Z TA245.7 B873 NO.1596 [Blank Page in Original * ‘v ~ \ 51' v . w x a \ x \ \ r 5*: FORESTS AND THE TEXAS ECONOMY by Jay O’Laughlin Associate Professor Texas Agricultural Experiment Station (Department of Forest Science) Texas A&M University and Richard A. Williams Graduate Research Assistant Texas Agricultural Experiment Station (Department of Forest Science) Texas A&M University i?‘ The assistance and support 0f the Texas Forestry Association and the Texas Forest Service are gratefully acknowledged. Cover photos courtesy of the Texas Forestry Association and the National Forests in Texas. TEXAS A&M UNIVERSITY COLLEGE STATION, TEXAS 77843-2135 409-845-5033 Department 0f FOREST SCIENCE FOREWORD This publication provides a comprehensive summary of the contribution of Texas forest resources to the economy of the state. It identifies the potential for expanding the timber raw material base, and the challenges that must be addressed to reach that potential. Without expansion, the forest products industry of the future may provide fewer jobs, according to recent projections by the U.S. Forest Service. Without additional timber supplies, the industry cannot expand, and the state will become even less self-sufficient in meeting its forest products needs than it is today. Our forests produce exceptional benefits in addition to an industrial base for East Texas. Forests are an important source of recreation, wildlife habitat, soil and water conservation, and aesthetic values. Providing increased economic benefits, while maintain- ing a healthy forest environment, requires the cooperation and understanding of many individuals, groups, and organizations. This document provides a unique statistical base for understanding the current status of forestry in Texas and projecting its future contributions. Its objective is to stimulate further discussion and action that results in a full realization of the economic and social benefits that accrue from healthy, Well-managed forest resources. yaMaMZ-a. J. Charles Lee, Ph.D. Professor and Head Department of Forest Science Texas A&M University College of Agriculture Texas Agricultural Experiment Station Texas Agricultural Extension Service Institute of Renewable Natural Resources Table ot Contents Page 1. Introduction and Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Importance of Forests to People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Forest Resources of Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Public Opinion and Forestry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Texas’ Forest Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Economic Impact of Texas’ Forest Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Future of Texas’ Forest Resources and Forest Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . Texas’ Changing Forest Resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Forest Survey Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 East Texas Piney Woods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Forest Land Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Timber Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1O Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l l . Ownership ot Timber Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Non-Industrial Private Forest (NIPF) Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l l Forest Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Public Forests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l2 . Texas’ Forestry Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Society of American Foresters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l5 U.S. Forest Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l5 Texas Forest Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l5 Forestry Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l6 Forestry Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l6 Texas Agricultural Extension Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l6 Texas Forestry Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l7 Consulting Foresters of Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 . Texas’ Forest Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Overview . .9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Products Derived from the Forest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2O The Timber Harvest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2i Importance of the Industry in East Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Income and Income per Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Value Added and Value of Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Trends in Value Added and Value of Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . 24 Trends in Value Added . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Trends in Value of Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Trends in Value Added as Percentage of Value of Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 The Industry Since 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 . Economic Impact ot Texas’ Forest Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Economic Impact of Texas’ Agricultural Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Economic Impact Multipliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Economic Impact of the Primary Wood-Based Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 . Other Effects ot and on the Forest Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Capital Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Restructuring to Maintain Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Public Opinion and Forestry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8. Non-Timber Uses of the Forest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Recreation and Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Wildlife Management and Hunting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __ . . . . . . . 39 Water Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 . . . . . . . 39 Shifting Agricultural Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Wilderness and Forest Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Environmental Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 9. Sufficiency of the Forest Resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Forest Products Self-Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Forest Resource Self-Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 10. Future of the Forest Resource and Forest Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Timber Resource Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Timberland Acreage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Softwood Inventory Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Hardwood Inventory Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Timber Demand and Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Texas Reforestation of Harvested Private Timberland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 NIPF Reforestation: Problem or Opportunity? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5O TRe Foundation: Unique Approach to Aid NIPFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q . . . . . . . . . . . 53 Increasing Timber Supplies and Landowner Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Investments Yielding More Than 4 Percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Investments Yielding More Than l0 Percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Economic Impact of Timber Supply Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Policy Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 References Cited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 An overview 0f the forest resources of East Texas and _ heir economic importance to the state is presented in this report. Because of the extensive area covered by forests in Texas— 14 percent or an area equivalent in size to the state of Indiana—everything about the Texas forest resource can- not be addressed in one publication. However, an attempt has been made to describe the comprehensive range of ben- efits provided to Texans from forests and forest lands. This report is timely, in that it highlights and expands upon Texas forest resource information recently published by the U.S. Forest Service. Chief among these publications is the culmination of a study that has been underway for more than three years—The Souths Fourth Forest: Alterna- tives for the Future (USDA Forest Service 1987 a). Importance oi Forests to People Forest products include paper for packaging materials, newspapers, magazines, and paper bags; as well as solid wood products such as lumber, plywood, and wood panels contained in our homes and their furnishings. Forests provide not only wood products and employment, but also invest- ment opportunities, recreation, and a vast array of other benefits to people. The economy 0f East Texas 1's based on its natural re- sources—wood, petroleum, and coal. This area of dense forests has long been recognized as a significant source of lumber, wood products, and recreational opportunities (Texas Almanac 1986). Forest-based employment is a direct benefit to thousands of Texans, as the following indicates: 0 The wood-based industry employs almost 60,000 Tex- ans. Approximately 18,000 people are directly involved in the growing, harvesting, and converting of timber into primary wood-based products such as lumber, ply- wood, and paper. The remaining 42,000 jobs are in manufacturing secondary wood-based products such as doors, cabinets, furniture, treated poles, and consumer paper products and paper packaging (Figures 5-7 and 5-10). I An additional 228,000 Texans transport, sell, or use wood-based products in construction activities and in printing and publishing (Figure 5-7). Forest Resources of Texas ‘ More than 23 (million acres of the land in Texas is forested. ' About half of this area, roughly ll.6 million acres, lies in East Texas and is considered to be timberland—land capable of growing timber crops (Lang and Bertelson 1987). East Texas’ timberlands are located near the borders ofthe neigh- ring states of Oklahoma, Arkansas, and Louisiana, and s1 ‘are often referred to collectively as the “Piney Woods.” Al- most all of the rest of Texas’ 11.4 million acres of forest is classified as woodlands, and consists, for the most part, of sparsely distributed hardwoods. a, 1. Introduction and Highlights F This report, with its focus on economics, concentrates on the timberlands of the Piney Woods region. In this region of East Texas—representing 12.6 percent of the state, which is an area larger than the state of South Carolina or Maine— 55 percent of the land is timberland (Figure 2-3). The major timber types present in the Piney Woods are pine, oak-pine, upland hardwood, and bottomland hardwood. Pine is the principal tree on 36 percent of the timberland acres. Oak and other hardwoods in association with pine (oak-pine) are the principal forest types on 26 percent of the timber- lands. So pine trees are present to a substantial degree on well over half of the East Texas Piney Woods timberlands. Upland hardwood forest covers 29 percent of the timberland acres, and bottomland hardwoods cover the remaining l4 percent. Public Opinion and Forestry Apublic opinion survey by Shipley & Associates , commis- sioned in 1984 by the Texas Forestry Association, revealed that people are not knowledgeable about the forest resource, forestry practices, or the forest products industry. More than half of the citizens of EastTexas who were surveyed indicated that they had heard little or nothing about the industry. Sur- prising! y, only 6 percent of the East Texans surveyed realized that timber supports an industry of major importance in the region (AFI 1985). Given that forestry in East Texas has such a low level of public awareness, it is no surprise that 55 percent of the respondents to the survey believed that companies could not be trusted to preserve forest lands, and that legislation should be passed to protect forests (AFI 1985). But excessive en- vironmental and regulatory restrictions can create timber availability problems and potentially stifle industrial growth. And, as Figures 10-8 and 10-10 illustrate, companies in the Texas forest products industry have planted a substantial amount of their harvested timberlands with trees, which is an indicator of good timber resource stewardship. The general public may know little about forestry, but in the past decade, active groups of concerned citizens from many areas of the state have become increasingly aware of the forests of East Texas, and interested in the actions taken to manage these resources. Areas of concern have included timber harvesting methods (particularly clearcutting), site preparation methods, and air quality (more specifically, the management of smoke from prescribed fire or controlled burning of the forest). More Texans are using the forests for recreation purposes and are thus able to observe forest management activities firsthand. The influence exerted on the management of forest lands by citizens who are concerned about the forest may or may not be disproportionate to their numbers. But one thing is certain: Citizen concern regarding forestry matters will continue to be a crucial element for planning and imple- menting management activities on all timberlands, regard- less of who owns them. ' Texas’ Forest Products Industry The forest products industry in Texas manufactures wood- based products such as lumber, plywood, poles, furniture, pulp, paper, and a host of other products from the timber grown in Texas forests. The economic activity in the forest products or wood-based industry is a part of the manufactur- ing industry that is a vital component of Texas’ diverse econ- omy (Figures 5-1 to 5-3). As indicated below, Texas is one of the top producers of forest products in the country: 0 Texas is one of the top ten states in the U.S in primary wood-based manufacturing. Texas ranks third in ply- wood production, seventh in pulpwood consumption, and twelfth in lumber production (Figure 5-13). 0 The Texas wood-based industry is the ninth largest in the nation (Figure 5-11) and the fourth largest in the South (Figures 5-6 and 5-12), with sales of $5.6 billion and a value added contribution of $2.3 billion in 1984. Economic Impact of Texas’ Forest Products Industry The wood-based industry has a substantial impact on the Texas economy. The industry provides jobs and income for thousands. Timber is a major cash crop for landowners. Examples of the industry’s economic impact include the following: 0 Timber is the most valuable agricultural crop in the South. In Texas, timber consistently ranks among the top four cash crops, with an annual delivered value of approximately $500 million (Figure 6- 4). 