Progress 07/18/16 to 06/30/20
Outputs
Target Audience:Research scientists at the universities, industries, and governments who are concerned about the economics and managemnet of forest resources, particularly as they relate to the dynamics of timber prices over time and how the prices over time may affect management decisions. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?This project supported a graduate student Fan Zhang who graduated in Devember 2019 with a Ph.D, dissertation "Making decision adaptive to price uncertainty and risk preference: a decision-making model for forest management'. Two articles were publised with Dr. Fan Zhang: Zhang, F. and S.J. Chang. 2018. Measuring the impact of risk preference on land valuation: Evidence from forest management. Land Economics 94(3):425 - 436. Zhang, F. and S.J. Chang. 2019. Dynamics of the softwood sawtimber stumpage market in Louisiana: Insights from quarterly data over the last 30 years. Canadian Journal of Forest Research 49(12): 1590 How have the results been disseminated to communities of interest?Results of the the study have been dissemented to commnunities of interst through publications mentioned above and also at SAF Louisiana Chapter annual conference in 2019. What do you plan to do during the next reporting period to accomplish the goals?
Nothing Reported
Impacts
What was accomplished under these goals?
First, a preliminary analysis showed that the stumpage prices reported by the Louisiana Office of Forestry and TimerMart South are highly correlated. As a result, the project focused on using the stumpage price data published by the Louisiana Office of Forestry. Second, this project established that seasonality exists in stumpage pirce and used three dummy variables to represent the second, third and fourth quarter of each year. The results suggest that the stumpage price is the highest during the first quarter of the year, followd by the fourth quarter and then the third quarter of the year. The second quarter of the year, typically, has the lowest price of the year. These results confirm what field practioniers and consulting foresters have long suspected. However, in this project, we were able to provide the exact magnitude of the seasonality effect, which at most is about $1 in real 1982 dollar, a relatively small amount, . Third, this project results in the publication of the paper "Dynamics of the softwood sawtimber stumpage market in Louisiana: Insights from quarterly data over the last 30 years" between 1988 ad 2017. The length of the study period covers major market disturbances such as the dramatic reduction of federal timber harvest in the Pacific Northwest since 1993, and the financial crisis of 2007-2008 as they affected the softwood stumpage market in Louisiana, Fourth, with the quarterly model, the resutls of this project showed that in the long run timber demand is price inelastic in its own stumpage price. This result is consistent with past studies using annual data. On the other hand, the long run supply of timber is highly elastic. The high own price supply elasticity of 2.74 is both surprising and totally contrary to all past annual based studies. Upon reflection, it is realized that the high own price elasticity makes perfect sense. With large volume of standing timber, land owners can and will respond quickly to any short term spurt of stumpage prices, resulting in highly elastic timber supply. Fifth, the results obtained in this project detailed the speed of market adjustments in the short run in both the stumpage prices and harvest volume. For the former, it would return to equilibrium only after six quarters, suggesting that the stumage price is rather volatile. On the other hand, for the latter, the adjustment to volumre equilibrium is very quick. In one quarter, the timber harvest volume returns to equilibrium. None of these results of market adjustment speed are possible with annual data-based models. Finally, the result on the effect of dramatic reduction of federal timber harvest in the Pacific Northswest suggests that such reductions actually reduced rather than increase the timber demand in Louisiana. This is a total surprice and counter-intuitive. New research efforts are being planned to further investigate this specific phenomenon.
Publications
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Susaeta, A., D. Carter, S.J. Chang, D. Adams. 2016. A generalized Reed model with application to wildfire risk in even-aged Southern United States pine plantations. Forest Policy and Economics 67:60-69.
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Parajuli, R., S. Sarangi, S.J. Chang, and R. C. Carter. 2016. The United States- Canada softwood lumber trade: an actual vs. optimal export tax. Forest Policy and Economics 73: 112-119.
