Source: NORTHEASTERN RESEARCH STATION submitted to
THE INFLUENCE OF MARKETS ON THE SUSTAINABILITY OF EASTERN HARDWOOD FORESTS
Sponsoring Institution
Forest Service/USDA
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
0197226
Grant No.
(N/A)
Project No.
NE-4805-2
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Oct 1, 2000
Project End Date
Oct 1, 2005
Grant Year
(N/A)
Project Director
Luppold, W. G.
Recipient Organization
NORTHEASTERN RESEARCH STATION
11 CAMPUS DRIVE
NEWTOWN SQUARE,PA 19073
Performing Department
FORESTRY SCIENCE LAB - PRINCETON, WV
Non Technical Summary
(N/A)
Animal Health Component
15%
Research Effort Categories
Basic
85%
Applied
15%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
12306133010100%
Goals / Objectives
Develop procedures to predict how future market induced disturbance will change species distribution, timber quality, and sustainability of specific ecosystems and examine how adaptive technology will influence these changes.
Project Methods
Ascertain the nature and magnitude of market-induced disturbance for specific locations by relating the resource base, structure of the hardwood processing industry, processing technologies, and proximity to markets to the level of harvesting and residual stand attributes (structure and composition) after harvesting.

Progress 10/01/06 to 09/30/07

Outputs
Over the last 40 years, trends in interspecies and intergrade hardwood lumber prices have been erratic. In the early 1960s, high- and mid-grade hard maple commanded high prices while red oak was the least valuable lumber regardless of grade. In the 1980s, high- and mid-grade oak prices surged, but prices of all grades of maple and yellow-poplar declined. During the 1990s, maple prices increased in all grades while the price of oak increased only in the lower grades. It is important to understand changes in interspecies and intergrade pricing as well as the market forces causing these changes because lumber price reflects the use of these products relative to availability. What these long-term trends indicate is that as species become more available, markets for these species will develop. By contrast, as species become less available, substitute material will be developed. As a result of these trends, we can expect the species composition of the eastern hardwood forests will continue to change. Still if the tendency for partial timber removal continues, then shade-tolerant and mid tolerant species will become more dominant.

Impacts
This research examines how markets have adjusted to changing forest composition and how these adjustments influence harvesting methods that in turn influence future forest composition.

Publications

  • Luppold, William G.; Bumgardner, Matthew S. 2007. Examination of lumber price trends for major hardwood species. Wood and Fiber Science 39(3): 404-413.


Progress 10/01/05 to 09/30/06

Outputs
Over the last 40 years relative prices of oak and maple species have fluctuated as demand (driven by fashion considerations) and relative availability have changed. In the mid-1960s, maples were important appearance species and along with black cherry dominated the furniture markets. From 1973 to 1990, the price of oaks increased as white oak was in high demand in export markets and red oak was used heavily in the production of furniture and kitchen cabinets for the domestic markets. During the same period, the price of hard and soft maple declined. During the 1990s, the use of maple species for kitchen cabinet and furniture production increased while the use of white oak declined and red oak use remained steady. Maple used in appearance applications has continued to increase. These changes in market conditions have interacted with hardwood inventory volume and forest composition influenced regional lumber production. In Pennsylvania we examined these relationships from 1970 to 1999 for three hardwood regions. These regions were based on forest composition in 1989. A chronological study found that regional changes in sawtimber volumes, sawtimber composition, and lumber prices influenced shifts in regional shifts in lumber production. Specifically, regional changes in hardwood lumber production were found to be positively related to changes in the price of No. 1 Common lumber adjusted for changes in forest composition. This finding supports the contention that regional changes in lumber production are influenced by a combination of changes in interspecies lumber price and changes in species availability.

Impacts
This research examines how markets have adjusted to changing forest composition and how these adjustments influence harvesting methods that in turn influence future forest composition.

Publications

  • Grushecky, Shawn T.; Buehlmann, Urs; Schuler, Al; Luppold, William; Cesa, Ed. 2006. Decline in the U.S. furniture industry: a case study of the impacts to the hardwood lumber supply chain. Wood and Fiber Science. 38(2):365-376.
  • Luppold, William G. 2005. What do regional changes in lumber production tell us about future competitiveness? Hardwood Market Report 2005: The year at a glance. Hardwood Market Reports 9th annual statistical analysis of the North American hardwood marketplace: 88-91.
  • Luppold, William G.; Bumgardner, Matthew S. 2006. Are we transitioning from an era of oak to an era of maple? In: Chang, Sun Joseph; Dunn, Mike A., eds. Forestry: economics and environment. Proceedings of the Southern Forest Economics Workshop 2005. 2005 April 18-20; Baton Rouge, LA. [Place of publication unknown]: [Name of publisher unknown]: 185-196.
  • Luppold, William G.; Bumgardner, Matthew S. 2006. Can past price trends tell us anything about the future? Hardwood Market Report. 83(34):11-15.
  • Luppold, William G.; Bumgardner, Matthew S. 2006. Influence of markets and forest composition on lumber production in Pennsylvania. Northern Journal of Applied Forestry. 23(2): 87-93.


