The forestry situation and outlook in the Southern U.S. is examined with respect to timber and agriculture acres, output, income, employment, and USDA policy changes. Also examined is the competitiveness of forestry and agricultural enterprises and the issue of long term leases for timber production, on marginal crop and pasture land. Forestry is a major resource in the thirteen Southern states with two to three of every five acres devoted to forest production. The total acreage of productive forests in the U.S. South is, and will continue to be, declining slightly reflecting seven percent (24 million acres) fewer acres resulting from losses to other land uses. However, this smaller forest will contain slightly more timber volume in 2040 than in 1990. It will also grow 12 percent faster and support a 48 percent larger total harvest. This increased growth and productivity is reflected by declining hardwood forests, softwood harvests near minimum merchantability limits with shorter length rotations, and more intensive timber management. Planted pine stands have increased in acreage and will continue to increase for the foreseeable future at the expense of natural pine stands and of hardwood acreage. Roundwood removals are expected to exceed growth from 1990 to 2010/2015. Growth will catch-up to and exceed removals from 2015 to 2040. Real pulpwood prices are expected to be constant for the long-run. Softwood pulpwood supply is projected to be adequate for the short-run and for the long-run with increasing inventory and removals. Softwood sawtimber supply is projected to be adequate for the short-run and to be below demand for the long-run. Real sawtimber prices will increase for the long-run. Intensive management practices are expected to concentrate forest enterprise acres and raise per acre wood flows and net returns on existing forest, forests replanted after harvests, and afforestation of marginal crop and pasture land. Continued farm policy direction toward market orientation with emphasis on environmental benefits should serve to make the South less competitive in agricultural production compared to other regions and with respect to increase returns from intensively managed forest enterprises on marginal crop and pasture land. Opportunities exist to include tree crops among those examined as alternatives for agricultural land use.