STRONG demand, rising prices and a drop in imports have encouraged UK timber growers to be moderately optimistic about their short-term future.

Matthew Rivers, managing director of Tilhill, which harvests more than 1.5 million tonnes of timber a year, said of its latest market analysis bulletin: "It has been written against a background of continued optimism. Although we are cautious about the fragility of the market and slowdown of the housing sector, our future price forecasts reflect that."

Rivers notes legendary economist JK Galbraith's assessment of forecasters that "there are those who don't know and there are those who don't know they don't know", but adds that Tilhill's 2004 forecasts were unduly pessimistic. Similar caution has been used this year.

The key conclusions in the bulletin are that price and volume of imported sawn softwood remain a big influence on the domestic price, with import volume down more than 3 per cent last year; UK prices for logs, small roundwood and standing timber are all forecast to rise; and the government's gas emission targets are boosting the renewable energy sector, offering "significant opportunities" for UK forestry.

Although sawn softwood imports are down, Sweden again sent more than 2.5 million cubic metres to the UK, one-third of the total. Latvia and Finland each sent about 1.5 million cubic metres.

Within the UK, sales of 10.4 million cubic metres of sawn softwood worth £1.3 billion were up almost 5 per cent in the latest complete figures (for 2003), the largest part of domestic timber product sales, for uses including hardboard, fibreboard and plywood, worth more than £2.5bn to growers.

Processing and "added value" almost trebled that figure to a retail value of £7bn - still less than half the value of imports.

The Tilhill bulletin - produced in association with the Timber Marketing Group and the Forestry and Timber Association - is most optimistic about use of home-grown roundwood. Sawmill intake increased by almost 3 per cent in 2003, chipwood by 2 per cent and exports by 157 per cent. Tilhill's analysts say: "We forecast that total deliveries will increase by 7 per cent up to 2006, with sawmill intake growing at 1.8 per cent a year."

For forest and woodland owners now harvesting timber, or planning to do so soon, standing sale prices rose 3.7 per cent from April 2004 to March this year. Log prices rose more than 4 per cent after a 12-month standstill.

Exchange rates can affect sawn timber prices, particularly the krona because of Sweden's dominant import market share, although the euro and dollar - Latvian timber is traded in US dollars - are also important. Forecast exchange rates indicate that import prices will firm, increasing the price of home-grown logs.

The report adds: "With cautious optimism, indications of potential prices for products such as chips, sawdust bark and sawn timber suggest that a sustained price rise of at least 2 per cent a year for logs is possible."

Roundwood and standing timber sales are also forecast to increase while the government's intention to have 10 per cent of electricity produced from renewable sources by 2010 could be beneficial.

The bulletin notes: "The shortage in overall renewable capacity, coupled with a growing timber resource and obstacles to other renewable capacity expansion, offers opportunities for UK forestry to promote and support biomass projects.

"[However] potential demand from 'planned' projects exceeds the total current UK annual timber harvest."