Progress 01/01/01 to 12/31/06
Outputs
Mississippi's wood supply system has been in a state of flux over the life of this project. Certification issues and mill closures, especially pulp mills, were of major concern in the early years, followed by the sell-off of industrial forest lands, the rise of timber investment firms and globalization in the mid years and culminating with damage wrought by Hurricanes Katrina and Rita and the subsequent salvage effort in 2005. Certification training and tightened environmental requirements resulted in the departure of many of the casual - or part time - producers. A sizeable population remains. Three thousand firms and individuals met the certification criteria by 12/2006, indicating that the industry sector is a major contributor to rural economies and deserving attention. The system is still stressed. The logging cost index which measures the direct expenditures (excluding allowances for return on capital and profit) gathered from loggers' financial statements rose
from 109 to 141 between 2000 and 2005, the PPI logging remained flat, at 90% of the 1995 level. Contractors continue to reduce their investment in equipment (their primary form of business equity). Equipment outlays constituted 18.6 % of total costs in 1995, rising to 21.9% in 1998, and falling to 14% in 2005. Smaller firms have left the industry while larger firms have expanded. Common concerns in the industry are the low numbers of young people entering the industry as entrepreneurs or workers. Globalization has put price pressure on domestic manufacturers and reduced capital for investment in newer, more efficient technology. This has focused on logging contractors and a variety of initiatives to reduce wood supply costs have been attempted over the period- double shifting, increasing the use of low impact equipment, contract trucking, etc., but our work indicates the most effective and least disruptive means of improving system performance is through better (data driven)
communication between the logging contractors and consuming mills. Cooperative research promoting the use of tools for doing so with one major sawmill in the area has demonstrated that this approach can leave both the mill and the loggers in stronger positions. The selling off and subsequent break up of industrial forests and changing landownership objectives promise to result in small harvested tracts and forest management objectives that are not simply timber production driven. Smaller tracts favor smaller crews, and changing management objectives will require greater operational flexibility in round wood products produced and markets for those products. The Gulf hurricanes demonstrated the need for a more effective way to get logging contractors involved in the restoration of services immediately after a disaster of that magnitude, and the need for additional funds for salvaging and storing salvaged wood. Our research indicates that losing one dollar's worth of usable wood reduces
the state's economic activity by six dollars. Forest products are - and will continue to be - an important part of Mississippi's economy, and all three industry sectors must be kept healthy to maximize their impact.
Impacts
The tools developed from this research are being applied locally, in Canada and in Europe. One supplier for the cooperating mill, for example, ended 2006 with the equivalent of 6 weeks production ahead of his 2004 output with the same crew and equipment. the Logging Cost Index is recognized as the only long term measure of logging business performance and is widely used as a tool by both loggers and wood procurement staff in negotiating rates. Recognizing that research only has value if used, research findings and insights of a targeted nature are taken directly to loggers and procurement foresters in training sessions, on-the-ground contact and presentations at state and regional meetings.
Publications
- Stuart, W.B., L.A. Grace, C.B. Altizer. 2006. Preliminary 2004 Logging Cost Indices. Wood Supply Research Institute. 15 pp.
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Progress 01/01/05 to 12/31/05
Outputs
The transition in the Gulf coast Region wood supply system continued through 2005, with an extra push from two hurricanes. There was an emerging awareness that previous management of the system has caused many firms to withdraw, and was affecting labor recruitment by those that remained. The preliminary logging cost index indicates that costs rose 15% in 2004, the largest increase in the 10 year history of the index, while the PPI for logging rose only 3%, emphasis is slowly shifting from reducing logging costs to the maintenance of a viable entrepreneurial force. The indices also indicate that capital invested in logging and transport continues to decline in total and as a percent of per ton costs. A paper emphasizing that the primary objective of any business undertaking, including logging, is the preservation and growth of owners equity. The sales of forest industry lands continue, and the resale of these poses interesting problems for the future. The size of
tracts harvested will likely be smaller, land management and business management will be different and harvesting prescriptions more specific. The devastation from the hurricanes will make this even more difficult. Information and insights from this project were used in three short notes providing guidance for loggers and landowners concerning salvage operations. One issue that arose in the immediate aftermath of the storm and that is being pursued was how to incorporate the equipment and skills of logging firms into the immediate post storm clean-up, restoration of services and recovery. The initial concern of salvaging what can be recovered will be followed by a lull, and massive re-evaluation by all participants in the wood supply system of their future business opportunities. The amount of material that could be salvages was restricted by funds available to pay for the salvage effort and maintain long term storage yards. Logging firms, to survive in the post-Katrina era must be
prepared to make the transition profitably. We have been working with one regional firm and their contractors to develop insights into the challenges of the future, especially the challenges of smaller tract sizes, the effects of moves, the costs of merchandizing from woods landings, and the effects of dispersed delivery points. The emphases of this effort has been to work toward a wood supply system that meets the consuming mills needs but also gives suppliers the opportunity to preserve and grow their equity and become attractive sources of employment. This effort was particularly useful in encouraging two businesses to change their mode of operation, saving the firms and protecting well over a million dollars in equity and in aiding several other firms that were in business difficulty. A survey instrument was developed and approved for interviewing logging firms that participated in the loggers education program over the last five years to assess if they are in still in business,
how they view their business future, and constraints on development.