0 Timber grown in East Texas is processed into primary wood-based products that had a sales value of $1.6 bil- lion and a value added contribution of $550 million in 1984 (Table 6-3 and Figure 6- 6). I The wood-based industry provides more than one- fourth of the manufacturing employment opportunities in rural East Texas (Table 5-1). 0 A 1 percent increase in the output of the primary man- ufacturing sector of the industry —- lumber and plywood, and pulp and paper-will produce a statewide impact of almost $50 million (Table 6-2). 0 If processed in new manufacturing facilities, a 12 per- cent increase in Texas timber harvests could have a statewide economic impact of $187 million, of which $63 million is value added. This new manufacturing ca- pacity could result in 1,300 new jobs (Table 10-1). Future ot Texas’ Forest Resources and Forest Industry Short-term: The present situation and short-term outlook for Texas’ forest resources appear favorable, based on the re- cent forest inventory conducted by the U.S. Forest Service with assistance and cooperation from other members of the Texas forestry community. The major portion of the Texas timber inventory is in the larger and more valuable classifica- tion of sawtimber (Figure 2-5), indicating an adequate supply of raw material forTexas’ diverse wood-based manufacturing facilities. The short-term outlook for the forest products in- dustry is based on the following: I Historically, Texas wood-based industry growth in tht primary manufacturing industries (Figure 5-10) was fueled in the 1960s and 1970s by an abundance of softwood timber supplies (Figures 9-4 and 10-3). 0 Annual harvests of Texas timber, for the past decade have been approximately equal to annual timber growtl" (Figure 9-4). Any additional harvests would reduce they’ timber growing stock inventory. This is illustrated by U.S. Forest Service projections of declining future softwood inventories in Texas (Figure 10-3). 0 Future expansion of the primary wood-based manufac- turing industry will require additional sawtimber and pulpwood as raw materials. Because these timber prod- ucts have a low value-to-volume ratio, as a rule of thumb, the economic transportation distance for timber is 50 miles. Texas mills will therefore depend upon the supply and proximity of Texas timber. This notion is reinforced by Texas’ position as a net exporter of timber (Figure 9-5). Long-term: The long-term outlook for Texas’ forest re- sources relative to projected future demand may not be as favorable as the short-term, based on the findings of a U.S. Forest Service study (USDA Forest Service l987a): ¢ Annual increases to the pine growing stock throughout the South, including Texas, are beginning to decline (Figure 10-3). Several factors are cited as being respon- sible for this trend. Principal among them is the lack of adequate regeneration after harvest on non-industrial private forest lands. Other factors contributing to pro- jected declines in softwood timber growth are increases in tree mortality caused by pine bark beetles and the con- version of timberland to other uses. The effects of pro- jected land use changes are illustrated in Figure 10-1. The future of the forest industry sector depends on the sol- ution to timber growth and timber supply problems. Without a change in landowners’ management activities, the U.S. Forest Service foresees a decline in the future timber inven- tory. Reductions in timber inventories mean decreased timber supplies and increased raw material costs for the wood-based industry. Together with improvements in manufacturing technology, reduced timber supplies could result in fewer jobs in the industry than currently exist. The most rational so- lution is to plant more trees today to provide a sustained timber supply in the future. Timber supplies can be increased as explained below: 0 There are opportunities to increase future timber supply inventories in Texas that would also provide landowners with attractive rates of return on their investments (Figures 10-12 and 10-13). 0 Investment opportunities on 1.9 million acres of private‘ timberlands exist that could potentially provide greater than a 10 percent real rate of return, pre-tax. These in- vestments, at an estimated cost of $145 million, would increase annual timber growth in Texas by 25 perce- (USDA Forest Service 1987a). \¢ *0 Forests cover almost 14 percent of the land area in Texas. fihese forests provide income for their owners, raw material for Wood product facilities, recreation opportunities, wildlife habitat, soil and water protection, aesthetic values, and em- ployment for thousands of Texans. Half of Texas’ forests are in the Piney Woods region of East Texas. The Post Oak region, just west of the Piney Woods, has 3.6 million acres of trees. The Cross Timbers re- gion in North Central Texas has almost 2.4 million acres of trees. The Cedar Brakes region, in the East Central hill coun- try, has 4.5 million acres of mountain cedar mixed with oak, elm, and other hardwoods. Another 1.5 million acres of for- ests are in the mountains of West Texas, the coastal regions. and in flood plains in South Central Texas. Extensive areas of rangeland that grow mesquite are not included as forested acreage (TFS 1970). Of the total forest area in Texas, 12.118 million acres are considered to be productive timberland (USDA Forest Serv- 2. Texas’ Changing Forest Resource ice 1987a). Of the twelve southern states, Texas ranks eleventh in timberland acreage (Figure 2.1). Ninety-five per- cent of the timberland in Texas, or 11.565 million acres, is in the Piney Woods region. Timberland is forest land that is producing, or is capable of producing, crops of industrial wood. Land that is otherwise withdrawn from timber utiliza- tion, such as legally designated wilderness and preserve areas, are not classified as timberland, regardless of their productive capability. The minimum productivity standard for timberland is annual growth of 20 cubic feet of wood per acre, which is only about one-fourth of a cord. According to the U.S. Forest Service (Lang and Bertelson 1987), the “average” acre of Texas timberland can produce 76 cubic feet per year-almost one cord of wood. Forest Survey Regions Texas is divided into three forest survey regions: The Post Oak region, and the more productive Northeast and South- TWELVE SOUTHERN STATES TIMBERLAND ACREAGE BY OWNERSHIP 1985 GEORGIA ALABAMA NO. CAROLINA MISSISSIPPI ARKANSAS VIRGINIA FLORIDA LOUISIANA TENNESSEE v SO. CAROLINA TEXAS OKLAHOMA 7 t0 O 5 10 OTHER PUBLIC NATIONAL FOREST FOREST INDUSTRY FARMER NIPF CORPORATE NIPF / r INDIVIDUAL NIPF 15 20 25 30 MILLIONS OF ACRES Figure 2-1. Twelve southern states ranked by timber/and acreage ownership. (Source: USDA Forest Service 1987a). east regions (Figure 2-2). An inventory of the forest, using sampling methods, is conducted approximately every 1O years by the U.S. Forest Service. The most recent survey in- ventory was completed in 1986. These findings as reported by McWilliams, Rudis, and Lord (l987)1 reveal trends when compared to the 1975 survey. A brief but comprehensive and highly readable report of these findings and their implications for the future is available from the Texas Forest Service (TFS 1987b). Some of these findings are addressed in this chapter. The Post Oak region consists mainly of lands with a low productivity rating that grow low-valued hardwood trees. Al- though almost one million acres of timberlands are in the Post Oak region, this region was not included in the 1986 survey inventory for efficiency reasons because these lands are used little for timber production. The vast majority of forest land in the Post Oak region is classified as woodland. Because of adverse site conditions, woodlands will not grow the requi- site 20 cubic feet of wood per acre per year needed to qualify as timberland. FOREST RESOURCE REGIONS OF EAST TEXAS 1986 Figure 2-2. The three forest survey regions of East Texas and the count/es in each region. (Sources: Murphy 1976; Lang and Bertelson 1987). The “Lost Pines” area, centered around Bastrop County, is an exceptional area in the Post Oak region. There are 143,000 acres of timberland there, but few wood-based processing plants. Timber volumes in the Lost Pines area are low, at less than 1,500 board feet per acre on two-thirds of the timber- land. By contrast, more than 6O percent of the timberlands in ‘Statistical reports of the U.S. Forest Service forest inventory and analysis completed in 1986 are available (Lang and Bertelson 1987; McWilliams and Bertelson 1986a, 1986b). These statistics are briefly summarized by Lord and McWilliams (1986). the Piney Woods have more than 1,500 board feet per acre (McWilliams and others 1987). The Northeast region consists of pine and higher-value; hardwood trees and accounts for 4.9 million acres of timber-i land. The forest type on these acres is determined by the pre- dominant type of tree that occupies a given area of land. In 1986, pine forests comprised 25 percent of the total timber- land acreage, mixed oak-pine forests covered 22 percent, up- land hardwood forests accounted for 38 percent, and bottomw land hardwood forests made up the remaining 15 percent (Lang and Bertelson 1987). When compared with the previ- ous survey conducted in 1975 (Murphy 1976), the 1986 figures revealed a 15 percent decrease in pine forest acreage and a corresponding 16 percent increase in upland hardwood acreage. The Southeast region has more than 6.6 million acres of timberland. More than 45 percent of this area is classified as pine forest. The oak-pine forest type is 2O percent, upland hardwood forest acres comprise 22 percent, and bottomland hardwood forest covers 12 percent of the acreage. Since 1975, the Southeast region has experienced a 9 percent de- crease in pine forest acreage and an ll percent decrease in oak-pine forest. Upland hardwood acreage has increased by 46 percent. Pine forest type acreage decreased by 159,200 acres in the Northeast region and 453,000 acres in the Southeast region. It would appear from U.S. Forest Service inventories in 1975 and 1986 that 612,700 acres of pine timberland has been lost from the pine forest type, and thus from pine production. However, 344,000 acres of this apparent loss is accounted for by plantations that have a high proportion of hardwood trees, and are classified as oak-pine. Under proper forest manage- ment, these acres should eventually return to pine timberland classification. Forest industry companies own 83 percent of this acreage. Another 228,000 acres of pine plantations are now classified as oak-hickory because of the overwhelming presence of hardwoods in them. It is likely that most of these plantations will shift to pine over time, since forest industry companies own 70 percent of this acreage (McWilliams and others 1987). Projections of future timber supplies, presented in Chapter l0, appear to have taken into account that a sub- stantial amount of the missing pine plantations do indeed re- turn to pine production. At first glance, it appears that a million acres of timberland have disappeared in East Texas between 1975 and 1986, but, in reality, this is not the case. Most of the apparent loss is ac- counted for in the deliberate decision not to inventory the Post Oak region. During the last l0 years, the single most sig- nificant reduction in the timberland acreage base has been the withdrawal of forest land from timber production to create wilderness areas, totaling 35,000 acres, in the national forests. Prior to 1975, there were more substantial acreage re- ductions for reservoirs, the creation of the Big Thicket Na ~ tional Preserve unit of the National Park Service, and other land use shifts due to urban and agricultural expansion. Cur- rently, the change in timber types and achievement of the pro- ductive potential of timberlands is of more concern than land use shifts. This new focus has implications for timber ma, , agement and future timber supplies. East Texas Piney Woods A, There are 43 Texas counties in the Piney Woods region. fThis coincides with the forest survey regions designated as Northeast and Southeast Texas (Figure 2-2). Considering all land uses, the Piney Woods region consists of almost 22 million acres. Timberland comprises almost 55 percent of the land in East Texas. Of the six other states in the South Central re- QgiOnQ, only Alabama has a higher percentage of timberland. There is more pasture land in East Texas than in any other southern state. Of the eleven other states in the South, only Eastern Oklahoma has fewer acres of cropland than exists in East Texas (Figure 2-3). Forest Land Productivity Texas timberlands have a high productive potential, av- eraging almost one cord per acre per year. More than three- fourths of the timberland acreage consists of land with good t0 excellent site productivity (Figure 2-4). Natural stands on good sites are capable of producing greater than 85 cubic feet of wood per acre per year, which is at least one cord per acre annually. By applying current plantation forestry practices, these yields can be increased by up to 4O percent. New technologies such as genetic improvement with biotechnol- ogy, coupled with fertilization and herbicide application, offer the promise of doubling and perhaps tripling the produc- tivity of a natural stand (Farnum and others 1983). The overall average productive potential of Texas timber- lands is estimated at 76 cubic feet per acre per year. Currently, Texas timberlands are producing an average of 54 cubic feet of wood per acre per year. With increased management efforts toward achieving the 76 cubic feet of wood growth potential, the average annual growth of timber could be in- creased by 4O percent, and Texas landowners could receive substantial and highly competitive rates of return on their in- SOUTHERN LAND AREA CLASSIFICATIONS BY STATE TIMBERLAND Z OF TIMBERLAND CRORLAND PASTURE OTH ER LAN D ERIE ALABAMA (55) EAST TEXAS (55) MISSISSIPPI (53) TENNESSEE (49) LOUISIANA (49) ARKANSAS (45) E. OKLAHOMA (41) 11 SOUTH CENT/PAL REG/ON SOUTHEAST REG/ON OEOROIA (53) SO. OAROLINA (e5) VIRGINIA (51) NO. OAROLINA (59) FLORIDA (44) O 5 1O N 15 2O 25 3O .35 4O MILLIONS OF ACRES