MISSISSIPPI STATE -- Mississippi's timber industry may break its string of record years as preliminary figures show a slight decrease in value as higher prices couldn't completely offset reduced harvests.

The state's timber industry has a 1998 projected value of $1.31 billion, down about $3 million from 1997. This fraction of 1 percent decrease still put it above the 1996 harvest value.

Dr. Bob Daniels, forestry specialist with the Mississippi State University Extension Service, said 1998 started unusually with all-time high prices for pine saw timber in January and February. Prices trended down from that initial peak.

"People have been looking at the January peak and saying markets are really down," Daniels said. "But when you look at the prices for the whole year, we do have a lower volume of harvest by about 4 percent, but the reason our value didn't suffer too badly is because average prices have still been good."

Pine pulpwood took the biggest hit both from slumping prices and lower demand. These prices fell about 7.5 percent compared to 1997. Pine saw logs price dropped considerably from early in the year, but the year's average price is still about 5 percent higher than 1997's average prices.

"We had such a dry year and soft lumber market in 1998 that the lower standing prices of the summer persisted through September and October," Daniels said. "Additionally, all our forest products markets were impacted by the economic slowdown in Asia, some more than others."

Pine lumber demand was lowered especially by financial troubles in Japan, a major importer of Pacific northwest and Canadian softwood lumber. This lumber left on the domestic market caused a national oversupply, which depressed prices most of the year.

"Even though we've had the best housing market in the United States in a decade, there's been lots of lumber available and it's been an opportunity for lumber users, and not as much for lumber producers and landowners," Daniels said.

Hardwood saw logs had a good year, increasing almost 14 percent overall in price, primarily on the strength of oak prices. A lower volume was harvested, but the high prices overshadowed this. Hardwood pulpwood prices increased about 2.5 percent from 1997 levels.

"The Asian market is having a direct affect on us through the pulpwood markets because a lot of wood fiber, especially hardwood chips, have been going to Japan for the last eight years or so," Daniels said. "Japan's recession is affecting demand."

David Barge, president of Barge Forest Products Co., in Macon, said timber owners have faired well in 1998, but finished product prices suffered a 25 to 30 percent reduction in 1998.

"I attributed that to the acceptability of substitute products and the share they've taken of the lumber market," Barge said. These substitute products include plastic, steel and engineered products made of wood.

Adding to the price reduction is increased timber production and manufacturing worldwide. The best worldwide export market currently is the United States, Barge said. The Asian crisis has compounded the problem, and countries such as Brazil, Chile and Scandinavian nations have a better exchange rate in Asia and the United States than does U.S. exporters.

"I think that even after the Asian economy corrects itself, these other countries have established a foothold in the market, and the U.S. producers are not going to be able to regain the market share they had prior to the crisis," Barge said.

Total softwood lumber exports from the United States are down 31 percent in 1998. Further declines are expected, Daniels said, but domestic demand saw an all-time high in 1998. Softwood lumber demand is expected to be about 3 percent less in 1999.

"The problem is there is too much softwood lumber available," Daniels said. "Abundant supplies combined with declining softwood lumber exports caused these prices to fall about 20 percent in 1998. Competition to sell lumber in the 1999 market should remain fierce."

Heat and drought in the summer actually made logging easy, allowing a plentiful log supply all through summer and into October which generally lowered prices and made mill buyers choosy. The drought did hurt newly planted pine plantations, killing a reported 20 to 30 percent of those planted in Mississippi in the spring. Other Southern states suffered plantation failures of 60 to 70 percent from the drought, Daniels said.

"This has made pine seedling demand high as winter planting starts," Daniels said.