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Parajuli, R., Zhang, D., Chang, S.J. 2016. Modeling stumpage markets using vector error correction vs. simultaneous equation estimation approach: A case of the Louisiana sawtimber market. Forest Policy and Economics 70, 1619
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Chang, S.J. 2016. Some observations on forest devolution: an editorial. Forest Policy and Economics 73(2016):270.
- Type:
Journal Articles
Status:
Published
Year Published:
2017
Citation:
Chang, S.J. 2017. An editorial from the handling editor. Forest Policy and Economics 84(2017): 9-10.
- Type:
Journal Articles
Status:
Published
Year Published:
2018
Citation:
Chang, S.J. 2018. Forest property taxation under the generalized Faustmann formula. Forest Policy and Economics 88(2018): 38-45.
- Type:
Journal Articles
Status:
Published
Year Published:
2018
Citation:
Chang, S.J. 2018. Forest valuation under the generalized Faustmann formula with taxation. Forest Policy and Economics 88(2018): 46-51.
- Type:
Journal Articles
Status:
Published
Year Published:
2018
Citation:
Zhang, F. and S.J. Chang. 2018. Measuring the impact of risk preference on land valuation: Evidence from forest management. Land Economics 94(3):425 436.
- Type:
Journal Articles
Status:
Published
Year Published:
2019
Citation:
Zhang, F. and S.J. Chang. 2019. Dynamics of the softwood sawtimber stumpage market in Louisiana: Insights from quarterly data over the last 30 years. Canadian Journal of Forest Research 49(12): 1590-1597.
- Type:
Journal Articles
Status:
Published
Year Published:
2020
Citation:
Chang, S.J., Y. Chen, and F. Zhang. 2020. Debunking the forest rent model fallacy in a fully regulated forest. European Journal of Forest Research (2020) 139:145150.
- Type:
Journal Articles
Status:
Published
Year Published:
2020
Citation:
Knoke, T., Paul, C., Friedrich, S., Borchet, H., Hartl, F, and Chang, S.J. 2020. The optimal rotation for a fully regulated forest is the same as, or shorter than, the rotation for a single even-aged forest stand: comments on Helmedags (2018) paper. Eur J Forest Res (2020) 139, 133143.
- Type:
Journal Articles
Status:
Published
Year Published:
2020
Citation:
Chang, S.J. 2020. Twenty-one years after the publication of the generalized Faustmann formula. Forest Policy and Economics 118(2020): 102238.
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Progress 10/01/18 to 09/30/19
Outputs
Target Audience:Fellow forest economics researchers in the universities, Forest Service research stations, forest prodducts industry, real estate investment trusts.and private landowners. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?This projet provided support for the training of a Ph.D.student. How have the results been disseminated to communities of interest?The results will be published in the December issue of the Canadian Journal of Forest Research. They have also been presented at two of the State Society of American Foresters conferences. What do you plan to do during the next reporting period to accomplish the goals?We intend to incorporate the quarterly data on precipitation into the model as a proxy for changes in the inventory level, with the idea that high precipitation limits access to the forest and thereby temporarily restricts the available timber inventory. This may give us better resolution on the effect of precipitation on timber supply. We also want to explore the possibility of combining the sawtimber model with that of a chip and saw model to investigate the interrelation and the level of competition between these two product classes. There is, however, a steep price to pay. Instead of 30 years' worth of quarterly data, the combined model would only have 13 years' worth of data because data on the chip and saw market only became available in the early 1990s.
Impacts
What was accomplished under these goals?
During the past year, we made significant progress in the time series econometirc analysis of the southern pine stumpage market in Louisiana. By using the quarterly data of both timebr prices and harvest volumers, we obtianned the follwing major results: 1. In contrast to the results of all past studies, southern pine stumpage supply is price elastic, instead of price inelasrtic. This result helps explains why the current price for southern pine lumber is high while the price of southern pine stumpage remains low. 2. Southern pine stumpage market shows clear seasonality. In terms of the stumpage price from high to low 1st quarter, 4th quarter, second quarter, and third quarter. In terms of harvest volume, third quarter, fourth quarter, second quarter, and first quarter. 3. The surprising results that dramatic reduction in the federal timber harvest reduction in the Pacific Northwest caused a reduction rather than an increase in timber market demand for southern pine stumpage. The results of ths study has been accepted by the Canadian Journal of Forest Research and willl be published in December 2019.
