The federal and South Australian governments have more than doubled funding to a study into the future of the forestry industry in the state's southeast.

More than $1 million will now be spent on the Cellulose Fibre Chain Study with $580,000 allocated for stage two.

Federal Industry Minister Greg Combet says the study will help prepare the forestry sector in the southeast to compete internationally by producing niche, high-value products.

SA Manufacturing Minister Tom Kenyon said the study would help identify short, medium and long-term business opportunities.

"This is an important project for South Australia's economy as developing higher value forestry products is the key to creating a sustainable future for the forestry industry," Mr Kenyon said.

"The southeast forestry industry accounts for approximately 35 per cent of local employment and offers great potential for the region to secure a sustainable economic future."

The study follows the closure of some timber milling in the southeast and the South Australian's move to sell of future timber harvests.