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MEMORANDUM

DATE:
June 3, 2005

RE:
Badger Paper Mills, Inc. - Commission File No. 000-00795

Annual Report on Form 10-K for the year ended December 31, 2004

________________________________________________________

        This
memorandum responds to the comments included in the comment letter, dated May 12, 2005, of
the Staff of the Securities and Exchange Commission (“SEC”) regarding Badger
Paper Mills, Inc.‘s (the “Company”) above-referenced Form 10-K. The
Company, together with its independent registered public accounting firm and legal
counsel, has carefully reviewed the Staff’s comment letter and intends to make the
noted changes prospectively. Although the Company believes that its historic financial
statements and prior SEC periodic filings were correct in all material respects, it is
willing to make certain changes in language and presentation in future financial
statements and future SEC periodic filings in light of the Staff’s comments and
concerns.

        Please
note that the numbered items set forth below repeat (in bold italics type) the
Staff’s comments reflected in its May 12, 2005 letter. The Company’s responses
(in normal type) follow the Staff’s comments.

      Selected
Financial Data, page 5

1.

We
note you have excluded the restructuring provision from your measure of
          operating income in the tabular information presented
          under this heading, contrary to the guidance in SAB Topic 5:P.3, and
          inconsistent with your presentation in the Consolidated
          Statement of Operations on page 24. Please revise the disclosure of selected
          financial data to be consistent with the Consolidated
          Statement of Operations.

        The
Company concurs with the Staff’s comment. The $1,303,000 restructuring provision will
be presented as a component of income/loss from continuing operations in the Five-Year
Comparison of Selected Financial Data section of the Company’s future Annual
Reports on Form 10-K.

      Management’s
Discussion and Analysis, page 13

        Results
of Operations

2.

Where
two or more business reasons contributed to a material change in a           financial
statement line item, please consider the applicability of guidance
in FRC Section 501.04; quantify the extent to           which each item contributed to
the overall change, where           appropriate. For example,
although you identify two factors contributing to           higher costs of sales on page
15 you quantify the effects           attributable to just one
factor, with no mention of the offsetting factors           leading to an overall decrease
in cost of sales.

        The
minimal decrease in the Company’s cost of sales in 2004 as compared to 2003 is
primarily attributable to: (i) labor savings of $282,000 and (ii) an $878,000 net last-in,
first-out (“LIFO”) credit adjustment, offset by: (iii) a $699,000 increase in
the cost of natural gas and electricity. The Company will ensure that when two or more
business reasons contribute to a material change in a financial statement line item, where
appropriate, the extent to which each item contributed to the overall change is adequately
quantified in future SEC periodic filings.

3.

Please
expand your disclosure to describe the extent to which your           reported financial
information is indicative of future operations, given the 2004
restructuring activities and workforce           reduction. Please refer to SAB Topic
5:P.3, FRC Section 501.02, and Instruction 3 to Paragraph 303(a) of
Item 303 of Regulation           S-K for further guidance.

        The
Company will include in the Management’s Discussion and Analysis of Financial
Condition and Results of  Operations — Results of Operations — Executive
Overview section of its Annual Report on Form 10-K for the year ending December 31,
2005, disclosure to the following effect: “[t] he workplace redesign process to
improve manufacturing efficiency and quality was completed during 2004, resulting in a
permanent 20% workforce reduction at the Peshtigo Facilities. The labor and fringe benefit
cost savings associated with such workforce reduction are estimated at $2,014,000 and
$1,337,000 for the fiscal years ended December 31, 2005 and December 31, 2004,
respectively.”

        Application
of Critical Accounting Policies and Estimates, page 20

4.

Please revise your disclosures to address the material implications of the uncertainties that are associated with the methods, assumptions and estimates underlying your critical accounting measurements. Specifically,
you should provide the following:

               (a)

               An analysis of the uncertainties involved in applying the principle and
               the variability that is reasonably likely to result from
               its application.

               (b)

               An analysis of how you arrived at the measure and how accurate the
               estimate or underlying assumptions have been in the past.

               (c)

               An analysis of your specific sensitivity to change based on outcomes that
               are reasonably likely to occur and have a material  effect.