Progress 10/01/00 to 10/01/05

Outputs
OUTPUTS: Between 1963 and 2005 hardwood lumber production more than doubled in the northeastern and north-central regions while increasing by less than 25 percent in the southeastern and south-central regions. Increased lumber production in the northern regions was facilitated by an expanding sawtimber inventory, relative high volumes of desirable species, an expanding kitchen cabinet industry, increased exports, and increased lumber demand by the pallet industry. Hardwood lumber production in the south-central region was correlated with hardwood flooring production and after 1982 increased when flooring production increased. Lumber production in the southeastern region has been tied to the furniture industries and decreased between 1982 and 2005 as domestic furniture production declined. Today, many of the larger secondary hardwood processors are facing international competition. By contrast, smaller manufacturers producing custom and semi-custom products are increasing. These manufacturers purchase higher quality lumber and use a variety of species. Therefore, states or regions with high volumes of timber and a broad composition of species have the greatest potential for future growth in hardwood lumber production. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Industry, government, academia PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
Historic and up-to-date information on the regional production of hardwood products are needed to develop effective forest policy. This historic analysis examined the interaction of markets and timber base on regional hardwood lumber production. This examination in combination with analyses completed in prior years has established a base line in which future production of hardwood products can more easily be projected.

Publications

  • Luppold, William; Bumgardner, Matthew. 2008. U.S. hardwood lumber production: 1963 to 2003. In: Jacobs, Douglass F.; Michler, Charles H. eds. Proceedings, 16th Central Hardwood Forest Conference; 2008 April 8-9; West Lafayette, In. Gen. Tech. Rep. NRS-P-24. Newtown Square, PA: U.S. Department of Agriculture, Forest Service, Northern Research Station: 157-165.
  • Luppold, William G. 2008. Changes in the Appalachian Forest. 2007: The Year at a Glance: 11th Annual Statistical Analysis of the North American Hardwood Marketplace: 83-85.
  • Luppold, William G.; Bumgardner, Matthew S. 2008. Regional shifts in hardwood lumber production: 1984 to 2003. In: Hodges, Donald G., ed. Proceedings, 2006 SOFEW, Emerging Issues in Forest Economics. 2006 March 22-24; Knoxville, TN: 97-104.
  • Luppold, William; Bumgardner, Matthew. 2008. Regional analysis of hardwood lumber production: 1963 to 2005. Northern Journal of Applied Forestry 25(3): 146-150.


Progress 10/01/04 to 09/30/05

Outputs
Timber harvesting has been disturbing Central Appalachian hardwood forests since colonial times, but its most profound influence on forest composition has occurred during the last 130 years. Between the end of the Civil War and the Great Depression, the lumber industry went from state to state harvesting relatively large portions of the timber resource. This disturbance and the slash fires that occurred after harvesting frequently resulted in even-aged timber stands and an increase in northern red oak. During the Depression, harvesting decreased and marginal farm lands were abandoned. Mill size declined because of a scarcity of timber and selective cutting based on diameter and species became common. While shade intolerant and mid tolerant species regenerated on abandoned farmlands, the implementation of selective cutting after 1929 generally favored the regeneration of shade-tolerant species. In 1973, the adoption of floating exchange rates ushered in an era of international trade. During this period, timber that regenerated during and after the era of heavy cutting grew into commercial size and consumption by baby boomers resulted in an increase in demand for hardwood products. The markets that resulted further emphasized selective cutting based on timber quality and species. Today, the composition of hardwood forests reflects the history of harvesting disturbances and the changing market structures that promoted them. Using this frame work of market induced disturbance, we examined how regional changes in lumber production in Pennsylvania were influenced by interspecies price and changes in species composition.

Impacts
This research examines how markets have adjusted to changing forest composition and how these adjustments influenced harvesting methods that in turn influenced future forest composition.

