A method for making a composite material including a discontinuous phase of cellulosic fiber encapsulated in and bonded to a continuous phase of a polymeric component containing a major portion of polyethylene by mixing the cellulosic fiber and polymeric component while raising the temperature of the mixture to the encapsulation point, maintaining the encapsulated material within the encapsulation range while reducing the particle size, and thereafter extruding the material while controlling its temperature within the encapsulation range and substantially aligning the fibers in the flow direction until the material contacts a heated die.