      Please
refer to FRC Section 501.14 for further guidance.

        The
Company will include in the Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Critical Accounting Policies and
Estimates section of its Annual Report on Form 10-K for the year ending December 31,
2005, disclosure to the following effect:

         “Revenue
Recognition

        Description:  Sales
revenue consists of direct sales to customers. Sales are recorded when products are
shipped to the customer, with provisions for discounts and rebates to customers and
returns and other adjustments provided for during the period in which the related sales
are recorded.

        Judgments
and Uncertainties: Accounting for revenue recognition requires the Company to make
assumptions and apply judgments when estimating the provisions for discounts and rebates
to customers and returns and other adjustments. Periodically, the Company reevaluates its
estimates to assess the adequacy of the provisions for discounts and rebates to customers
and returns and other adjustments and adjusts the amounts as necessary.

        Effect if Actual Results Differ from Assumptions:  If actual results differ from
the Company’s estimates and judgments used to calculate the provisions for discounts
and rebates to customers and returns and other adjustments liability, then the Company
may be exposed to gains or losses that could be material. A 25% increase in the
provisions for discounts and rebates to customers and returns and other adjustments
expense at December 31, 2004, would have decreased the Company’s net earnings by
$294,000 for the fiscal year ended December 31, 2004.

2

         Research
and Product Development Costs

        Description:  The
Company’s strategy is to expand its product offerings into specialty and niche
markets. The costs associated with the development of new products are expensed when
incurred. To the extent that new product trials are successful, customers pay for the
product and the product is included in sales for the period.

        Judgments and Uncertainties:  The accounting for research and development costs
requires the Company to assign research and development related activities into expense
or reimbursed cost sales categories.

        Effect of Change in Reimbursed Cost of Sales:  If research and development
activities result in a higher proportion of the incurred costs being categorized as
expense compared to reimbursed cost sales, then the Company may be exposed to additional
costs that could be material. A 25% reduction in the reimbursed cost sales amount for the
fiscal year ended December 31, 2004 would have decreased the Company’s net earnings
by $130,000 for such fiscal year.

         Bad
Debt

        Description:  During each accounting period, the Company determines an allowance to be reserved to
cover potential uncollectible accounts receivable. The Company’s methodology is
based upon a risk-based evaluation of accounts receivable associated with a customer’s
ability to make payments.

        Judgments and Uncertainties:  These evaluations require considerable judgment in
assessing the ultimate potential for realization of these receivables, including
reviewing the financial condition of the customer and considering current market
conditions. If the financial condition of any of the Company’s customers
deteriorates, then such customer’s ability to make the required payments may become
impaired, which may result in increases in the Company’s bad debt allowance.

        Effect if Actual Results Differ from Assumptions:  If actual results differ from
the Company’s estimates and judgments used to calculate the allowance for bad debts,
it may be exposed to losses that could be material. A 25% increase in the allowance for
bad debt reserve at December 31, 2004, would have decreased the Company’s net
earnings by $100,000 for the fiscal year ended December 31, 2004.

         Benefit
Accruals

        Description:  During
each accounting period, the Company estimates the amount to be accrued for medical costs
incurred but not yet reported under its self-funded employee medical insurance plans. The
Company’s estimates are based on an evaluation of past rates of claim payouts and
trends for payouts.

3

        Judgments and Uncertainties:  This determination process requires significant
judgment and is dependent upon the likelihood that past trends are representative of
future payment patterns. A significant shift in usage and payment patterns within the
Company’s medical plans could necessitate significant material adjustments to these
medical cost accruals in future accounting periods.

        Effect if Actual Results Differ from Assumptions:  If actual results differ from
the Company’s estimates and judgments used to calculate the accrual for medical
costs incurred but not yet reported, it may be exposed to losses that could be material.
A 25% increase in the accrual for medical costs incurred but not yet reported liability
at December 31, 2004, would have decreased the Company’s net earnings by $163,000
for the fiscal year ended December 31, 2004.”

      Note
A – Summary of Accounting Policies, page 27

        8.
– Inventories, page 28

5.

Please expand your disclosure to describe the various costs elements that comprise inventories
to comply with Regulation S-X, Rule 5-02.6(b).