Figure 2-3. Southern land area classifications by state, including East Texas and East Oklahoma. Ranked within reg/on by timberland percentage of total land. (Source: USDA Forest Service 1987a). zThe South Central region consists of Alabama, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, and Texas (USDA Forest Service 1987a). vestments. The opportunities for achieving this goal are sum- marized in Chapter l0 (Figures 10-12 and 10-13). There are 965,000 acres of marginal crop and pasture land in East Texas that could produce net annual growth of 40 to 100 million cubic feet of wood per year if converted to pine. For comparison purposes, the 1985 timber harvest in Texas totaled 551.5 million cubic feet. Another 145,000 acres of highly erodible lands in Texas could be converted to pine forests and produce net annual growth of 10 to 16 million cubic feet of wood (USDA Forest Service l987a).The Con- servation Reserve Program, a new feature of the 1985 Farm Bill, is targeting these acres for planting of pine or other cover crops to protect these lands from soil erosion. In summary, the growth potential of Texas forest lands is not being met. The difference between actual growth and po- tential growth provides a challenge for all landowners and others who guide timberland decisions to better utilize the Texas forest resource. The rates of return on investments made by landowners to improve their timberlands is very competitive with other investment alternatives. Increased timber inventories could provide an opportunity for growth in the wood-based industry. Further discussion of this impor- tant topic is included in Chapter 10. Timber Inventory The growing stock of Texas timber was estimated to be in excess of 12 billion cubic feet of wood in 1986. This is enough wood to pave a 24-foot-wide boardwalk of 2 x 4s to the moon, circle it, and return to earth with another 24-foot walkway. Even with this huge volume of wood growing in Texas forests, there is an opportunity to increase wood vol- ume because 3.8 million timberland acres are understocked. More than 70 percent of the understocked acres are owned by non-industrial private forest landowners. The 1986 Forest Survey inventoried the 11,565,190 acres of timberland in East Texas. Figure 2-5 depicts the acreage breakdown by size of timber, which is the average size of the trees growing on that acreage. Approximately 50 percent of TEXAS TIMBERLAND PRODUCTIVITY 1986 SITE CLASS 120-165 i \\ Figure 2-4. Texas timberland productivity by site class (cubic feetl acre/year). Expressed as a percent of the total acreage in Texas, which is 11,565,190 acres. (Source: Lang and Bertelson 1987). SITE CLASS >165 4% SITE CLASS <50 10 TEXAS TIMBERLAND ACREAGE 1986 PINE OAK-PINE HARDWOOD SAWTIMBER ' POLETIMBER * ~ UNSTOCKED " SAPLING V/l/A o I1 z 3 4 5 I MILLIONS OF ACRES Figure 2-5. Texas timberland acreage classified by timber size class and forest type. (Source: Lang and Bertelson 1987). the total acreage has sawtimber size trees growing on it. Al- most one-fourth of the timberland acreage has poletimber size trees. Poletimber trees are merchantable trees that are not large enough to be sawn into lumber products. Seedling and sapling stands occupy 24 percent of the timberland acreage. Two percent of the timberland acreage (258,000 acres) is not stocked with trees. Non-industrial private forest landowners own more than 70 percent of these unmanaged timberland acres. In addition to the 2 percent non-stocked acreage, 33 percent of the timberlands are understocked by at least 40 percent. Non-industrial private forest landowners own 69 percent of these understocked acres. A large volume of poten- tial wood growth is lost each year, simply because so many timber stands are understocked. Almost two-thirds of the timberland acreage in Texas is adequately stocked with trees. Continued management ef- forts aimed at stocking control on this acreage can keep forests growing and producing wood at or near their produc- tive potential. The most abundant trees in EastTexas are southern yellow pines. Four species of pine can be found in East Texas. The beautiful native longleaf pine (Pinus palusrris) and the exotic fast-growing slash pine (P. elliotti) together occupy 2 percent of the timberland acres. Loblolly (P. raeda) and shortleaf pine (P. echinara) occupy 34 percent of the timberland acres as pine stands and another 21 percent of the timberland acres in an oak-pine association. In total, more than 57 percent of the timberland acres in East Texas have pine species growing as one of the principal tree types, thus East Texas timberlands deserve their common sobriquet, the “Piney Woods.” Hardwood forest types are predominant on 43 percent o the timberlands. Bottomland hardwoods-—so called because they grow in the flood plains of rivers, streams, or creeks— comprise 14 percent of the total timberland acreage. These t forests contain valuable timber resources, and are prime are( for recreation and wildlife habitat. Lower-valued uplan hardwood tree species cover the remaining 29 percent of the timberlands in the Piney Woods. Q‘ Summary ATexas Forest Service summary (TFS 1987b) of the 1986 orest survey conducted by the U.S. Forest Service addresses -hese main points regarding the status of timber resources in East Texas: 0 Acreage of pine timber is declining. 0 Timber growth has declined. 0 Timber mortality has more than doubled in the past decade. 0 Annual pine timber removals exceed annual growth. 0 Pine timber inventory is declining. I Tree planting has not kept pace with harvesting. 0 There are many opportunities to increase timber growth. The future of the Texas forest economy as described in The South ’s Fourth Forest report (USDA Forest Service 1987a) is not a favorable one. The U.S. Forest Service projects that fu- ture demand for timber will increase at a more rapid rate than future timber supplies. If problems-such as higher timber and wood product prices and reduced opportunities for indus- trial growth—caused by this situation are to be resolved, it is important to understand the objectives of various timberland owners. 3. Ownership of Timber Resources Ownership is a critical factor in determining how timber- lands are managed; its importance as a management consid- eration cannot be overstated. The landowner—within legal, environmental, economic, social, and political constraints —decides what happens to the land, including the timber re- source attached to it. » There are three major categories of timberland owners in Texas: 1) Private landowners not involved in the manufacturing of wood-based products—Non-Industrial Private For- est (NIPF) landowners—own more than 6O percent of the timberland in the Piney Woods region (Figure 3- 1). 0 In the Northeast forest survey region, this group holds more than 8O percent of the timberland (Figure 3-2). 0 Ownership objectives are diverse and difficult to generalize. 2) Companies involved in the manufacturing of wood- based products own 33 percent of the timberland in the Piney Woods region (Figure 3-1). 0 Industrial ownership is concentrated in the South- east forest survey region (Figure 3-2). 0 The primary ownership objective is to provide supplies of wood for the companies’ manufacturing facilities. 3) Public ownership of timberland in Texas amounts to less than 7 percent of the total (Figure 3-1). 0 Most timberland in this category is managed by the U. S. Forest Service as national forests, concentrated in the Southeast region (Figure 3-2). 0 Public forests are managed to provide many different uses. Further discussion of ownership objectives is provided in the sections that follow. TEXAS TIMBERLAND OWNERSHIP 1986 EAST TEXAS PINEY WOODS TOTAL: 11,565,190 ACRES INDIVIDUAL (NIPF) M? NATIONAL FOREST 5.3% OTHER PUBLIC 1.3% CORPORATE (NIPF) A/arr/ndustr/b/ Private Forest (N/P/‘Q Percent of Total’ 60. 4X Figure 3-1. Percent of total East Texas timberland acreage by owner- ship category. (Source: Lang and Berte/son 1987). Non-Industrial Private Forest (NIPF) Ownership NIPF ownership is the largest segment of Texas’ timber- land acres. More than 7 million acres of timberland is in non- industrial private ownership. By definition, these owners do not process their timber into lumber or other wood-based products. The management objectives of the NIPF owners are as di- verse as the owners themselves. Even categorization of these estimated 150,000 owners is difficult. The forest inventory ll conducted by the U.S. Forest Service now recognizes three sub-groups of NIPFs: farmers, corporate, and individuals (Figure 3-2). However, ownership objectives are likely to be quite independent of any generalization based on these three categories. Some NIPF landowners are timber culturists, practicing forest management and making investments to im- prove the value of their timberland. Some landowners are willing to let Mother Nature manage their timber stands for them, and harvest when they need income, with varying de- grees of concern about future timber inventory. Others own timberland for a variety of non-timber production reasons, in- cluding recreation, aesthetics, and a place to get away from urban pressures. Wildlife, grazing opportunities, and water- shed enhancement may be key objectives in timberland own- ership, whether timber value is the primary goal or not. A part of the forest industry ’s future will be determined by the deci- sions made regarding understocked NIPF timberlands. Forest Industry Companies in the forest products industry own 33 percent of the total timberland acreage in Texas. This percentage is higher than in the U.S., the South, or the West Gulf region (Figure 3-3). The West Gulf region includes Texas, Arkansas, Oklahoma, and Louisiana. Only two other states—Maine and Florida—have a higher percentage of industrial timber- land ownership than Texas (Figure 3-4). The largest portion of industry ownership in Texas, totaling more than 3 million acres, is in the Southeast forest survey region (Figure 3-2). Forest industry companies manage their lands for timber production to ensure a supply of raw material for their lumber, plywood, and pulp and paper production facilities. Ownership objectives are often stated as ensuring low-cost wood supplies for company mills. These wood-based com- panies provide employment for many Texans (See Chapter 5.), as well as recreation opportunities, watershed protec tion, tax revenues, and the manufacture of a wide variety 013 useful and versatile wood-based products. Public Forests The national forests of Texas contain 5.3 percent of the 11.6 million timberland acres. There are four national forests in Texas: Sam Houston, Davy Crockett, Sabine, and Ange- lina. These areas include 610,000 acres classified as timber- land. Almost all of these federally owned timberlands are managed by legal mandate for multiple uses, which include timber management, recreation, wildlife, grazing, watershed protection, and other environmental concerns. National forests have 35,000 acres that are classified as legal wilder- ness areas from which timber may not be harvested. Other public agencies with timberland include state parks, Texas Forest Service forests, and state wildlife management areas. Collectively, these state agencies, county and munici- pal agencies, and other federal agencies hold 1.3 percent of the timberland acreage. The Texas Forest Service (TFS) owns and manages 7,200 acres of timberlands in five state forests. TFS also manages timberlands owned by the General Land Office and the Texas Department of Corrections. Timber and seedling sales pro- vide revenues for the state. These forests also provide demon- stration areas for landowners to see good forestry at work and sites for applied research. EAST TEXAS TIMBERLAND OWNERSHIP BY REGION 1986 NORTHEAST TOTAL: 4,898,690 ACRES INDIVIDUAL (NIPF) NATIONAL FOREST 1.67. OTHER PUBLIC 2.2% FOREST INDUSTRY Northeast Texas" N/PF Percent‘ of Tofa/ .' 50. .92’ Figure 3-2. Texas timberland ownership by region and ownership category. Expressed as a percentage of total acreage for both the Northeast and Southeast. (Source: Lang and Berte/son 1987). l2 SOUTHEAST TOTAL: 6,666,500 ACRES NATIONAL FOREST OTHER PUBLIC .72 FOREST INDUSTRY Southeast‘ Texas N/PF Percent‘ of Tota/ .' 4.5.22 \¢ vb on» TIMBERLAND OWNERSHIP U.S. TOTAL: 482.5 MILLION ACRES (1977) SOUTHERN U.S. TOTAL: 182.2 MILLION ACRES INDMDUAL (NIPF) THER PU UC 4 INDIVIDUAL (NIPF) ' NATIONOAL FOREST 6 . OTHER PUBUC NATIONAL FOREST FOREST INDUSTRY FOREST INDUSTRY CORPORATE (NIPF) rV/PF Percent‘ of 7010/.‘ 58X N/PF Percent‘ of Tofu/x 67/7 WEST GULF TOTAL: 46.7 MILLION ACRES EAST TEXAS TOTAL: 11.6 MILLION ACRES INDMDUAL (NIPF) INDIVIDUAL (NIPF) OTHER PUBLIC 4 OTHER PUBUC 1 \ NATIONAL FOREST 5 ,!4}; Q O ' LOGIrGING r Io; 1972 1977 1982 1984 (3)=5ECONDARY MFG- 1 72 1977 1982 1984 (P)=PRIMARY MFG. 5*‘ Figure 5-14. Economic contribution of Texas wood-based industry segments by value added. Data portrayed in both current dollars and constant 1984 dollars. (Sources: USDC Bureau of the Census 1985b; USDC Bureau of the Census 1986a). 26 Table 5-2. Texas wood-based industry trends in value added and value of shipments, 1972-1984. A Value Added Perc ge .0 Value Added Value of Shi nts of Value of ipme 1972 1977 1982 19847 1972 1977 2 19847 1972 1977 1982 19847 Millions of Dollars Percent Wood Furniture‘ 33.8 87.8 99.8 109.7 97.5 154.6 178.9 188.2 34.7 56.8 55.8 58.3 Paper Productsz 194.9 347.2 602.4 756.1 448.1 884.4 1,473.3 1,704.3 43.5 39.3 40.9 44.4 Q Wood Productss 167.6 304.0 453.8 622.8 407.9 771.9 1,148.9 1,395.3 41.1 39.4 39.5 44.6 Pulp & Pa 4 147.1 315.8 393.7 494.2 294.1 696.5 1,158.3 1,339.9 50.0 45.3 34.0 36.9 Lumber 8t ood5 107.5 230.9 131.2 163.7 237.6 496.4 517.8 600.8 45.2 46.5 25.3 27.2 Leggings 22.8 65.6 110.9 149.1 64.7 155.3 298.8 357.8 35.2 42.2 37.1 41.7 Total 673.7 1,351.2 1,902.7 2,295.6 1,549.9 3,159.1 4,776.0 5,586.3 43.5 ' 42.8 39.8 41.1 Sources: USDC Bureau of the Census 1985b; USDC Bureau of the Census 1986a. 1 Includes SIC 2511, 2517, 2521, and 2541; wood househ urniture, w TV ca ' ts, wood office furniture, and wood partitions. zlnclude 4 and 265; ' c. con d paper prod , and pape rd co ' ers and boxes. s SIC 26 3lncludes SIC 243 (except 2 and 2 , 244, 2 except 2451, mobile homes), and 249; millwork, wood containers, wood buildings, and misc. ‘Include , 262 263 mills r mills. s SIC 261 , , and 266; pulp ' , r mills, paperboard mills, and ‘din pe slncludes SIC 242, SIC 243 , d SIC 2436; sawmills, hardwood veneer, and softw ven . 6 Includes SIC 11; 'ng harvesting. 