Impacts
The tools for assessing logging business performance have been adopted by at least three regional firms. The basic research methodology has been employed by French researchers and is under consideration in Canada and Sweden. There is increased awareness that entrepreneurial-based logging cannot be managed and administered using corporate tools. Harvest and delivery are key functions in the foresty supply chain. The sustainability of production forestry is linked to that of forest owners, wood-using firms, and the logging industry. The latter component has, arguably, the greatest impact on local economies because of the multiplier effect of money spent locally on wages and services. The estimated work force directly dependent on the wood supply system in Mississippi is between 25-30,000 people, most located in small towns and rural communities. Anything that can have an affect of supporting the physical and economic health of the workers and the viability of the
businesses will have a significant impact on the state.
Publications
- Grebner, D.L., L.A. Grace, W. Stuart, and D.P. Gilliland. 2005. A practical framework for evaluating hauling costs. International Journal of Forest Engineering 16(2):115-128.
- Stuart, W.B., L.A. Grace, and C.B. Altizer. 2005. Final 2003 Logging Cost Indices. Wood Supply Research Institute and Mississippi Forest and Wildlife Research Center. FWRC Publication No. FO439. 15 p.
- Stuart, W.B., L.A. Grace, and C.B. Altizer. 2005. 2004 Preliminary Logging Cost Indices. Wood Supply Research Institute and Mississippi Forest and Wildlife Research Center. FWRC Publication No. FO314. 15 p. http://www.cfr.msstate.edu/fwrc/pubs/WSRI-R7.pdf
- Stuart, W.B., L.A. Grace, and L. Stewart. 2005. Hurricane damaged timber overview. Management Technical Note 10, Forestry Extension, MSU Extension Service. 4 p.
- Stuart, W.B., and L.A. Grace. 2005. Tips for landowners attempting to salvage hurricane damaged timber. Management Technical Note 12e, Forestry Extension, MSU Extension Service. 3 p.
- Stuart, B. 2005. Ultimate objective. Timber Harvesting 53(4):16-22.
- Stuart, W.B., L.A. Grace, I.A. Munn, and J. Smith. 2005. Hurricane Katrina and private forest ownerships. Management Technical Note 13e, Forestry Extension, MSU Extension Service. 5 p.
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Progress 01/01/04 to 12/31/04
Outputs
The logging segment of Mississippi is considerably larger than traditionally assumed, and an important part of the state economy. Our findings over the life of the study indicate that there are over 3,000 individual logging firms operating in Mississippi employing over 25,000 individuals. The population is not static. The logging industry was especially hard hit by the downsizing and restructuring of the forest products industry in 2003 and 2004. Many well-established firms chose to pull back or withdraw from the industry. The perceived over-capacity of 2001 turned into perceived under-capacity in 2004. The exit and entry rate affects not only the number of businesses, but also the characteristics of the producing firms in the short term. The owner population is aging; fewer businesses have a member of the next generation planning to continue the business. The work force is aging as well. Firms are finding it difficult to attract and retain quality labor in an
industry that offers very few benefits and is subject to weather-related lost wages. Mechanization has made the work less physically demanding than in the past, but has increased the need for a literate, dependable, skilled, drug-free work force. The production forests of the state and region are undergoing major changes. The sale of industrial lands to institutional and private investors promises to have a major effect on the harvesting force. The tracts to be harvested are decreasing in both size and volume while some are encouraging larger more productive harvesting businesses in an effort to reduce transactional and administrative costs. The industry is typified by small, family owned firms; 65% have four or fewer employees. One third of the businesses are minority owned. These firms are entrepreneurial at the most basic level, with much of their capital in depreciable personal property, which makes them extremely sensitive to any factor that affects their ability to retain and
grow equity. The logging cost and productivity survey and the accompanying logging cost index continues to expand and serve as a tool for tracking the effect of industry changes on business performance. Over 70 loggers are now providing cost and production information, with a target of 100 by the end of 2005. The cost of doing business for logging firms follows general inflation trends, with fuel pushing costs upwards in 2004. The producer price index (PPI) for logging fell dramatically between 1997 and 2002, resulting in intense cost pressure on suppliers. The PPI showed some upward movement in the last two years, but a differential of more than 25% percent persists between the increase in costs and the decrease in revenues. The Logging Cost Indices reports receive wide distribution, with over 5,400 down loads from the departmental web site in 2004. The effort supports other research, such as the comparison of the change in workers' compensation insurance rates with those in other
industries.