Publications
- Type:
Journal Articles
Status:
Awaiting Publication
Year Published:
2019
Citation:
The 30-year dynamic of the softwood sawtimber stumpage
market in Louisiana: insights from quarterly data from 1988 to
2017
- Type:
Theses/Dissertations
Status:
Accepted
Year Published:
2019
Citation:
Making Decision Adaptive to Price Uncertainty and Risk Preference: A New Decision-Making Model for Forest Management
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Progress 10/01/17 to 09/30/18
Outputs
Target Audience:The target audience of this project includes fellow research scientists in forest economics, forest economists in the forest products industry, REITs, TIMOs, consultants, forest landowners and managers. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?This project provided Ph.D. training for Fan Zhang How have the results been disseminated to communities of interest?Preliminary results of this project has been presented at the LA SAf annual convention in Baton Rouge, LA on January 29, 2017 and will be presented at the LA SAF annual convention in Pineville, LA on Feb 5, 2019. In addition, some of the results have been presented at the International Societyof Forest Resource Economists Conference on March 20, 2018 in Gattlinburg, TN. What do you plan to do during the next reporting period to accomplish the goals?Based on the Zivot-Andrew unit root tests, two breaks have been detected, one in 1992 and the other one in 2008. It appears that the 1992 break was caused by sigificant reduction of timber harvest by the Forest Service. The 2008 break was caused by the financial crisis of 2007- 2008. Since the current model incorporated only the 1992 break, I intend to incorporate both breaks into the VECM model to further fne tune the model to see if additional information and different results could be obtained from the efforts.
Impacts
What was accomplished under these goals?
In 2018, based on the quarterly data we established a vector error correction model (VECM) for Louisiana sawtimber stumpage market. This model consists of one demand function and one supply function. These two functions are estimated together in the VECM by applying Johansen cointegration techniques. The supply function,does not include the inventory data as an independent variable like most of previous related studies. This is because that inventory data is updated with extended intervals, i.e. once per 5 to 7 years, whichadds difficulty ingenerating reliable data series on a quarterly basis. The major steps of this study are listed below: Perform unit-root tests (DF-GLS test and Zivot-Andrew test) to determine the stationarities of data series, Carry out a Johansen cointegration test in the presence of structural break to confirm validity of building the VECM, Estimate the VECM by using maximum likelihood approach, Calculated relevant elasticities. Specifically, the following issues were addressed: Responsiveness of demand and supply: measured by own-price elasticity, Substitution among products: measured by cross-price elasticities, Seasonality effects: measured by dummy variables, Exogenous impacts, i.e. PNW Federal timber harvest reductions, financial crisis of 2007 - 2008, Market efficiency: measured by error correction terms in dynamic model Based on the results from the long-run demand and supply equations derived from restricted cointegration vectors are as follows: For the demand function, all estimated coefficients are significant at the 5% or 1% level. The own-price elasticity of sawtimber is -0.289, indicating that the softwood sawtimber are inelastic in terms of market demand. However, the price elasticity of sawtimber and its end-consumer products, i.e. lumber are elastic at a value of 1.387, indicating a fact that softwood sawtimber harvest quantity are easier to be driven by its end-consumer market rather than stumpage market. The trend break terms show that the 1993 Pacific northwest harvest reduction policy has changed the market trend slightly upward. For the supply function, the supply price of softwood sawtimber was found to be very elastic at 2.183, which is contrary to most previous inelastic findings. This might be caused by differences in research period and function form of the models. In addition, this elastic result may also imply an imbalanced demand and supply relationship from the massive amount of ready-to-cut timberlands that were initially grown under the USDA Forestry Incentive Program. In addition, the CNS products show an negative elastic price elasticity to the sawtimber while the pulpwood also show a negative inelastic price elasticity to the supply of sawtimber harvest quantity. All timber products were competitive with each other over the last 30 years in Louisiana. The estimation results can answer the questions about the seasonality, market responsiveness, and the effect of some exogenous impacts. Specifically, the results of ECM terms suggest that the harvest quantity can return to the equilibrium state very quickly after receiving an exogenous impact, i.e. only one quarter. However, compared to the harvest quantity, the sawtimber price needs much longer time to return to equilibrium state, i.e. around 7 quarters or one and three quarters years. Strong seasonality patterns are found in both price and harvest quantity of softwood sawtimber in Louisiana. Specifically, compared to other quarters, the first quarter appears to have the lowest harvest quantity and highest sawtimber price. In addition, the recession caused by 2007-08 financial crisis generates a significant negative impact on the harvest quantity of sawtimber products, which is possibly related to a cooled down of the housing market.
