The downturn in the U.S. housing market is cutting production substantially in Canada’s wood products industry, causing profits to decline for the third consecutive year in 2007, according to the Conference Board of Canada.

“At $1.5 billion this year, profits will be down from their 2004 peak but will still fall within the historical range for this industry,” said Michael Burt, senior economist, in a news release. “The effects of the downturn in the U.S. housing market are still working their way through the industry. Production cuts will continue in the first half of 2007, and prices will improve modestly after hitting bottom last year.”

Profits reached a record $3.9 billion in 2004, but have declined steadily since then. As the weakness in U.S. housing markets comes to an end in 2008, production and prices will rise, and so too will profits-exceeding $2 billion by 2010. These levels do not include duties being returned to producers as part of the softwood lumber agreement, as they are considered an extraordinary profit item.