7TotaI f rom ual Survey of Manufactures (USDC Bureau of the Census 1986a). Certain Industry segments for 1984 have been estimated from 1982 relatio ' s. TEXAS WOOD-BASED INDUSTRY TRENDS VALUE OF SHIPMENTS 1 972-1 984 CURRENT DUAL/IRS CONSTANT DOLLARS 6000 i _ INDUSTRY SEGMENTS 7 ° wooo FURNITURE (s) 5000*" Q 4ooo-— PAPER PRODUCTS (s) 5 _.| C) Q L5 3000-- (f) g wooo PRooucTs (s) 3 .._l i 2000-r PULP at. PAPER (P) 1000-" y‘ V LUMBER at.- PLYWOOD (P) r LOGGING o ~\¢ ~ , IL )7_(Jt‘ '- \ gflk-Lxn 1972 1977 1982 1984 (5)=5ECQNDARY MFG- 1972 ‘I977 1982 1984 (P)=PRIMARY MFG. Figure 5-15. Economic co ' ution of Texas wood-based industry segment value nipments. a portrayed in both current do//ars ‘and constant 1984 do//ars. urces: USDC Bureau of the Census 1985b; U Burea the Censu 86a). 27 TEXAS WOOD- BASED INDUSTRY TRENDS BY INDUSTRY SEGMENTS VALUE ADDED AS A PERCENTAGE OF VALUE OF SHIPMENTS 1 972-1 984- INDUSTRY TOTAL 6O 6O i? +9 LUMBER 8c PLYWOOD E g PULP 8c PAPER 6O E E 6O .- 5 5O 5O t? so 3 :5 so LIJ |.|.l 4° > 4Q l r40 > 40 LL U. O O so g g so E E5‘ g 3O r30 ‘or 2O Lu Lu 2O 1972 1977 1982 1984 3 3 1972 1977 1982 1984 § § 2O 2O 1972 1977 1982 1984 WOOD PRODUCTS (SECONDARY) LOGGING WOOD FURNITURE PAPER PRODUCTS (SECONDARY) 5O 6O 6O 5O 5O 5O 5O 3O 3O 3O 3O 2O 2O 2O 2O 1972 1977 1982 1984 1972 1977 1982 1984 1972 1977 1982 1984 1972 1977 1982 1984 Figure 5-16. Texas wood-based industry trends in value added as a percentage of value of shipments. Data presented by industry segments as well as by industry total. (Source: USDC Bureau of the Census 1986a). The Industry Since 1984 The most current economic data available in 1987 for the wood-based industry is the Annual Survey of Manufactures for 1984 (USDC Bureau of the Census 1986a). This data is not as complete or reliable3 as the more detailed information currently available in the 1982 Census of Manufactures (USDC Bureau of the Census 1985b). The Census of Manu- factures is conducted every five years. There is a three-year publication lag, so the most recent Census of Manufactures was in 1987, to be published in 1990. The wood-based industry suffered through the economic recession in the early 1980s, which was characterized by poor markets and low prices. Record high interest rates increased the cost of doing business, and profits declined. In order to 3The 1984 breakdowns by industry segment presented in this chapter were estimated by using 1984 totals in the major industry groups and the relationships among industry segments that existed in 1982. 28 survive these troubled times, many companies restructured themselves. Some left the industry, creating growth oppor- tunities for others. But all had to become leaner and more ef- ficient to survive. A more complete discussion of restructur- ing follows in Chapter 7. Employment levels in the forest products industry have im- proved since the doldrums of 1982 (Figure 5- 10), and the gen- eral economy is better, so better markets exist for wood-based products (Figure 5-15). This has improved corporate profits, which are one component of value added. As the general economy improves and interest rates reach acceptable levels, the fortunes of forest products companies will improve. In mid-1987, many wood-based companies were achieving their best financial performance of the decade. (tk 6" F 6. Economic Impact of Texas’ Forest Products Industry 4y The influence or impact of the forest products industry 0n the Texas economy can be expressed or measured in many dif- ferent ways. Chapter 5 described the $5 .6 billion wood-based manufacturing industry as a direct employer of 59,800 jobs and more than $2.3 billion in value added by manufacturing. Another 288,475 Texans had jobs that indirectly involved the use of wood products. These facts alone indicate a significant impact on the Texas economy (Figure 5-7). In Chapter 5, Texas’ wood-based industry was compared to that of other states in the nation and in the South. By any of those various measures, the industry is a significant one. Texas ranks among the southern states as the second largest employer in the wood-based industry. Texas is the fourth lead- ing state in the South in terms of value added by wood-based manufacturing, and ninth in the nation. There are several other ways to consider the impact of Texas’ forest products industries. One is to compare timber to other agricultural products. Another is with economic im- pact multipliers. Economic Impact of Texas’ Agricultural Products In 1985, Texas was the second leading agricultural state in the nation (Figure 6-1). The leading agricultural product in TOP 10 STATES FARM INCOME: CASH RECEIPTS FROM FARMING 1985 CALIFORNIA TEXAS ' IOWA ' rumors ' NEBRASKA ' MINNESOTA . LIVESTOCK KANSAS CROPS \‘ WISCONSIN a ~\\\ GOVT. PAY. INDIANA F FLORIDA a 0 2 I é T0 1T2 1'4 1.6 IIB 20 n,» BILLIONS or DOLLARS ‘A Figure 6- 1. Top 1O agricultural states in the U.S., categorized by farm income from livestock, crops, and government subsidies. (Source: USDA 1986). Texas is beef cattle, representing 42 percent of the total value in 1986 (Figure 6-2). Other livestock represent another 16 percent of the value. According to the Texas Agricultural Ex- tension Service, recreation ($147 million) and hunting ($136 million) together account for almost 3 percent of the total $10.6 billion in value received by agricultural producers in 1986 (Anderson 1987). The remaining 39 percent of the total agricultural value was cash crops, including timber (Figure 6-2). TEXAS AGRICULTURAL PRODUCTS ESTIMATED VALUE BY COMMODITY GROUP AS PERCENT OF TOTAL VALUE 1986 CASH CROPS Figure 6-2. Estimated value of Texas agricultural products by com- modity group. Data presented as a percentage of the tota/ $10.6 billion in value received by agricultural producers in 1986. (Source: Anderson 1987). When the value of Texas cash crops were estimated at their first point of delivery in 1986, cotton was the leader in value at $680 million, followed by sorghum4and then timber, at an estimated $490 million (Figure 6-3). Approximately three- fifths of the timber value represents timber stumpage sold by landowners (TAEX 1985). The remainder is the value of har- vesting or logging, and transportation to the first point of de- livery, which is usually a lumber, plywood, or pulp mill, or a wood concentration yard. It is necessary to add harvesting and hauling to the landowners’ stumpage receipts so that timber may be compared equally to other agricultural crops. Figure 6-4 illustrates that timber has ranked consistently with the leading agricultural crops in Texas, with values at the first point of delivery comparable to sorghum and wheat. Cotton is the only crop that consistently has produced a value greater than the delivered value of timber in Texas. According to the U.S. Forest Service, timber ranks as the number one agricultural crop in the southern U.S. Soybeans, cotton, tobacco, wheat, and corn follow timber in value at 4Texas led the nation in the production of cotton and sorghum in I985 (Texas Almanac). 29 the first point of delivery.‘ In 1984, timber was the number one agricultural crop in 6 0f the 12 southern states. Timber ranked second in three other states, and third in the remaining three (USDA Forest Service 1987a). TEXAS CASH CROP VALUES AT FIRST DELIVERY POINT I986 COTTON SORGHUM TIMBER NURSERY WHEAT HAY CORN -VEGETABLES HOE PEANUTS COTTONSEED MELONS PECANS SUGAR SOYBEANS OTHER FEED 2% FRUH' E OATS E I l I I 0 100 200 300 400 500 600 700 800 MILLIONS OF DOLLARS Figure 6-3. Estimated value of Texas cash crops at their first point of delivery. (Source: Anderson 1987, except timber). As Figure 6-5 illustrates, when economic impact—mea- sured by the value of manufactured products based on ag- ricultural commodities-is considered, the timber harvested and processed in East Texas has an impact on the state econ- omy that is comparable to other major cash crops and agricul- tural products. In 1982, each dollar’s worth of Texas timber delivered to a primary wood-based manufacturing plant in Texas ultimately provided 1.4 times the value of timber in value added by primary wood-based manufacturingS . Wheat also had a ratio of 1.4 in value added to the commodity value. Cotton is the only other agricultural product in Figure 6-5 with a ratio of value added to delivered commodity value that exceeds 1.0, and at 1.1, it barely does so. Beef, dairy, and feed grains did not provide a manufacturing value added equal to the value of the commodity; timber, wheat, and cot- 5 The year 1982 was used because Census of Manufactures data for later years is unavailable. This unconventional “value added multiplier" of 1.4 was deter- mined in the following manner: The delivered value of timber at Texas mills in 1982 was $371 million (Figure 6-4). Along with other purchased inputs, tmsunmermommedavmueamkdnimepfinmgflumbmgmywomiandpqmr manufacturing industries of $525 million (Table 5-2), and a value of shipments of primary lumber, plywood, and paper products totaling $1.7 billion in 1982 (Table 5-2). Timber imported to Texas accounted for 10.6 percent of processed timber in Texas (TFS Texas Forest Resource Harvest Trends), so an appropriate downward adjustment was made in timber value, value added, and value of shiprnentsin Figure 6-5. 3O ton did. Figure 6-5 also indicates that manufacturing timber into primary wood-based products requires the purchase of many more inputs than do other agricultural industries, due to the amount of manufacturing and purchased inputs needet to convert timber into useful wood-based products. Economic Impact Multipliers An economic impact multiplier can jbe likened to a rock tossed into water, in that multipliers are designed to measure a the ripple effect upon the rest of the economy created by changes in economic sectors or industries. Multipliers are de- veloped for gauging the effect of changes in employment, personal income, and output, or sales revenues. j, Multipliers may be interpreted in the following way: An additional dollar of sales revenue by the solid wood manufac- turing sector of wood-based industry would generate a total of $2.58 of sales revenue throughout the entire state econo- my. In other words, for each additional dollar of lumber sales revenue, there would be an additional $1.58 in sales revenue generated in all other industries. Similarly, one additional job in the lumber manufacturing industry would generate or re- quire approximately 1.29 jobs in other industries, for a total effect of 2.29 jobs. The Texas wood-based industry multipliers cited above are those reported by the U.S. Forest Service for Texas in Table 6-l (USDA Forest Service 1987a). The various wood-based industry Type II multipliers (See the Glossary.) in Texas are quite similar to the average multipliers in the South Central states (Table 6-1). The use of multipliers to gauge economic impact must be approached with caution. There is a wide range of wood- based industry multipliers for the southern states. They range from 1.5 in Tennessee to 3.5 in Oklahoma. The leading au- thority on the use of forest-based industry multipliers (Flick 1986) does not know whether the range of multipliers repre- sents fundamental differences in the economies of various states, or fundamental differences in the methods used in various states to generate multipliers. It is likely that both fac- tors are important, but wood is wood, and relatively undif- ferentiated wood-based products are traded across state and national boundaries. On the other hand, the data require- ments of the methods used to determine multipliers exceed both the quantity and quality of data available, and the methods of analysis are static rather than dynamic. Economic multipliers are derived from input-output mod- els. Input-output analysis is a widely used technique to mea- sure the effect of sectors of an economy on the overall econ- omy. Simply stated, a given amount of output-which can be an increase or decrease in jobs, sales, or income—is placed into a carefully constructed mathematical model of the economy. The needed inputs are measured as they change to meet the new level of inputs. Input-output models have a variety of uses, ranging from the assessment of the sales po- tential of an individual firm to the assessment of a broad"- economic program. A major contribution of an input-output model to economic analysis is that it facilitates measurement of direct, indirect, and induced impacts resulting from an in- cremental change in demand in one sector of the econorr o?‘ An example of input-output analysis could be demand f houses. An increase in consumer demand for houses will lead to a direct increase in the number of houses being con- _/ "fie" TEXAS TOP FOUR CASH CROPS AT FIRST DELIVERY POINT 1 9B1 - 1 985 a A ,1 , 140°“ § g TIMBER 9 g §\\\ COTTON 1200.1 § § 3 WHEAT § \ SORGHUM g 1ooo-- g § I’: g § 8 R R s R R §6”' ,§%é $8; §§5, >§a; $89 8 4w— isag ssag ,§a; ,§ag ;§a; 1 5? /Sag r§§¢ /Sag @§%¢ *§§¢ 3 %¢ /Naa sa¢ *§a/ > \ \ \ § \ - % \ \ \ \ % \ \ \ w §.%\\\\ %~\\\\¢ \ s % \ \ \ s % a >\ \ % so" § § g8 Q § y % % g g < um R @~>%§??%%%%%% aaaaaaa i230“??? o ' '7 '7 '7 '7 '7 ‘A '79 '8 '8 '8 '8 '8 '7 1 l -( P1 1> I] Figure 7-1. Texas wood-based industry capital expenditures by industry segment. Tota/ for 1972-7984 exceeded $2 bi/l/on. (Sources: USDC the Bureau of the Census 1985b; USDC Bureau of existed? As discussed in Chapter 9, it appears that as a whole, Texas cannot supply its own domestic wood-based product needs, because the state is not self-sufficient with respect t0 wood-based products. Then the question becomes, can Texas’ wood-based industry expand to meet anticipated in- creases in domestic and international demand? Restructuring to Maintain Competitiveness Restructuring is a response to change; it is a term for reor- ganizing an individual firm, or an entire economic system. The pattern of restructuring by individual forest products companies resulted in a more concentrated forest products in- dustry in the mid-1980s than at the beginning of the decade. For example, in 1984, there were seven major forest products companies in Texas. Corporate restructuring has left only four to manage the same system of lands and mills b (O’Laughlin and Bell 1986). Grum (1986), the Chief Executive Officer of Temple- Inland, a large integrated southern U.S. forest products com- pany based in Texas, recently said, “Forest products com- panies have two choices: they can restructure [themselves] to Census 1986a; Bureau of Business Research 1987). become more cost-efficient or they can be restructured [by others] via corporate takeovers.” The change agents leading to restructuring in the forest products industry can be lumped into two major categories: l) economic factors, and 2) raw material or timber supply characteristics. The severe economic recession of the early 1980s that occurred as policy-makers fought to control infla- tion (which they were able to do) also produced the highest real interest rates in U.S. history. With unprecedented and staggering federal revenue and international trade deficits, the U.S. has become the largest debtor nation in the world. Ultimately, restructuring the economy with revamped tax- ation policies and changed federal spending priorities will have some effect on timber supplies. These effects are dec- ades away and difficult to foretell. Public Opinion and Forestry Groups of concerned citizens can exert an influence on land management activities that is, as the Sierra Club proudly points out in recruitment mailings, “out of all proportion to their numbers.” 