Publications
- Type:
Journal Articles
Status:
Published
Year Published:
2018
Citation:
Chang, S.J. 2018. Forest property taxation under the generalized Faustmann formula. Forest Policy and Economics 88(2018): 38-45.
- Type:
Journal Articles
Status:
Published
Year Published:
2018
Citation:
Chang, S.J. 2018. Forest valuation under the generalized Faustmann formula with taxation. Forest Policy and Economics 88(2018): 46-51.
- Type:
Journal Articles
Status:
Published
Year Published:
2018
Citation:
Zhang, F. and S.J. Chang. 2018. Measuring the impact of risk preference on land valuation: Evidence from forest management. Land Economics 94(3): 425-436.
- Type:
Journal Articles
Status:
Accepted
Year Published:
2019
Citation:
Chang, S.J.,Y. Chen, and F. Zhang. 2019. Debunking the Forest Rent Model Fallacy in a Fully Regulated Forest. european Journal of Forest Research.
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Progress 10/01/16 to 09/30/17
Outputs
Target Audience:My target audience typically targets research scientists, forest economists in the forest products industry, REITs, TIMOS, and government officials. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?This project provide Ph.D student training for Fan Zhang. How have the results been disseminated to communities of interest?Some of the results of this study have been scheduled for presentation at the 2018 LA SAF annual conference in January 2018. What do you plan to do during the next reporting period to accomplish the goals?For 2018, the research efforts will focus on developing a vector error correction (VEC) model of the three southern pine products.
Impacts
What was accomplished under these goals?
The primary objective for 2017 is the expanded time-series examination of the price dynamics of all three major southern pine timber products in Louisiana, i.e. sawtimber, pulpwood, and chip & saw (CNS). To this end, the quarterly data on price and quantity harvested of all three products from 1988 to 2016 have been compiled. With the compiled data, we have performed the Augmented Dicker-Fuller unit-root tests on these price series and their differenced series to test the stationarity of data. In addition, the Zivot-Andrews unit-root tests have been employed to find potential endogenous structural breaks for those price series. These tests indicate that the quarterly price series of Louisiana southern pine pulpwood price is stationary with a constant trend. The quarterly price series of sawtimber and CNS are both non-stationary, but the price series of these two products are co-integrated. In addition, multiple potential endogenous structure break points have been detected, some of which are consistent with significant impacts to the market. Specifically, for the Louisiana southern pine sawtimber quarterly stumpage price series, the results of ADF test of the unit-root indicate that the sawtimber stumpage price is non-stationary, with or without the inclusion of a trend term. The first difference of the sawtimber stumpage price was highly significant in ADF tests, meaning that such time series is an I(1) process. In addition, the potential break points detected by the ZA tests are concentrated to the time period around 1993, which may shows the potential impact from the 1993 PNW Federal timber harvest reductions. For the quarterly price series of Louisiana southern pine pulpwood, the results of ADF test without a trend term was not significant, but is significant at 5% level with the addition of a constant trend term. The latter result suggests that the pulpwood price is stationary at level with a trend, i.e. an I(0) process. Likewise, the first difference is also showing strong stationarity, with or without either atrend or intercept term. For quarterly price series of the CNS products, ADF tests shows a similar non-stationary pattern to that of sawtimber in all test types. However, the first difference of such series show a strong sign of stationarity. Thus, the CNS quarterly price series is an I(1) process, and it is co-integrated with the sawtimber price. Furthermore, the potential endogenous break points varies depends on where the breaks shows up. Specifically, the break on both intercept and trends suggests a potential break point on the intercept of 1997Q2, which is very close to the detected break point on trend.