Impacts
Measuring economic impact from a study such as this is like identifying and measuring the costs of an accident that did not happen. However, several things have happened that may have been influenced by this project. The producer price index for logging rose for the first time since 1995, indicating that consuming mills are paying more for services. Concern has arisen over the decline in capital investment in logging equipment. The tools for assessing logging business performance have been adopted by at least three regional firms. The basic research methodology has been employed by French researchers and is under consideration in Canada and Sweden. There is increased awareness that entrepreneurial-based logging cannot be managed and administered using corporate tools. Harvest and delivery are key functions in the foresty supply chain. Without them, trees become interesting biological specimens and a mill becomes simply a site for economic re-development. The
sustainability of production forestry is linked to that of forest owners, wood-using firms, and the logging industry. The latter component has, arguably, the greatest impact on local economies because of the multiplier effect of money spent locally on wages and services. The estimated work force directly dependent on the wood supply system in Mississippi is between 25-30,000 people, most located in small towns and rural communities. Anything that can have an affect of supporting the physical and economic health of the workers and the viability of the businesses will have a significant impact on the state.
Publications
- Stuart, W.B. and L.A. Grace. 2004. Logging Cost Indices for 2002. 04-R-25. Forest Operations Review.
- Stuart, W.B., L.A. Grace, and C.B. Altizer. 2004. Preliminary 2002 Logging Cost Indices and Demographics of Participating Firms. Wood Supply Research Institute. 30 pp.
- Stuart, W.B., L.A. Grace, and C.B. Altizer. 2004. Final 2002 Logging Cost Indices and 2003 Update. Wood Supply Research Institute. 11 pp.
- Stuart, W.B., L.A. Grace, and C. B. Altizer, 2004, Preliminary 2003 Logging Cost Indices, Wood Supply Research Institute, 11p.
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Progress 01/01/03 to 12/31/03
Outputs
The logging cost and productivity/logging cost index project participation is expanding with support from the Wood Supply Research Institute. Over 50 loggers are currently providing quarterly cost and production, the target participation is 100+ firms by the end of the 2005 business year. This study, assessing the changes in logging businesses over time is generating some interesting insights. The average harvesting and hauling cost per ton rose 21% between 1995 and 2002, slightly ahead of the Consumer Price Index (18%). The Producer Price Index for logging decreased 13% over the same period. The 34% percent deficit has forced contractors to adopt a variety of survival strategies. Equipment costs per ton, a measure of reinvestment, rose between 1995 and 1999, and have since fallen back, decreasing from 22% of total cost to just over 17%. This partially reflects aging equipment spreads and outsourcing hauling services. Labor costs per ton have increased nearly a dollar
over the period, with the greatest increases occurring in the last few years. Many of the younger contractors in the study left the business since 1999, and few new young contractors, whether children of existing contractors or new start-ups, are entering. The larger operations have gotten larger, and the small contractors have reduced output. This trend is disturbing as the dis-aggregation of ownerships caused by the selling off of corporate ownerships is resulting in smaller harvesting blocks, and new owners requiring specialized harvesting treatments. Hauling rates common in the industry are sufficient to support only used equipment. Logger owned fleets of 3+ trucks are being replaced by single truck owner operators. A side investigation of workers comp rates for logging compared with those for all non-farm industrial employment has found that logging rates fell later and less than those in the general economy and began to move upward from 2000 on. The continued loss of market
outlets is causing concern, especially with trucking as the dominant delivery methods. Longer hauls reduce the tonnage per day per truck and result in higher overall costs. A study of factors affecting tract specific hauling costs shows differences of as much as five dollars per ton from tracts within the same county depending on the low standard public road mileage, the number and size of towns to be passed through and highway standard. The current consolidation and cost reduction efforts of major companies have altered the wood procurement environment. Systems under stress tend to revert to earlier strategies and mills have moved from direct supplier relationships to outsourcing wood procurement. There are economies to be realized in a well administered dealer system, but the change has created opportunities for increased speculation and abuse. Timber has a low harvest penalty, owners can keep stumpage off the market for several years in hope of improved prices. Stumpage price
increases, largely due to speculation, in the late 1990s still have not had time to work their way out of the system, creating problems for local industries to remain competitive in the global market. Graduate students=4.
