Since 1960, pallet production has quadrupled, increasing the pallet industry's use of hardwood lumber from 14 percent to almost 50 percent of total hardwood lumber production. Part of this growth can be attributed to the grocery and related products industry, which should continue as a major growth area for pallet usage over the next decade.

The general objective of this study is to provide information that can be used to understand the long-term potential and long-term trends in the grocery pallet market which relate to future regional timber demands by the pallet industry. Specific objectives are: (A) Provide information on current use of grocery pallets in the grocery distribution industry; (B) Provide theoretical framework for future analysis of the regional demand for grocery pallets; and (C) Provide information on demand for regional timber resources resulting from grocery pallet production within specified regions.

Models are presented representing demand and supply in the grocery and related products and grocery pallet markets. In the grocery pallet model, demand for new grocery pallets is expressed as an 'excess demand' where demand for new grocery pallets equals the difference between aggregate supply of pallets to grocery distribution and available inventory of grocery pallets in the system. Inventory of grocery pallets in grocery distribution is expressed as a function of dollar volume of retail sales, based on application of a stock adjustment model for durable inputs.

Consumption of grocery pallets by the grocery distribution industry is shown to be an important part in overall new pallet production even though the pallet used, 48"x40", only constitutes about 11 percent of total new pallet production in 1986. Estimates of national consumption of new grocery pallets in 1986 are broken down into regional estimates of new pallet consumption.

Volume of wood raw material used in 1986 for production of grocery pallets is estimated to exceed 838 million board foot of wood raw material, or potentially 18 percent of total hardwood raw material consumed in production of all types of pallets. National trends effecting wood use in grocery distribution are considered. Specific regional trends effecting wood raw material use are not identified.