Publications
- Type:
Journal Articles
Status:
Published
Year Published:
2017
Citation:
Chang, S.J. 2017. an editorial from the handling editor. Forest Policy and Economics 84:9-10.
- Type:
Journal Articles
Status:
Under Review
Year Published:
2018
Citation:
Chang, S.J. 20xx. Forest Property Taxation under the generalized Faustmann formula. Submitted to Forest Policy and Economics
- Type:
Journal Articles
Status:
Under Review
Year Published:
2018
Citation:
Chang, S.J. 20xx. Forest valuation under the generalized Faustmann formula with taxation. Forest Policy and economics.
- Type:
Journal Articles
Status:
Under Review
Year Published:
2018
Citation:
Zhang, F. and S.J. Chang.20xx. The impact of risk preference on the valuation of forestland and performance of forest management under price uncertainty
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Progress 07/18/16 to 09/30/16
Outputs
Target Audience:Research scientists, professors, and forestry professionals primarily in timber investment and management organizations and real estate investment trusts. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?A Ph.D. student is being trained under this project. How have the results been disseminated to communities of interest?Manuscripts are being prepared to inform the interested communities. What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, I will focus on developing a quarterly time series econometric model of the softwood stumpage market for Louisiana. I will then compare the resulting model with current stumpage price data reported by the Louisiana Office of Forestry and data from TimberMart-South data.
Impacts
What was accomplished under these goals?
The current project is designed to enhance the generalized Faustmann formula by incorporating various forms of forest taxation into the formula to reflect the different forms of forest property ownership and taxes related to timber harvest. These new formulas can change how millions of acres of timberland are valued when they are bought or sold, with a potential economic impact well over a billion dollars. With roughly 70 million acres of timberland under active management by either Real Estate Investment Trusts or Timber Investment Management Organizations, a modest enhancement of $1 in forest valuation per acre for these acreages would conservatively have an impact of $70 million. Analysis of Louisiana's quarterly stumpage price data with Augmented Dickey-Fuller test, Augmented Dickey-Fuller test with trend, Zivot-Andrews Test with break on intercept, Zivot-Andrews Test with break on trend, andZivot-Andrews Test with break on intercept as well as trend,indicate that these dataare not stationary and must be corrected when building a time-series econometric model. The results also are interesting when compared with the long term data from both Finland and Sweden. In the case of Sweden, an analysis of over one hundred years ofresultsindicates thatprices are stationary while those of Finland are non-stationary.
Publications
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Susaeta, A., D. Carter, S.J. Chang, D. Adams. 2016. A generalized Reed model with application to wildfire risk in even-aged Southern United States pine plantations. Forest Policy nd Economics 67:60-69.
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Parajuli, R., S. Sarangi, S.J. Chang, and R. C. Carter. 2016. The United States- Canada softwood lumber trade: an actual vs. optimal expoer tax. Forest Policy and economics 73: 112-119.
- Type:
Journal Articles
Status:
Awaiting Publication
Year Published:
2016
Citation:
Chang, S.J. 2016. Some observations on forest devolution: an editorial. Forest Policy and Economics
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