Impacts
Harvest and delivery are key functions in the forest industry supply chain. Without these services, trees become simply interesting biological specimens functioning within an ecosystem and a mill becomes simply a site for economic re-development. The sustainability of forest ownership and wood products manufacturing is dependent on the economic viability of the logging and hauling sector. This component of the system has, arguably, the greatest impact on community, regional and state economies because of the multiplier effect of money spent on wages and services locally. The estimated work force within and directly dependent on the wood supply system in Mississippi is between 25 and 30,000 people, most of whom are in small towns and rural communities. Any thing that can have an effect of supporting the physical and economic health of the workers and the economic viability of the businesses will have a significant impact on the state.
Publications
- Grace, L.A., J.B. Auel, W.B. Stuart. 2003. Attitudes and perceptions of logging contractors, foresters, and other participants in the wood supply system towardseducation and training opportunities. Skogforsk Arbetsrapport Nr. 538. pp. 29-38.
- Jackson, B.D., W. B. Stuart, L. A. Grace, A. J. Londo 2003 Examining the Performance of Independent Harvesting Firms in the Eastern United States, Proceeding of 2003 SOFEW Conference, in press
- Stuart, W.B. 2003. Checking our foundations: Matthews' least code models revisited. Southern Journal of Applied Forestry 27(1):30-35.
- Stuart, W.B., C. Altizer, L.A. Grace. 2003. Long term perspective of logging business performance in the eastern United States. Skogforsk Arbetsrapport Nr. 538 pp 3-11
- Stuart, W.B., L.A. Grace, B.D. Jackson, R. Stutzman. 2003. Logging Cost Indices. Wood Supply Research Institute. 23 pp.
- Stuart, W.B., L.A. Grace,B.D. Jackson, R. Stutzman. 2003. Logging Cost Indices-The effect of increasing sample size, Wood Supply Research Institute. 20 pp.
- Stuart, W.B, L. A. Grace, C. Altizer 2003. Preliminary 2002 Logging Cost Indices And Demographics of Participating Firms, Wood Supply Research Institute. 23 pp.
- Stuart, W.B, L. A. Grace, C. Altizer 2003. Action Items from the Mississippi State University Loggers Roundtable, MSU 6pp.
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Progress 01/01/02 to 12/31/02
Outputs
The forest industry and the wood supply systems of the Eastern United States continue to restructure in response to changes in the domestic and global economies. There have been fewer major disruptions than in the recent past, but the effects of previous changes continue to be felt across the wood supply system in the form of mill closures, production curtailment, and land sales. A project completed this year analyzed the production and cost histories of 38 contractors from the region across the period 1997-2001. Median production of the group has declined 10% over the period, that of operations producing 30,000 tons per year or less declined 26%. Only the larger firms, >100,000tpy, showed an increase and that only 5%. Equiment investment and reinvestment was found to be in the form of bulldozers (required to meet tightened BMPs, multiple and larger loaders (in response to industy demands for increased merchandizing and improved material preparation on loggers) and
trucks (that have resale value beyond the logging industry), none of which contribute to gains in production or business efficiency in wood supply. Production costs continued to rise, and are expected to increase dramatically in 2002 as a result of increased insurance costs and continued need to replace older equipment. The cost and productivity study has been joined and supported by the Wood Supply Research Institute which will expand both participation and coverage. The effect of a 'new' industrial philosophy of shutting down or curtailing production when wood supplies are low or prices deemed too high on contractors and suppliers is being watched with interest. Land ownership patterns have been developed for 27 of the state's 82 counties. The data are providing some interesting insights concerning the differences relative to acreage measured as total forest (uncultivated) ownership and that of the number and size of individual parcels making up that ownership. Comparisons of the
2001 ownership data and the 1995 data at the owner/parcel level is finding a number of counties where land use has not changed over the six year period, but parcel sizes have decreased. In others, we are finding that 'forest fragmentation' is really forest re-fragmentation, the breaking up of ownerships consolidated from smaller holdings by the forest industry in the 20th century back into smaller, private investor or TIMO ownerships. The resulting data is also being used in preliminary analyses of transportation systems and planning, especially as concerns rural roads usage and land ownership and development changes along those routes. Data from these and related studies have been shared with several state and multi-county economic development efforts directed not only at increasing the commodity production (pulp, paper, lumber and panels), but other products with higher local value- added ratios. A paper based on this research has been accepted for the international 2nd Forest
Engineering Conference in Vaxjo, Sweden. Graduate Students: 4
Impacts
The wood supply system is a critical part of forestry. The economic contribution of the logging sector in 2002 was half that of forest landowners, and these figures likely underestimate payments to dealers, brokers and timber buyers. The contributions of this economic sector to the social, economic and environmental sustainability of production forestry has been largely overlooked or considered as an engineering undertaking in the past. Employment in logging and transportation in Mississippi is much greater than that in either primary manufacturing and is a major contributor to the state's economy. Management information relative to the status, health and functioning of this system is proving valuable for economic development, regional planning and maintaining public support for production forestry.
