an oversupply of softwood lumber across the United States, pushing prices lower."

The specialist said with the exception of supplies, leading economic indicators for the lumber market have been positive. Building permits and new home sales provide insight into future housing starts. Current U.S. housing starts are reasonably good, about 1.4 million annually. Housing starts are an indicator of softwood lumber demand for construction, and hardwood lumber for furniture and finishing. However, these positive factors are being neutralized by the oversupply of softwood lumber.

Sales of existing homes also are important to predict the renovation/repair markets for lumber. Daniels said all these factors impact hardwood products as well.

"Some hardwood lumber goes to make furniture, wood flooring, decorative moldings and paneling," he said. "There tends to be a six month lag time behind housing starts before these hardwood demands show up."

Daniels said pine sawtimber prices reached all-time highs in January and February of nearly $482 per thousand board feet. Summer prices have averaged $436. Dry weather makes harvest easier and keeps plenty of timber logs on the market.

"It will be a while until supplies back off enough to help prices significantly. Supplies are historically higher in late summer, and the Asian situation is just compounding the problem," Daniels said. "We may see the normal rally in prices as winter arrives, but not as much as usual."

In 1997, the forestry industry set its 10th record in 11 years with estimated value of $1.31 billion.