Publications

  • Luppold, William G.; Miller, Gary W. 2004. Influence of markets on the composition of Central Appalachian Forests. In: Alavalapati, Janaki, R.R.; Carter, Douglas R. eds. Proceedings, 2004 southern forest economics workshop: competitiveness of southern forest products markets in a global economy: trends and predictions. 2004 March 14-16; St. Augustine, FL. Mississippi State, MS: Mississippi State University: 113-122.
  • Luppold, William G. 2005. The number of hardwood sawmills continues to decrease - is that bad? In: 2004: the year at a glance, Hardwood Market Report's 8th annual statistical analysis of the North Anerican hardwood marketplace. Memphis, TN: Hardwood Market Report: 80-83.
  • Luppold, William G.; Bumgardner, Matthew S. 2004. Regional changes in the timber resources of and lumber production in Pennsylvania. In: Alavalapati, Janaki, R.R.; Carter, Douglas R. eds. Proceedings, 2004 southern forest economics workshop: competitiveness of southern forest products markets in a global economy: trends and predictions. 2004 March 14-16; St. Augustine, FL. Mississippi State, MS: Mississippi State University: 60-69.
  • Luppold, William; McWilliams, William H. 2004. Avoiding spurious conclusions from Forest Service estimates of timber volume, growth, removal, and mortality. Northern Journal of Applied Forestry. 21(4): 194-199.
  • Luppold, William; Miller, Gary. 2004. The influence of markets on the composition of Central and Northern Hardwood Forests. In: One forest under two flags: proceedings of the Canadian Institute of Forestry and the Society of American Foresters joint 2004 annual general meeting and convention; 2004 October 2-6; Edmonton, AB. [Place of publication unknown]: [Name of publisher unknown]: Abstract.


Progress 10/01/03 to 09/30/04

Outputs
The 1995 USDA Forest Service assessment of Maines forest resources found that softwood growing stock volume had declined 20 percent since 1982. Reduced volumes of spruce-fir accounted for most of this decline, but hemlock sawtimber volumes also declined. In order to better understand what is taking place in Maines forest, changes in the composition were examined by evaluating the relative impacts of harvesting versus growth and mortality. Although much of the decline in spruce-fir could be attributed to the budworm infestation of the 1970s and 1980s, continued high use also contributed to the decline. Examination of spruce-fir roundwood consumption found that sawtimber production increased during the 1990s as a result of national market trends, changes in sawmilling technology, restricted Canadian softwood supplies, and low prices of sawtimber during the 1980s as a result of salvage and presalvage sales due to spruce bud worm infestation. The continuous demand for spruce-fir roundwood combined with high mortality and low growth caused a decline in inventories of these species in relative and absolute terms. However, continual use of spruce-fir sawtimber at 1990s levels is, in all likelihood, economically unsustainable. Furthermore, the high level of demand during this period was probably facilitated by capital investments resulting from the markets interpretation of the low prices as abundant supply and the lack of information on the forest resource to counter this interpretation. Unlike spruce-fir and hemlock, hardwood growing stock volumes have steadily increased in absolute and relative terms because of low utilization, high growth, and low mortality. The ample supply of hardwoods have allowed increased volumes of these species to be used in pulp and engineered wood products production. Hardwood lumber prices are unique because of the large number of marketable species and variability of prices across species. Previous research showed that long run fashion decisions regarding species selection might be influenced by price, so the interaction between fashion and species price may act to keep prices (hence, demand) of different hardwood species together in the long run. To test this hypothesis, we examined the joint lumber price behavior of six major hardwood species representing different appearance characteristics in the Appalachian hardwood region. Bivariate and multivariate price cointegration tests within lumber grades revealed no stable long run statistical relationships between different hardwood species. Therefore, current relative price levels should not be used to infer future relative levels when trying to predict relative level of future roundwood used for a specific species.

Impacts
This research demonstrates how markets adjust to changing forest composition and structure and also demonstrates that in the diverse eastern forest the concept of underutilized species can be a short lived event.

Publications

  • Luppold, William G.; Sendak, Paul E. 2004. Analysis of the interaction between timber markets and the forest resources of Maine. Northern Journal of Applied Forestry 21(3): 135-143.
  • Luppold, William G.; Prestemon, Jeffrey P. 2003. Tests for long-run relationships in hardwood lumber prices. Forest Science 49(6): 918-927.
  • Luppold, William G. 2003. Is the hardwood market entering a new era? Part I. Hardwood Market Report 81(41): 11-14.
  • Luppold, William G. 2003. Is the hardwood market entering a new era? Part II. Hardwood Market Report 81(42): 11-13.