Publications
- No publications reported this period
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Progress 01/01/01 to 12/31/01
Outputs
A project completed during the year assessing the causes for low utilization of harvested timber found that the reasons are more structural than technical - but do illuminate some of the factors shaping wood supply systems. The regional forest economy has, for the last half century, been dominated by commodity industries; pulp, paper and structural lumber. Markets are largely undifferentiated and emphasize volume through-put and low unit costs of production rather than volume and value recovery between the standing tree and the mill debarker. Little attention has been paid to developing different markets for timber, for reducing the amount of material left in the forest after harvest, or exploring different strategies for increasing the value added, in state, to the material harvested. Mississippi is a state that exports a significant share of the timber harvested to other states for manufacture and exports a third of its pulp production as market pulp. The last
decade has been one of major changes; increased international competition, changing forest ownership, corporate mergers, acquisitions and re-alignments, aging plants and technologies, heightened social expectations, and loss of economic advantage. (Stuart 2001a) These changes are challenging the effectiveness of older strategies for managing the wood supply system. Mill closures within the state and region are affecting markets, wood flows and prices. Many of the analytical tools and techniques used to evaluate this critical sector of the forest based economy are no longer adequate to deal with the complexity of the current business environment (Stuart 2002). All participants, consuming mills, consultants, wood dealers, loggers, trucking contractors, equipment suppliers, and financial institutions, faced with rising costs and falling contract rates have been shifting business strategies to survive. (Roles and functions of these participants are being documented in another project
within this department.) Some have been forced to consume capital to endure; others have downsized and changed markets, and many have left the business entirely (Stuart and Grace 2002?). Annual surveys of logging businesses conducted by the Mississippi Loggers Association and shared with this project shows continued erosion of logger financial health. The rate of erosion has slowed from previous years, but the trend is still downward. Forest based economic development is emerging as a serious consideration for the state, evaluating alternative markets to replace the conversion capacity lost or that may be lost. Wood movements over the last five years by transportation method are being documented as a step in estimating the nature and extent of these changes on both the state and regional wood supply systems. A detailed assessment of the state's land ownership and distribution of uncultivated land at the county level has been initiated as means of identifying and monitoring forest
ownership and ownership change. This will be meshed with other data sources in an evaluation of the infrastructural support for future development of the forest industry.
Impacts
There is a growing awareness that there is more to a forest based economy than just landowners and converting firms. The wood supply system has escaped full recognition because it falls in the interstice between agriculture and industrial censuses, and as a result it has not been measured accurately by either or both. If the state and region is to maintain the social license to practice production forestry, the full contribution to the economic and social health must be measured and supported. Different ways to increase the economic benefits must be found. Past practices of cost transference rather than cost elimination must be avoided. Recognizing and understanding the full economic system is crucial to forest based economic development and survival.
Publications
- Stuart, Bill, 2001, Profound Impact! An Analysis of the forces reshaping the South's forest industry, Southern Loggin' Times, August 2001
- Stuart, W. B. and L. A. Grace, 2002?, Are fixed costs really fixed? In review, Southern Journal of Applied Forestry
- Stuart, W. B. 2002, Matthews' models revisited, In press Southern Journal of Applied Forestry
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