        The
Company values inventories at the lower of cost or market and includes the costs of
materials, labor and manufacturing overhead. The Company used the LIFO method to
determine the cost of its inventories at December 31, 2004 and December 31, 2003. The
value of inventories presented in the Company’s consolidated balance sheets included
in its Annual Report on Form 10-K for the year ended December 31, 2004, before reduction
for the LIFO reserve, approximates replacement cost at the respective dates.

        The
Company believes that the disclosure provided in item number eight of Note A, Summary
of Accounting Policies, to its consolidated financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 2004, when supplemented with
the disclosure related to inventory included in Note D, Inventories, to such
financial statements, describe adequately the various cost elements in the Company’s
inventory. The Company does not charge sales, general and administrative costs to
inventory.

        10.
– Environmental Expenditures, page 29

6.

We are unable to locate disclosure addressing your accounting for asset           retirement
obligations and the related information required under FAS 143. Tell
us the effects of adopting this standard so           that it is clear why you regard
disclosure unnecessary.           Please explain how you have
interpreted and applied this guidance to the various           closure and remedial activities
you are required to           undertake.

        The
Company does not have any legal obligations related to the retirement of any long-lived
asset as of December 31, 2004. The asset to which FASB 143 would have applied is the
landfill described in Note M, Commitments and Contingencies —Environmental
Matters, to the Company’s consolidated financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 2004. This landfill has been
closed, and pertinent details of this closure are described in this footnote. Future
remedial actions, if any, are in the nature of a contingency and are also described in
this footnote. The Company completed the closure in 1999, and has monitored the site for
a five-year period with no deterioration in groundwater quality. Accordingly, the Company
does not expect to incur significant remediation costs in future periods. In addition,
the Company included the following disclosure in Note 6, Contingencies, to its
unaudited condensed consolidated financial statements included in its Quarterly Report on
Form 10-Q for the quarter ended March 31, 2005, and similar language will be included, as
appropriate, in future SEC periodic filings.

4

        “Under
Section 289.41 of the Wisconsin Statutes, a business entity is required to demonstrate
financial responsibility for closure, long-term monitoring and any remedial action
related to its landfills. On May 5, 1999, the Company entered into a
Conditional Disclosure Plan (the “Plan”) that required it annually to document
and report its financial responsibility to the Wisconsin Department of Natural Resources (“WDNR”)
for a five-year period. The Company’s obligation to be able to demonstrate its
financial responsibility is ongoing. In March 2005, however, the Company had contact with
the WDNR regarding the extent of its ongoing  reporting obligation to the WDNR.
As a result of this inquiry and additional follow-up, the Company determined that its
reporting obligation to the WDNR ceased on July 1, 2004.  The Company no longer has
any reporting obligation to the WDNR. Pursuant to the Plan, an environmental consultant
retained by the Company monitored and evaluated the effectiveness of the current
alternative landfill cap design regarding the post-cap groundwater quality from December
1999 through September 2004. In January 2005, the Company’s environmental
consultants issued a report that suggested a net improvement in groundwater quality.
Based on this report, the Company believes that the future solid waste facility closure
activities that are subject to the financial responsibility requirements consist of
maintenance of the current landfill cap and groundwater monitoring for the next five
years. The Company estimates the annual cost related to such maintenance and monitoring
to be less than $10,000 per year. The WDNR has not yet responded to the January 2005
closure assessment report. In the event of any future deterioration of groundwater
quality, the Company will be responsible for the costs of any agreed upon remediation
plan. While the future costs associated with remediation, if any, cannot be reasonably
estimated as of the filing of this Quarterly Report on Form 10-Q, such costs could have a
material adverse effect on the Company.”

        13.
– Revenue Recognition, page 30

7.

We
note your disclosure on page 6, indicating that in addition to your           sales of
paper products, you also obtain revenues from           “certain
converting operations.” Tell us why you have not provided the           separate
revenue and cost information for products and           services in
your Statements of Operations, as would ordinarily be required to           comply with
Regulation S-X, Rule 5-03.1. If you believe           the amounts
are not material, please submit a qualitative and quantitat