37 Vocal minorities can affect forest management, and will use legal action and powerful symbols to get their point across. As Lindheim (1985) says, America in the 1980s is in a period of painful restructuring. Individuals and special in- terest groups, as if to fill a gap in their lives, respond over- whelmingly, viscerally, and emotionally to symbols of the values they no longer live. A vivid and local example of Lindheim’s point follows. In October 1986, members of a citizens’ conservation group chained themselves to standing dead trees and heavy equipment on the Sam Houston National Forest in Texas. They were protesting forest management activities that the U.S. Forest Service was engaged in prior to the planting of pine trees. The scene was the Four Notch area, a location where un- usual site preparation techniques not previously used in Texas were to be employed. Three years before, pine beetles had attacked the mature and park-like stands of pine timber. Miles (1987) chronicles the reason why the outbreak killed 3,500 acres of pine forest: Foresters were not allowed to control the beetle outbreak because the area was being studied for poten- tial addition to the National Wilderness Preservation System. This aspect of the example is discussed in the Wilderness and Forest Protection section of Chapter 8. Three-fourths of the dead timber in the area was salvaged. To minimize environmental damage in the area, helicopters were used for the first time in Texas. The Forest Service con- tracted to have the unsalvaged standing dead timber pushed over and chopped so that it could be efficiently burned with a prescribed fire ignited from the air, and later reforested with planted pine seedlings. In October 1986, a widely read national news magazine re- port on the situation said that Smokey the Bear had done a turnabout and was napalming, or fire-bombing, the forest (Uehling and others 1986). The Forest Service was actually planning to start a controlled burn by dripping a jellied mix of gasoline and diesel fuel from a torch suspended from a helicopter. The objective was to reduce the accumulation of dead trees left in the beetle’s wake. Injunctions temporarily halted site preparation activities, but subsequent federal court actions found no violation of law or procedure in the Forest Service’s planned timber management activities. In the fall of 1987, the prescribed burn was implemented, and pine trees will be planted as planned on about 60 percent of the ravaged Four Notch area. The message to the forestry community is that the conse- quences of land management activities need to be carefully analyzed not only for their technical effectiveness and effi- 38 cieincy, but for public acceptance as well. To maintain profes- sional credibility, foresters should include public opinion in their assessments of technical land management alternatives and their outcomes. The site preparation method proposed by the U.S. Forest Service in the Four Notch area and the public reaction to it is only one example of how public concern can affect forestry matters. Clearcutting in the national forests in Texas was a focal point a decade ago. Interesting and highly readable accounts of both sides of that story are readily available (Popovich 1977; Fritz 1983). The final verdict on this example, which again favored forest management, is now case material in a legal textbook (Schoenbaum 1982). _ An important part of the public concern regarding the’ forests in EastTexas is the desire for wilderness areas. Further discussion of this important ideal in modern American value systems is presented in Chapter 8. Currently, there is cause for concern that the forester’s most cost-effective tool, prescribed and controlled fire, may be lost due to air quality standards and citizen concern about smoke management by foresters. Somewhat similar was the fairly recent loss of the herbicide 2,4,5-T. This was a cost- effective chemical that was removed from forestry use by the Environmental Protection Agency due directly to the outcry of a few citizens in Oregon who were concerned about aerial applications of the herbicide, and attempted to link herbicide use to miscarriages in the area. Arnold (1982) suspects that the ulterior motive was the protection of illegal Cannabis gar- dens. Like the napalm symbol in the Texas case, images of the destructiveness of war were evident in the “Agent Orange” argument that was indirectly involved in this case. 2,4,5-T is now off the market, but until quite recently, this herbicide could be used on highway rights-of-way and in rice paddies, but not for forestry purposes as a result of public opinion. The point is, it was not scientific evidence of the harmful effects of 2,4,5-T on humans that took the herbicide off the market, but public opinion. This is important in Texas, because public opinion re- garding forest management could result in environmental re- strictions that might lead to a ban on forest burning due to air quality issues. Public concern could also lead to land man- agement regulations such as forest practices acts that other states have implemented, or local ordinances that inhibit forestry activities (Cubbage and Siegel 1985). These issues could affect the Texas forest economy by making timber pro- duction more expensive, and thereby restricting future timber supplies. 8. Non-Timber Uses 0i the Forest The forests 0f Texas provide many more benefits than \ trees that provide timber and jobs and income in wood-based manufacturing and related industries. These other important forest outputs or products of the forest are briefly described in the following sections. Recreation and Tourism The impact of outdoor recreation in Texas or anywhere else is difficult to quantify. What does the recreation experience mean in terms of dollars to an individual? Answers to subjec- tive questions like this are required to measure recreation im- pacts, because the value of outdoor recreation is not fully priced in a market, as are timber and wood products. It is estimated that more than $10 billion is spent in Texas in pursuit of recreation and related tourism activities (TPWD 1983). Another source puts the figure at $16 billion in 1985 (TTDA undated). These figures include expenditures for equipment, travel, vehicles, food, and licenses. According to the Texas Agricultural Extension Service, farmers, ranchers, and forest landowners received $147 million from non-hunt- ing recreation in 1986. Of this, 37 percent or $54 million was in East Texas (Anderson 1987). With continued population growth, increased levels of tourism, and the projected increase in leisure time for outdoor activities, the demands for recreation in Texas will be increas- ing. In 1980, more than one billion activity days occurred in Texas. By the year 2000, it is estimated that recreation activ- ity will triple to almost 3 billion activity days (TPWD 1983). Population growth means increased demand for forest rec- reation, and provides additional opportunities for forest land- owners to obtain non-timber revenues. Camping and hunting are two popular activities that landowners can offer to the public for a fee. Hunting opportunities in the woods of East Texas provide recreation for many Texans. Because of the ex- tensive land areas needed by wildlife, management of land as a hunting recreation resource poses a variety of specialized problems. Statewide, private landowners’ hunting receipts were esti- mated by the Texas Agricultural Extension Service at $136 million. Of this total, 16 percent or $22 million was received by landowners in the Piney Woods region (Anderson 1987). Wildlife Management and Hunting In East Texas, public hunting areas are provided by the Na- tional Park Service,’ U.S. Forest Service, Texas Parks and Wildlife Department, Texas Forest Service, U.S. Fish and Wildlife Service, U.S. Army Corps of Engineers, and the Bureau of Reclamation. Ip- A survey of forest industry companies that together owned s 3.5 million acres of East Texas timberland in 1983 revealed that 65 percent of their lands was leased to hunting clubs. They received an average of $1.14 per acre in lease revenue (Massey and Rodgers 1984). Forest land can be leased in East Texas at somewhere between $1 and $5 per acre per year for hunting (TAEX 1986). Most non-industrial private forest landowners participat- ing in a survey indicated that they would lease their lands for hunting as a source of extra income. However, 35 percent of the NIPF landowners that were surveyed indicated that no in- centive would encourage them to allow hunting on their lands (Wright 1985). The forests of East Texas provide habitat for many species of wild animals and birds. The pine forests of EastTexas are home to the red-cockaded Woodpecker, an endangered species with special management requirements. It depends on stands of pine trees that are at least 50 years old. These stands now exist almost exclusively on the National Forests of Texas and other southern states. Many landowners, companies, and government agencies recognize wildlife concerns in their management plans. Good timber management can also be good wildlife manage- ment, particularly for white-tailed deer and wild turkey. The majority of wild creatures are “edge” animals. Edges are created where timber of two different age classes intersect, causing a stair step in the forest canopy. These edges provide a good environment for a wide variety of plants that can sup- port wildlife. Thus, forest management that is designed to provide more wood products can also provide more varied wildlife habitats. Water Supplies East Texas is blessed with more rainfall than the rest of the state. Many large reservoirs—-Toledo Bend, Sam Rayburn, Livingston, and Conroe—have a substantial acreage of pro- ductive timberland underwater. So much of Texas’ surface is covered with water that only Alaska has more. In East Texas, more than 440,000 surface acres of water are con- tained in 30 large reservoirs during normal conditions (TPWD 1984). Between 1965 and 1975, some 561,000 acres of timber’- land were converted to other land uses, of which water reservoirs was one (TFS 1983). From 1977 to 1985, roughly 239,000 acres of natural pine stands and bottomland hardwoods were converted to other uses (USDA Forest Service 1987a). There are 311,000 acres of new reservoirs planned for East Texas (TDWR 1984). Of these acres, 164,000 are slated for the Rockland Dam project, which the U.S. Army Corps of Engineers now finds is “no longer economically justified” for flood control or hydroelectric power. However, water supply and recreation use justifies the almost $700 million cost of the project. But the Corps of Engineers’ study did not include the loss of 65,000 acres of timberland that would be flooded. The Corps has set aside indefinitely a reevaluation study of this project (TFA 1987). But there are still prospects on the books for 147,000 acres of new reservoirs in East Texas. It is not known how much 39 of this is timberland, but somewhere between 3O percent t0 5O percent would be a conservative estimate. Other than Rockland Dam, future reservoirs have the potential t0 flood 75,000 acres of timberland. Shifting Agricultural Land Use In the South, 6 million acres of agricultural croplands and ll million acres of pasture lands are identified by the U.S. Department of Agriculture as “marginal lands.” Almost a mil- lion of these acres are in Texas (USDA 1983; USDA Forest Service 1987a). The definition of marginal lands is simple: The landowner would receive higher rates of return if pines were planted there instead of annual crops or pastures (USDA 1984). But many Texans enjoy working their land or cattle, and forestry requires relatively little work. However, forestry investments are characterized by long payoff periods of at least 15 years, which many landowners find unattractive, re- gardless of the projected rate of return on investment. These potential returns are discussed in further detail in Chapter l0. Wilderness and Forest Protection The designation of public land as a legal wilderness re- duces the potential acreage of timber supply, as well as the county portion of timber sale receipts that are received from U. S. Forest Service timber sales in lieu of property taxes. Ad- jacent private landowners can also be impacted if wildfire or pest epidemics that are not managed in wilderness areas es- cape to their lands. Wilderness is a new use forTexas forests. Under provisions of the Eastern Wilderness Act of 1975, five areas in the na- tional forests of Texas now totaling 35,176 acres have been designated as legal wilderness by the U.S. Congress in the Texas Wilderness Act of 1984. The selection of areas to be added to the National Wilderness Preservation System was a classic example of political compromise, and yet another example of the importance of public opinion on forest man- agement matters. Special interest groups with the objective of setting aside as much of the public lands in the U. S. as pos- sible wanted to designate 81,000 acres of national forests as wilderness. They settled on a wilderness bill sponsored by a congressman from Dallas that proffered 65,000 acres for wil- derness designation. Another bill, sponsored by a congress- man from East Texas and supported by the Texas Forestry As- sociation, proposed less than 9,000 acres for legal wilderness designation. The total of 34,346 acres originally set aside for wilderness preservation was a compromise—almost an even split between the two bills. The additional 830 acres have sub- sequently been