Progress 10/01/02 to 09/30/03

Outputs
Forest composition and structure are the result of a complex interaction of harvesting activities, growth, mortality, and regeneration. This complex interaction is magnified in the Northeast United States as forested areas in this region are of varied composition and contain both conifer and broadleaf species. Arguably the most complex forested area in the east is contained in the State of Maine. This state has a variety of broadleaf species including maples, birches, beech, and oaks and several softwood species including spruces, firs, hemlock, and white pine. The vast timber resources of Maine provide raw material for numerous forest industries ranging from large paper mills to small hardwood bolt-mills and an active export market. The spruce-fir species in Maine also is periodically damaged by the spruce budworm resulting in variations in timber mortality and growth. During the last spruce budworm outbreak, large volumes of forestland had to be cut in salvage and presalvage operations. These salvage cuts temporarily increased spruce and fir roundwood supplies and decreased prices of these economically important species. However these increases were only temporary as the insect mortality decreased long run supplies of spruce and fir growing stock. During this same period that spruce growing stock was declining, increased volumes of smaller diameter spruce and fir roundwood that were previously used by the pulp industry were being exported to Canadian mills that had adopted small log sawing technologies. This complex set of market events caused the pulp industry to use increased volumes of hardwood species. Concurrent with increased hardwood pulpwood use, engineered wood product processing technology was developed to use aspen, a hardwood species that had historically been chronically underutilized. As a result of these changes in the market, low-value hardwood roundwood that had been historically underutilized became nearly as utilized as low- and mid-value softwood roundwood. While much of the research concerning the use of eastern hardwoods has examined the consumption of higher quality timber, the Maine study emphasized that forests contain vast quantities of lower quality timber. However, low quality does not always mean low value and high quality does not necessarily mean high value. Quality is a physical measurement, while value is an economic measurement. While it is true that it takes greater effort to obtain clear material for low-quality timber, value also is based on what the market is willing to pay for esthetic characteristics (color, grain, and texture) or special uses of that species.

Impacts
This research demonstrates how markets adjust to changing forest composition and structure and also demonstrates that in the diverse eastern forest the concept of underutilized species can be a short lived event.

Publications

  • Luppold, William; Bumgardner, Matthew. 2003. What is low-value and/or low-grade hardwood? Forest Products Journal. 53(3): 54-59.
  • Luppold, William; Bumgardner, Matthew. 2003. How do we define hardwood quality and how does quality relate to value? In: Amacher, Gregory S.; Sullivan, Jay, eds. Proceedings, 2002 southern forest economics workshop; 2002 March 17-19; Virginia Beach, VA. [Place of publication unknown]: Southern Forest Economics Workers: 226-234.
  • Luppold, William G.; Sendak, Paul E. 2003. Does the timber experiences in Maine hold information for other regions? In: Amacher, Gregory S.; Sullivan, Jay, eds. Proceedings, 2002 southern forest economics workshop; 2002 March 17-19; Virginia Beach, VA. [Place of publication unknown]: Southern Forest Economics Workers: 235-244.


Progress 10/01/01 to 09/30/02

Outputs
While much of the research concerning the use of eastern hardwoods has concentrated on the consumption of higher quality timber, these forests contain vast quantities of lower quality timber. However, low quality does not mean low value and high quality does not necessarily mean high value because quality is a physical measurement while value is an economic measurement. While it is true that it takes greater effort to obtain clear material for low-quality timber, value also is based on what the market is willing to pay for esthetic characteristics (color, grain, and texture) or special uses of a species. For instance, lower grade red oak is currently more valuable than mid grade yellow-poplar because consumers currently find red oak more esthetically desirable and red oak is more suitable to produce hardwood flooring. The reason why it is important to separate the concepts of value from quality is that the value of a product is what determines what will be harvested and what will be left in the woods. Another factor that brings value to wood is technology. Application of technology can range from simple ideas such as thin kerf sawing, more complex equipment such as linear log positioners and optimizing edgers, and information technology such as log sorting or coordinating log purchases to lumber inventories and expected sales. Regardless of the type of technology applied, the resulting economic efficiency can increase profits for the firm and eventually increase the value of stumpage. The need to develop and apply new technologies in lumber production is becoming more critical as shade tolerant species such as red maple displace red oak and other shade intolerant species. Because shade tolerant species can survive in the under story for a considerable period, the quality of the resulting timber can be low, thus increasing the cost of obtaining clear material. As domestic hardwood sawmill industries face increased global competition, increased use of new technologies will be critical for the sustainability of the industry.

Impacts
The impact of this research is that it isolates the difference between value and quality which allows timber owners and forest policy makers to make more informed decisions and explains how the development and adoption of new technologies can increase the value and use of a species or specific quality grades of a species.

Publications

  • Luppold, William G. 2001. Interrelationship between market demands, technology, and the northeastern forest resource with emphasis on Pennsylvania. In: Conserving future forest productivity; proceedings 2001 Penn State forest resources issues conference; 2001 March 20-21; University Park, PA. University Park, PA: Pennsylvania State University: 49-62.
  • Luppold, William; Bumgardner, Matthew S. 2002. What is low-value and/or low-grade hardwood? In: Forest Products Society 56th annual meeting; 2002 June 23-26; Madison, WI. Madison, WI: Forest Products Society: 44. Abstract.