added as boundary adjustments, and land trades with private landowners were made. The forestry community recognizes the important non- economic values of wilderness areas, as shown by its support for a 9,000-acre wilderness set-aside. However, there is sig- nificant concern that by allowing wilderness lands to revert to whatever nature provides, forest productivity on adjacent private lands could be jeopardized by lack of adequate protec- tion on these wilderness areas. The control of the devastating southern pine beetle in wil- derness areas was a recent issue. The southern pine beetle is 40 notorious for its rapid life cycle, producing up to seven gen- erations per year. The only cost-effective control measure re- quires cutting a 250-foot-wide buffer strip around the in- fected trees to prevent the population of infectious beetles from spreading. On wilderness areas or public lands being considered as potential wilderness, cutting trees is prohib- ited. Attacks from pine beetles, incapable as they are of know- ing where legal boundaries exist, can be disastrous without prompt treatment. According to the Director of the Texas Forest Service (Miles 1987), private landowners adjacent to the 1984 pine beetle outbreak in the Four Notch area of the Sam Houston National Forest suffered damage as the beetle attack spread to their land. Other significant losses attributable to the southern pine‘ beetle have occurred on the Beech Creek and the Big Sandy Units of the Big Thicket National Preserve. A total of 8,000 acres of pine stands were killed. These losses affect not only the pine timber, but also the habitat of the endangered red- cockaded Woodpecker (Miles 1987). The Big Thicket National Preserve consists of 84,500 acres that cannot be managed for timber production. Some of the lands were formerly industrial pine plantations. Con- tinuing arguments for increasing wilderness areas in the National Forests of Texas seldom take into account these forests that are managed for one purpose: preservation of biological communities. These are defacto wilderness areas. Under new authorization to act on pine beetle outbreaks in wilderness areas following the Four Notch incident, the U.S. Forest Service has responded quickly to more recent pine bee- tle infestations. Despite criticism from some citizen groups, they have limited 275 infestations to an average of 5 acres each. By using appropriate control measures, the number of acres lost to beetle attacks in wilderness areas has been minimized. Much more importantly, adjacent owners have been assured better protection for their valuable timber re- sources (Miles 1987). So the negative impact of one aspect of wilderness has been addressed. The other impact of wilderness designation is the reduction of timberland acreage. The only way to make up for this loss of Texas timber is to intensify timber management on the re- maining acreage. Environmental Quality The most recent wave of the environmental movement that began in the late 1960s is still an important concern today, and one that affects all land managers, including those who own and manage forests. Efforts made today to enhance en- vironmental quality will influence the future availability of wood, water, and air. Good forest management practices can enhance the environment by providing for soil conservation and enhanced water quality. At the same time, raw materials can be furnished to the industry that convert timber into the products used every day by consumers. Soil conservation and the quality of water, air, and forests as a visual resource will continue to be an important facet of forest management that must be considered by landowners and foresters. u. 9. Sufficiency of the Forest Resource " Forest Products Self-Sufficiency Texas is not self-sufficient with respect t0 wood-based products. There are three other southern states that are in the same situation: Oklahoma, Florida, and Kentucky. This is a major finding of a recent study by the U.S. Forest Service (Schallau and Maki 1986; Schallau and others 1987). The excess employment technique was used to determine what each state’s economic base industries were. The economic base industries are those that exceed the nation- wide norm of employee distribution. For an industry to qual- ify, the percent of all workers in the state must exceed the per- cent of all workers in the industry nationwide. This simple measure is important because economic base industries gen- erate new dollars in the state by earning excess exchange with other regions. Economic growth in a state is dependent on the success of its economic base. The core of economic base theory is that the economic growth of a region depends on exogenous demand. Whether a region grows or declines is de- termined by how it performs as an exporter to the rest of the world (Bendavid-Val 1983). As Figure 9-1 indicates, in 1980, eight industries made up almost 9O percent of the economic base in Texas. The manu- facturing industry, to which the wood-based industry be- longs, was not one of them. If an industry is not part of the economic base of the state, the industry is not considered as earning excess exchange and economic advantage for the state. Therefore, the state is not self-sufficient in that particu- lar industry (Schallau and others 1987). Although this measure and application of “economic base” at first seems simplistic, it is only simple in its logic. If the percentage of total employees in a particular industry in a state is below the national norm for that industry, then by the law of averages, some other region must be producing for that state’s needs. Thus, if Texas is not self-sufficient in wood- based products, there might be an opportunity to provide for those demands within the Texas economy, and thus a chance for economic growth in the state. In other words, demand seems to exist for additional wood-based products beyond those which are produced in Texas. " Is not being self-sufficient good or bad? As is true with most questions in economics, the reply depends on many factors. If not being self-sufficient is viewed as a static situation oc- curring at one point in time, then it very well may be viewed as bad, given that self-sufficiency is an often-stated econom- ic goal and an admirable personal trait. But if viewed dynam- ically over a period of time extending into the future, it could be good if opportunities existed to change the situation. Such is the case with manufacturing industries in Texas, “of which the wood-based industry is one. In spite of the fact * that the manufacturing industry in Texas is the fourth largest in the nation (Figure 5-1), the state needs to find oppor- tunities to expand manufacturing and other industries to pro- vide more jobs and income for Texans. As Figure 9-1 indi- TEXAS AND U.S. MAJOR INDUSTRIES COMPARISON OF PERCENT OF TOTAL EMPLOYMENT 1980 .;5.1.;5.55.1.5;.;.;.;.;.;.;.;.;.;.;544.34.;.;.;.;.;.;.;.;.;.;.;.;.;4.3.1.;.;.;.§.;.;.;.;.59;.(.3.3;.;.;.;.;.;.;.;.;.;.;.;.;.1.5.3. SERVICES .. . ._ . . In [1] MANUFACTURING - RETAIL TRADE GOVERNMENT SELF-EMPLOYED ¥"“’“‘ CONSTRUCTION I WHOLESALE TRADE T R A N S P O O N I-fi-Pl-Pl~14'1i-Flifi'f~l-f'l~f'lrf'l' I _ AGRICULTURE v """""" -" "‘_""'- {BASE I2] I_-_ I IR. E. I-r1-1-1-:':-:-:-:-;-r-z-t-z-za-t-z-t-z- I _ MI N I N G Iz-z-rI-:-;-t-;-:-:-:~:~:-:- _ {BASE W/A us. .;.;.;.;.;.;.;.;.;.;.;. FED. MILITARY i" " ‘ FED. CIVILIAN ?1""‘*’1“’1""‘* ~_ tiiiiiibfziticiiazbzz PERCENT OF TOTAL EMPLOYMENT [1] Includes the wood-based industry. [2] finance, Insurance, and Real Estate Figure 9-1. Percentage of tota/ emp/oyment by major industries in Texas and the U.S. Data depicts the industries that constitute the economic base in Texas. (Source: Schallau and others 1987). cates, the manufacturing industries in the state employed 15 percent of all working Texans in 1980. Nationwide, 19 per- cent of all workers were in manufacturing. During the 1970s, the economic base industries that Texas depends on became less diversified and more dependent on oil and gas production (Figure 9-2). Some opportunities to catch up with the U.S. manufacturing employment norm in Texas must exist, given the natural and human resources of the state. Because the de- mand for wood-based products in Texas exceeds Texas pro- duction, the wood-based industry could well be one such opportunity. Consider the breakdown of Texas’ primary and second- ary wood-based industries presented in Chapter 5 (Figures 5- 10, 5- 16, and 5- 17). It is quite reasonable to say that if more primary wood products could be produced in East Texas and transported to secondary wood and paper products convert- ing plants and marketing outlets near the large metropolitan areas of Texas, then fewer timber and wood-based imports would be needed. Therefore, the wood- based industry could begin to become part of the state’s economic base. Currently, only one segment of the industry might be considered as a AI TEXAS ECONOMIC BASE INDUSTRIES DEPENDENCY INDICATORS 1970 AND 1980 OIL a GAS EXTRACTION CONSTRUCTION I WHOLESALE TRADE i AGRICULTURE m I970 RETAIL TRADE FEDERAL MILITARY '5 PETROLEUM REFINING 5 ELEC., GAS, SANIT. SVC. ......... _. ......... ‘ . ''''''''' . ' ALL OTHER BASE IND. _;; U‘ é Ill li§ 2:0 2g 3:0 I 35 PERCENT or TOTAL ECONOMIC BASE Figure 9-2. Texas economic base industries characterized by per- cent of tota/ economic base in botn i970 and 1980. (Source: Scna/iau and others 1987). base industry. The processing of secondary lumber and wood products—millwork, pallets, and treated lumber, posts, and poles-—is the only Texas wood-based industry with employ- ment that approaches the national norm (Figure 9-3). But there are, of course, many problems involved in ex- panding the Texas wood-based industry. On the demand side, it appears that the current situation and anticipated population growth would mean that the Texas market will demand more wood-based products than can be currently manufactured in Texas. Projections of future demand by the U.S. Forest Service, which are discussed in Chapter l0, re- veal increasing timber demand in the region (USDA Forest Service 1987a). On the supply side, one problem is the large quantity of Canadian softwood lumber that has flooded the Texas and U.S. lumber market in-the 1980s. Some of these lumber im- ports may be reduced by an export tax that Canada levied on its producers in 1987 to calm troubled international trade waters. But even if Texas received no Canadian lumber im- ports, a fundamental supply side question needs to be answered. Can the forests of East Texas support industrial ex- pansion? Or, would timber have to be imported to support new wood-based manufacturing capacity in Texas? 42 Forest Resource Self-Sufficiency The sufficiency of the forest resource is a measure of its ability to supply raw material to wood-based manufacturing facilities. As can be discerned from Figure 9-4, in 1977, soft- wood timber harvests constituted 83 percent of the growth in that year. In 1978, softwood harvests exceeded growth. Soft- wood harvest levels declined until 1982 when removals were 85 percent of growth. As general economic conditions began to recover after the depths of the recession in 1982, so did softwood timber harvest levels. Hardwood harvests have been at about half the rate of hardwood growth. But removals have increased 48 percent since 1982, while growth increased ; only 9 percent. As previously mentioned in Chapter 5, the level of timber harvested in Texas can produce enormous quantities of wood- based products, but still not enough to supply the vast mar- kets in the 3 Texas cities that are among the nation’s 10 largest cities. Improvements in wood utilization technology can ex- tend timber supplies to meet further demands. But when timber harvest levels are very near the level of annual timber growth, as they are in Texas, increased timber supplies must come from either: a) forests in other states or countries, b) the Texas timber growing stock, or c) additions to Texas an- nual timber growth. The latter of these is preferable for Texas landowners, but these landowners need to take some action to provide the additional timber supplies that could support industry growth. The 1986 Texas timber inventory conducted by the U.S. Forest Service showed a high percentage of trees in the more valuable sawtimber classes (Figure 2-5). Seventy-six percent of the softwood volume was in the sawtimber class, and 51 percent of the hardwood volume was in sawtimber. This would seem to indicate that as it currently is being managed, TEXAS AND U.S. WOOD-BASED INDUSTRY COMPARISON OF PERCENT OF TOTAL EMPLOYMENT l 982 “ TEXAS wooo FURNITURE 7 WA U.s. SECONDARY PAPER i3 .357 SECONDARY LUMBER g ALMOST .239 PRIMARY PAPER % .351 PRIMARY LUMBER 5*’: c} .i 5 5 .4 PERCENT OF TOTAL EMPLOYMENT Figure 9-3. Comparison of tota/ wood-based employment in Texai- and the U.S. Data is used to determine economic base industries. (Source: USDC Bureau of the Census 1985b). 4% TEXAS'HMBER RESOURCE TRENDS GROWTH AND HARVEST RELATIONSHIP 1964-1986 s50 500-" PINE GROWTH 45o“ " i ‘ T‘? 400 '- OI (I O l I '__._ .300 "' 250 "' ¢ “ " - - _o 20D "- 150'“ _ . . _ _\ ANNUAL TIMBER GROWTH AND HARVEST (MILLION CUBIC FEET) 100'“ . _ _ . _ _ . _ - - - - - - -¢ so -- 0 4 l 1 4 1 J m. L ¢ u a" ¢ d‘. _. _. _. a -—' PINE HARVEST HARDWOOD GROWTH HARDWOOD HARVEST 's4'e5'se'e7'ea's9'7o'71'72'73'74'75'7s'77*7a-79'so'a1'a2's:s's4'a5'as YEAR 4 1 J‘ 1 4p 1 l .4‘ 4 J _l_ r r Figure 9-4._Trehds in Texas timber resource growth and harvest relationships. (Source: TFS, Texas Forest Resource Harvest Trends). the Texas forest resource will be capable 0f supporting the existing forest products industry. However, annual surveys by the Texas Forest Service (Skove and Lord 1986) indicate that in 1985, Texas was a net exporter of timber products. By applying an average annual timber price (TFS 1985c) to the quantity of timber imports and exports, on balance the net export value of timber prod- ucts was $2.75 million (Figure 9-5). This net export value is about 1 percent of the total stumpage value received by Texas landowners. In 1985, there was a net import balance of $2.25 million in pine sawlogs. Pine pulpwood showed a net export balance of $4.5 million that was transferred out of Texas to be processed in neighboring states. Various hardwood timber products made up a net import balance of roughly $500,000. But as Figure 9-5 indicates, the quantity of timber exports and imports vary significantly from year to year. The only constant seems to be significant exports of pine pulpwood. In recent years, almost all interstate trade in timber prod- ucts has been at less than 5 percent of the mill requirements of the Texas wood-based industry (Figure 9-5). The major ex- ception to this is the large quantity and value of pine pulp- wood that is leaving Texas to be processed and have value added in the paper mills of neighboring states just beyond the Texas border (Figure 5-5). However, the major concern regarding the sufficiency of the Texas forest resource to sustain and support growth in the wood-based industry is not interstate trade, but the lack of pine regeneration on non-industrial private forest lands. Without adequate planning and action now, the future wood product needs of a growing Texas population must be met with either timber or wood-based products, or both, pro- duced in other states or countries. In other words, an opportu- nity to expand the Texas wood-based industry will have been lost. TEXAS TIMBER HARVEST TRENDS NET IMPORT AND EXPORT VOLUME OF TIMBER PRODUCTS AS A PERCENT OF TEXAS MILL RECEIPTS 1975-1985 1995 NET EXPORT STUMPAGE VALUE BALANCE: $2,750,000 U WEUOMM 4:2 W5 Q J 1n1114*1r€;»- 4 5 9'“ 'u*€37¢4*i?§ 3 2 51> "5 z .. 11 ~r"111111111111 1111,11,I111_11,11,111_F11= 1952 1962 1970 1977 1985 1990 2000 2010 2020 2030 Figure 10- 1. Projections of timber/and acreage in Texas and the South by forest type on a// ownerships (using different sca/es of measurement). (Source: USDA Forest Service 1987a). the question of why only 1.12 million acres of pine plantations show up in the forest survey inventory data (USDA Forest Service 1987a; Lang and Bertelson 1987). The answer, appar- ently, is that the U.S. Forest Service counts more than 600,000 acres of plantations as mixed pine-hardwood or hardwood type because there are more hardwood stems than pines. This implies that some management effort is needed for these plantations to reach their productive potential. Since most of them are on forest industry lands, it is likely that the neces- sary investments will be made to control hardwoods in these stands. U.S. Forest Service projections for future timberland acreage in Texas show the forest industry almost tripling its pine plantation acreage, from the low base of 869,000 acres to 2.5 million acres by 2030. NIPFs are projected to increase their pine plantation acreage from 235,000 acres in 1985 to 1.5 million acres by 2030, an increase of almost seven times the current situation (Figure 10-2). Perhaps the NIPF base acreage in 1985 is too low, but even if it were doubled, NIPF pine plantation acreage must more than triple to reach levels projected by the U.S. Forest Serv- ice. Projections have NIPFs eventually owning 37 percent of the pine plantations in East Texas; today, they own 20 percent. Are NIPFs planting enough to reach these projected acre- age figures? The answer is a qualified yes. At the rate they are planting now—-an average of about 25,000 acres per year—NIPFs will reach the projected plantation acreage in 50 years. Are forest industry companies planting enough to reach their projected acreage? They have planted an average of 135,000 acres per year since 1977. At that rate, they will reach the projected acreage for 2030 in only 12 years. And this is using the low base acreage, without the 600,000 acres of pine plantations that contain a large proportion of hardwoods. The major factor that will influence future timber re- sources is not the projected acreage of timberland, but how timberland acreage is being managed to meet its productive potential. Since 1952, softwood inventories in the South have nearly doubled (Figure 10-3), and hardwood inventories have increased by more than 50 percent (Figure 10-4). These increases have come during a period of rapid expansion in the southern wood-based industry, with accompanying increases in timber harvest levels and economic impact. TEXAS TIMBERLAND ACREAGE TRENDS BY FOREST TYPE ON PRIVATE OWNERSHIPS 1952-1985, WITH PROJECTIONS TO 2030 NON-INDUSTRIAL PRIVATE GI u Q BOTTOMLAND HARDW 1.- : l - j _ irlov" » ~ - Egb‘. a" \ j >5 -__ _,_._ _- _._._, so. MILLIONS OF ACRES LI III MILLIONS OF ACRES IAIXED PINE-HARDWOOD I 3 imlirilirriilf" III [I l lllllll i4i+vqr~v>~ ‘ -‘. . -._'>:.,‘-- “. - 4 4 4 . = . -*:**’e*‘=**.**$**4 .-. 1952 1902 1070 1971 1905 1990 2000 2010 2020 2030 C! FOREST INDUSTRY 3 10 9" I l" I 7 *1 MILLIONS OF ACRES ll J- MILLIONS OF ACRES 44 ~4444 .. 4 4 4 4 4 4 PINE PIANTAIION ‘ 444444 4 444444444444 4445444444545444 a | I, 1952 1962 1970 1977 1985 1990 2000 2010 2020 2030 CI Figure 10-2. Projections of timberland acreage in Texas by forest type on forest industry and non-industrial private forest ownerships. (Source: USDA Forest Service 1987a ). 46 ‘\ l f’ ‘M- SOFTWOOD TIMBER TRENDS IN GROWTH, REMOVALS, AND INVENTORY 1952-1984, WITH PROJECTIONS TO 2030 SOUTHERN U.S. INVENTORY / \ / "'00 § \ / \ b Q \ INVENTORY (BILLIONS OF CUBIC FEET) ANNUAL GROWTH AND REMOVALS (BILLIONS OF CUBIC FEET) I 1 s l l 4 | ‘r Y’ m v 1952 1962 1970 1976 1984 1990 2000 2010 2020 2030 h) Figure 10-3. Softwood timber trends in growth, removals, and inventory for the Southern US. and Texas (using different scales of measurement). (Source: USDA Forest Service 1987a). Softwood Inventory Trends: Regarding future timber in- ventories in the South, the bottom line is that sufficient hardwood and softwood inventories and a broad spectrum of economic opportunities are available to increase the output of timber. If taken, these opportunities will help Texas wood- based industry companies maintain their economic position and expand their share of domestic and international markets. But levels of forest management must expand beyond their present levels (NFPA 1987). Otherwise, timber inventories arid forest industry prospects will steadily decline (USDA Forest Service 1987a). To understand these findings, the underlying assumptions in future projections need to be care- fully assessed. The key assumption is the management be- havior of the major timberland ownership group, the non- industrial private forest landowners. Softwood inventory projections for the South (Figure 10-3) show a decline in the near future as timber harvests ex- ceed annual growth. Inventory levels will rebound as the T growth from recent pine plantation efforts makes an impact T around the turn of the century. These projections are based on modest increases in annual timber harvest levels, and are dependent upon and extremely sensitive to today’s forest management practices. The Texas outlook is less favorable TEXAS 1286 9 Elm" //\\\ a w / \\ Q ‘flu I \ II! / \ D / \ r7 ° / mvcuroav ” O / \ \ _ _ _ _ _ If Q l/ ‘t’ 9 O m" / H] - :> j / o “ / 3' m l/ v5 i5 (II g / ‘i’ a / 9 l, w" REMOVALS --4 j Fg’ P; g an" E < 1 Q I Z E m. g o _ I! P2 o 4 m" < 3 ,1 % "--_ I 1 < m" 1952 1962 1970 1976 1984 1990 2000 2010 2020 2030 than the South’s as a whole. Increases in removals shown in Figure 10-3 are projected at an average compound rate of only 0.2 percent per year from now until 2030. This modest rate of increase is less than the average annual compound rate of 0.6 percent per year that is projected for the South Central. region. Timber cannot be harvested and processed if it is not available. Texas timber growth is projected to begin increasing in 1990, but the increase will not be as rapid as in the entire South (Figure 10-3). The driving force behind these trends are the actions of landowners. An analysis of the manage- ment practices that affect future timber supplies is presented later in this chapter. Hardwood Inventory Trends: Hardwood inventory projec- tions for the South (Figure l0-4) are different than those for pine. At the present time, hardwood growth is at a peak and comfortably exceeds removals. Growth is now beginning to trend downward, as is pine growth. Projections indicate that hardwood removals will begin to exceed growth before the turn of the century as new technologies are adopted that can better utilize the hardwood resource. In the long-term future, hardwood inventories are projected to be at lower levels than they are today, which results in rising prices for hardwood timber. This scenario could change with more intensive man- agement 0f the hardwood resource. Very little hardwood man- agement is practiced today because of its seeming abundance. Projections of hardwood supplies in Texas show declines in inventory that will occur sooner and are steeper than the general downward trend in the South (Figure 10-4). Both trends show increases in removals averaging 0.9 percent per year in Texas and 0.8 percent per year in the South Central region, pushing inventory levels down as the growth trend de- clines and then levels out. Timber Demand and Price The timber resource outlook for Texas and the South pre- sented in The Souths Fourth Forest: Alternatives for the Future report (USDA Forest Service 1987a) and summarized in the preceding section is based on a timber growth modeling system that is sensitive to landowners’ management actions. These actions will affect future timber supplies, and at pro- jected levels of timber demand, will produce various timber price effects. In turn, price signals will have some effect on landowners’ management plans. However, due to the long production periods in forestry, today’s price signals don’t have much of an effect. Wisdom (1986) says that econometric studies have determined that 0 forest demand and supply elasticities, in the range of 0.3 to 0.7, are quite price inelastic. A review of these studies by Cubbage (1986) emphasizes the point that changes in timber stumpage prices are not a significant influence on land- owners’ reforestation behavior. ' The U.S. Forest Service projections 5f future timber de- mand were made using 15 different scenarios. These included different levels of exports and imports of timber products, im- proved processing efficiency, reduced timberland area, re- duced timber growth, and increased management intensity- on southern private timberlands, crop and pasture lands, and industrial timberlands in the Pacific Northwest region (USDA Forest Service 1987a). Results of U.S. Forest Service simulations made with an econometric model using these 15 timber demand scenarios in the three primary wood-based product groups of softwood lumber, plywood, and pulpwood are presented in Figure 10-5. Abt (1986) disaggregated results of these simulations HARDWOOD TIMBER TRENDS IN GROWTH, REMOVALS, AND INVENTORY 1952-1984, WITH PROJECTIONS TO 2030 SOUTHERN U.S. 611 ’//\\ // \\ / \ 120 to // \\ / \\ / \ 9 // / INVENTORY M” / / l // / // / "l" i‘ INVENTORY (BILLIONS OF CUBIC FEET) . r ' GROWTH ANNUAL GROWTH AND REMOVALS (BILLIONS OF CUBIC FEET i 1 J 1952 1962 1970 1976 1984 1990 2000 2010 2020 2030 Figure 10-4. Hardwood timber trends in growth, remove/s, and inventory for the Southern U.S. and Texas (using different sca/es of measurement). (Source: USDA Forest Service 1987a). 48 1% 7 f3 iii m /\\\ h. // \ g 9 / \ S '°° / \ O / \\ E “ // \ w a m // \\ 5 "- O € / \ i: j / \\ D g coo / \ 0 5 // ‘ 6 , mvsuromr 9 \\ / w ; r" v a o 3 5 = i flf 4m" 9 O z t < 1- I 3m - Z E REMOVALS 5 g _ O gm - .J < 3 ~1 Z 5 ‘°°" GROWTH 1952 1962 1970 1976 1984 1990 2000 2010 2020 2030 to state levels, but only for the base level projection scenario used in The South ’s Fourth Forest: Alternatives for the Future report (USDA Forest Service 1987a). Taken in total, the overall increasing trend in timber prod- uct demand at the base level projection~which is, in effect, the median of the 15 demand scenarios-—is expected to in- crease at a faster rate than base level projections of timber supplies. Projected stumpage prices for softwood sawtimber and pulpwood are presented in Figure 10-6. At the base level scenario, in the 46-year period between 1984 and 2030, the average annual rate of real price increase for sawtimber is pro- jected to be 1.7 percent; for pulpwood, it is expected to be an average of 1.8 percent per year. As indicated in Figure 10-6, timber will be relatively less plentiful between now and the year 2000 in the South Central region than it will in later time periods. This reflects the plan- tation investments being made by private landowners that will provide additional future timber supplies. Because Texas timber inventory levels are not projected to increase in the fu- ture at base level management intensity (Figure 10-3), Texas timber prices may be expected to remain higher than those in other South Central states. Texas Reforestation of Harvested Private Timberland During the period from 1975 to 1986, the U.S. Forest Serv- ice forest inventory estimated that Texas NIPF landowners harvested 42 percent of their pine timberlands, a total of 963,700 acres. Evidence from the forest survey indicates that only 16 percent of this was clearcut, and 81 percent was “par- tially cut,” meaning that it was harvested with a pine-selection cut, a diameter-limit cut, a salvage cut, or a heavy thinning in sawtimber-size stands. Thinnings in poletimber-size stands are excluded. Only 3 percent of the harvested pine stands were managed with a seed-tree or shelterwood cut. On mixed pine-hardwood forest types, NIPF landowners harvested 21 percent of their forests between 1975 and 1986, for a total of 601,900 acres. The proportion of these stands that was clear- cut, partially cut, or seed-tree cut is approximately the same as the pure pine types, except that seed-tree cuts were used on only 1 percent of the harvested acreage (McWilliams and Skove 1987). Between 1975 and 1986, a total of 248,700 acres of NIPF pine or mixed pine-hardwoods were clearcut, and 1.28 mil- lion acres were partially cut (McWilliams and Skove 1987). During the same period, NIPF landowners planted 237,105 acres (USDA Forest Service 1986; 1987d). It appears, at first glance, that NIPF landowners are planting almost all of their land that is clearcut. But that does not take into account what- ever acreage of old field or pasture is being converted to pine plantation. Nonetheless, considering how much acreage is clearcut and how much is planted, NIPFs aren’t doing such a bad job of timberland stewardship. However, they could be doing a much better job. Many par- tial cutting techniques are abusive forest management prac- tices, in that adequate provision for regeneration is not consi- dered. Partial cuts account for more than 80 percent of the t5 harvests made on NIPF pine and mixed pine-hardwood acres. Figure 10-7 compares the effectiveness of reforestation ef- forts by forest industry companies and NIPFs. With compar- able acreage of pine and mixed pine-hardwood forest types harvested between 1975 and 1986, the forest industry has SOFTWOOD TIMBER DEMAND PROJECTIONS BY PRODUCT SOUTH CENTRAL REGION 1984-2030 SOFTWOOD LUMBER PRODUCTION 1o mot-t a 9r I- 5 B _ MEDIAN g 7 E Z Q 3 as s - LOW s 10:4 1on0 zooo 2010 2020 20:0 SOFTWOOD PLYWOOD PRODUCTION 1o ___ HIGH (l1 e g MEDIAN I (J z a a r LOW 7 T 3 El s is s T984 1990 2000 2010 2020 2030 SOFTWOOD PULPWOOD -- 1.4 ROUNDWOOD CONSUMPTION L; -_—IH|GH L2 _. MEDIAN BTLUON CUBTC FET a S LOW 1984 1990 2000 2010 2020 2030 Figure 10-5. Projected softwood timber demand by major product group in the South Central U.S. Depicts highest, /owest, and median (base ievei) projections of 75 different timber demand scenarios in the three primary wood-based product groups. Appropriate scales of measurement are used for each timber product. (Source: USDA Forest Service 1987a). only 15 percent of the harvested acres in the low pine stocking class, compared to 27 percent for NIPF s. It may be concluded that as a result of cutting practices and planting efforts, the forest industry has 262,000 acres of recently harvested land with low stocking levels of pine. This is significantly less than the NIPFs’ comparable acreage of 413,000 with low pine stocking, and the industry companies harvested 220,000 more acres of their pine timberlands than did the NIPFs. Evidence from the past l0 years indicates that NIPF land- owners have replanted 1 acre for every 10 harvested. Exclud- ing harvested hardwood stands and pine seed-tree cuts, 49 SOFTWOOD TIMBER STUMPAGE PRICE LEVEL PROJECTIONS SOUTH CENTRAL REGION 1 954—-203Q SOFTWOOD SAWTIMBER SOFTWODD PULPWOOD , HIGH m mu. ”! mlI mun U) Q0 . HIGH go ‘f? zso- E5’ 250-- LL II LL 11 MEDIAN 9 <4 MEDIAN 0 <r 6 g zoo l>u< g zoo-- 5 P 3 T I " ........................ -- Low 7 , LOW 15o» 15o" - 100 ' 100-- ” 1984 19.90 2000 P2010 2020 20.30 N 1984 19.90 2000 2010 20.20 2030 PROJECTED ANNUAL REAL PRICE INCREASE PERCENT PROJECTED ANNUAL REAL PRICE INCRUSE PERCENT SCENARIO '84-'90 '90-'00 '00-'10 '10-'20 '20-'30 1984-2030 SCENARIO '84-'90 '90-'00 '00-'10 '10-'20 '20-'30 1984-2030 HIGHEST 4.1 3.2 1.7 1.2 0.9 2.0 HIGHEST 2.2 4.0 2.7 1.7 1.5 2.7 MEDIAN 3.7 2.7 1.4 0.8 0.5 1.7 MEDIAN 2.2 2.4 1.3 0.8 2.7 1.8 LOWEST 5.1 2.4 1.2 0.3 0.2 1.3 ALOWEST 1.5 1.1 0.0 0.8 4.1 1.1 Figure 10-6. Projected softwood timber scenarios. (Source: USDA Forest Service 1987a). NIPFs have replanted 1.5 acres 0f pine timberland for every l0 acres harvested. Forest industry companies replanted 6.5 acres for every 1O that were harvested. Excluding harvested hardwood stands and pine seed-tree cuts, industry companies replanted 8.5 acres for every 1O acres harvested. Both NIPFs and industry have doubled their tree planting efforts since 1975, while harvest levels have remained rela- tively constant. It could now be said, based on planting and harvest levels in 1984-1985, that NIPFs are replanting 1.5 acres for every 10 acres of harvested pine timberland. Forest industry companies are currently replanting 9.3 acres for every 10 acres of harvested pine land that is not being natur- ally regenerated with seed tree cuts. The significant difference between the NIPFs and the forest industry in replanting per harvested acre reflects the re- liance of Texas N IPF landowners on partial cutting methods. NIPF Reforestation: Problem or Opportunity? The major factor influencing timber resources in the South is the non-industrial private forest (NIPF) landowner. Ap- proximately 67 percent of the timberlands in the South and 5O price indices in the South Central US. with rea/ indices for softwood sawtimber and pu/pwood based on highest, lowest, and median price changes per decade. Presents stumpage price (base ievei) projections of 75 different timber demand 60 percent of those in Texas are owned by NIPFs. Manage- ment practices on these lands vary with the individual land- owners and greatly affect projections of future timber in- ventories, upon which growth in the forest products industry depends. Members of the forestry community have long been aware of the problem of inadequate regeneration of pine acres after harvest on lands owned by NIPFs. Figure 10-8 illustrates the historic data for reforestation in the South and in Texas. The proportion of planting by NIPFs in relation to their two- thirds majority of the timberland is obvious cause for con- cern. The high peaks in NIPF planting resulted from policies that subsidized NIPF tree planting. The high spike in 1959 is from the “Soil Bank” program. NIPFs responded well to the financial incentives for planting. As this program was phased out, planting on N IPF lands dropped off sharply. The increase in NIPF planting since 1975 is a result of the Forestry Incen- tives Program, a federally funded program that shares th a . cost of reforestation with qualifying NIPF landowners. Re- forestation tax incentives that became effective in the 1981 planting season have also helped. l TEXAS REFORESTATION EFFORT AND EFFECTIVENESS T 1975-1986 NON-INDUSTRIAL PRIVATE FOREST INDUSTRY ~ 752' 0r l-MRVESTED AC/PEAGE WAS PuA/rra 852' 0F m/Pvzsiro ACRBME W45‘ PLAA/IFD 2000 1750 » 1500 , PARTIAL cur, BY 1529 1401 PARTIAL cur, BY 3 - PINE-SELECTION 3 > PINE-SELECTION 5 _ - DIAMETER-UNIT 5 - olAumn-uun < '25” » SALVAGE cur < - SALVAGE cur 5 - HEAVY mm '6 - HEAVY mm g 1000 ' SAWTIMBER g SAWTIMBER 3 3 3 750 r 3 O O E E s00 - 250 i- __ 2%.. _ ~i Q CLEARCUT f: CLEARCUT 0 E ; I T ACRES PLANTED ACRES HARVESTED ACRES PLANTED ACRES HARVESTED EFFECTIVENESS PERCENT OF HARVESTED ACRES WITH HIGH, MEDIUM, AND LOW PROPORTIONS OF PINE STEMS NON-INDUSTRIAL PRIVATE FOREST INDUSTRY HIGH 46% HIGH 66% 27% LOW 15% LOW MED 27% V33’ ><>°3€OFJNE|NE I 3 o‘ o LOW: <3oz PINE MED 19% §. M Figure 10-7. Comparison of tne effectiveness of reforestation efforts by non-industria/ private forest owners and forest industry companies. Comparable pine and mixed pine-hardwood forest acreage was owner-harvested using c/earcut and partial cut methods. (Sources: USDA Forest Service 1986; USDA Forest Service 1987d; McWi/iiams and Skove 7987). Forest industry companies have increased their pine plan- tation acreage dramatically (Figure 10-8). Their incentive may be described as self preservation. If the companies can- not be assured of timber from other landowners, they must make certain that their massive capital investments in wood- based manufacturing plants have adequate supplies of timber. That explains why they own and manage timberland. They are in the lumber, plywood, or paper industry-—not the timber industry (O’Laughlin and Ellefson 1982). The historic tree planting trend in Texas parallels that in the South (Figure 10-8). An obvious difference, though, is that Texas NIPF landowners are planting at a lower rate than most of the other southern states. This, more than any other factor, explains why projections of Texas softwood inventories do not keep pace with the rest of the South (Figure 10-3). Again in Texas, the NIPF landowners’ tree planting efforts are closely related to subsidy programs. Texas N IPFs respond quite favorably to cost-sharing programs (Hickman and Gelhausen 1981). Without such programs, NIPF landowners plant only a few thousand acres of trees (Figure 10-9). In Texas, only 15 percent of all NIPF planting occurs without some form of cost-sharing. A recently reported survey of southern NIPF landowners that had harvested timber re- vealed that between 60 percent and 8O percent of those who reforested used either special reforestation tax incentives, cost-sharing assistance, or both (Royer and Moulton 1987). In the South, six states have cost-sharing assistance pro- grams for tree planting: Virginia, Mississippi, North Caroli- na, South Carolina, Texas, and Florida (USDA Forest Service 1986). These programs were undertaken by the various states to accomplish the same objective as the federal Forestry In- centives Program (FIP) because FIP funds are not adequate for these states (O’Laughlin and others 1983). All 6 southern states with cost-sharing programs are among the top l0 states in NIPF tree planting (Figure 10-10). But remarkably, the leading state, Georgia, and third-ranking leader, Alabama, do not have cost-sharing programs. Texas NIPFs are not keeping up with the planting pace of their counterparts in other southern states (Figure 10- 10). The 1986 planting season—which extended from October 1985, through September 1986—reached record planting levels of almost 2.4 million acres on all ownerships (USDA Forest Service 1987d). This exceeded the 2 million acres planted in both 1984 and 1985 (USDA Forest Service 1986). NIPF re- forestation in 1986 totaled 883,000 acres throughout the South, twice the acreage that was planted in 1982. But in REFORESTATION TRENDS BY PRIVATE OWNERSHIP 1 9 45 —- 1 9 8 7 SOUTHERN U.S. TEXAS zzno- 22m -- -2zo ma: m m r qnm um- nmo m - 4m m mo" --1mo w m m" ~11: m m m u u: 5 5 5 "‘ 4; 14m- ~14m < < I40" 4n 2 u. u. u. u. O O O O m 1zm~ "mo q) m 120-- 20 m Q Q 2 2 < < < g’ 1on0» --moo g’ g 1M" woo é ° 2 2 Q E aw 1- |- m“ m 13-: m<> "-- m<> "4 an; mo: a . : : : a oi *"" ' 1945 1950 1955 1960 1965 1970 1975 1980 1985 1945 1950 1955 1960 1965 1970 1975 1980 1985 Figure 10-8. Historic reforestation trends in the private forest ovvnersh/ p sector in the Southern U.S. and Texas (using different scales of measurement). (Sources: USDA Forest Service 7986; USDA Forest Service 7987d; Dangerfield and Gunter 1987). 52 1L Q» TEXAS REFORESTATION NON—lNDUSTRlAL PRIVATE FOREST LANDS 1 945-1 987 55 6O __ PROGRAM (SPONSOR) CRP (FEDERAL) 551- TRe FOUNDATION (STATE) 5o + FiF (FEDERAL) 45 ~- v, S0|L BANK (FEDERAL) LL] § 401' ACP (FEDERAL) 5 35 -- NO ASSISTANCE (f) ‘é 50 1 < (f) 3 25 1- I l-— 2o 1- 15 ~- 10 ~- 5 -- 0 .;.'.AA.;...,.;;_..._...._...,..,..1“....,...,..,...,:.;:::,:::;:' I _ ::_::;_;::;:::,:::;:;gzzzgzzgzzgzqz:t:Y" 1945 1950 1955 1950 1955 1970 1975 1980 Figure 10-9. Historic reforestation trends 0n non-industrial private forest lands in Texas. Depicts reforestation both with and without various financiai assistance programs. (Sources: USDA Forest Service 1986; USDA Forest Service 19870; Dangerfie/d and Gunter 1987; TFS, Texas Forest Resource Harvest Trends). Texas, NIPF acreage planted in 1986 was only slightly more than 20,000 acres, which is about the same acreage planted in 1980. Texas NIPF planting approached 30,000 acres in 1981, but according to Dangerfield and Gunter (1987), it de- creased to 17,320 acres in 1986-1987, of which only 761 acres were planted without some form of subsidy (Figure 10-9). Further indications of the limited amount of NIPF planting in Texas appear in Figure 10-10. The line on the figure indi- cates the relative efficiency of NIPF planting in each of the top>‘15 planting states, which includes Texas. Texas’ efficiency rating on NIPF planting is among the lowest of the southern states. Many Texas N IPF landowners do not clearcut and reforest their lands by planting seedlings because the capital invest- ‘ment required for tree planting is substantial——somewhere between $75 to $250 per acre—depending on the amount of work necessary to prepare the site for tree planting. Natural regeneration methods can be effective, but require adequate "slanning before a timber harvest and skilled management ‘enereafter. And natural stands will, at best, achieve only two-thirds of the productive potential of well-managed plantations. Forest industry companies, in comparison to NIPFs, are doing a much better job of tree planting (Figure 10-10). Texas companies rank among those with the heaviest commitment to tree planting, as the efficiency index on Figure 10-10 indicates. TRe Foundation: Unique Approach to Aid NIPFs The state cost-sharing assistance program for NIPF tree planting in Texas, mentioned in the preceding section and in Figure 10-9, is worthy of some discussion. The TRe (“Tree”) Foundation, Inc. , shares half of the cost of reforestation and timber stand improvement with non- industrial private forest landowners. It is the only program of its kind to approach the problem of reforestation on NIPF lands with a private sector initiative. The TRe Foundation was established in 1981 to provide funds to aid NIPFs with reforestation and improvement of their timberlands. Voluntary contributions from companies in the Texas wood-based industry provide the source of funds. Administration of the program is the responsibility of the Texas Forestry Association. Technical forestry assistance for landowners is provided by the Texas Forest Service. As of 53 g TOP 15 STATES RANKED BY ACRES OF TREE PLANTING ON PRIVATE TIMBERLANDS 1986 t NON-INDUSTRIAL PRIVATE TIMBERLAND FOREST INDUSTRY TIMBERIAND 225 6 225 8 m. m. V» >5 >5 I75 175" E5 Q u i LINE: EFFICIENCY INDEX (PLANTED ACRES AS A PERCENT OF NIPF OWNERSHIP IN STATE) 3 BARS: THOUSANDS OF ACRES PLANTED Fr‘ \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\€ i, 8 G-AHISALFLSCVANCARTXWAWILAOROKMN BARS: THOUSANDS OF ACRES PLANTED 3 i? é G s3 8 i u LINE: EFFICIENCY INDEX (PLANTED ACRES AS A PERCENT OF‘ INDUSTRY OWNERSHIP IN STATE) - ‘\\\\\\\\\\\\\\\\\\\\\\‘\\\\\\\\\\\\\ W .. TNVAOKCA 9 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\§\\\\\\\\\\\\\\\\\\\\\ FLALTXLAWAMSSCORARNC Figure 10-10. Top 15 states categorized by ownership and ranked by thousands of acres of trees p/anted on private tirnber/ands (indicated by bar graphs). Line graphs indicate p/anted acres as a percentage of totai timber/and acres in forest ownership. (Source: Adapted from USDA Forest Service 7987d). mid-1987, more than $2 million had been distributed to land- owners from the TRe Foundation. Some of the cost-sharing funds are used for timber stand improvement, but most are used for tree planting. TRe Foundation funds have planted more than 50,000 acres of timberlands owned by 710 individuals. As depicted in Figure 10-9, TRe funds planted 8,553 acres in 1985. The federal Forestry Incentives Program (FIP) planted 10,844 acres on NIPF lands in 1985. Increasing Timber Supplies and Landowner Income Texas timberlands are as productive as any in the South, but barely are achieving more than half of their productive po- tential. The comparative advantages of the southern U.S. as a tree-growing region are well known (Sedjo 1983). Indeed, the investment returns achievable from pine plantations in the southern U.S. outstrip any other region in the northern hemi- sphere (Figure 10-ll). There are only two problems with a forestry investment. First, land costs are a substantial consideration, especially in 54 forest industry and non-industr/a/ private Texas. But all of the productive timberlands in East Texas are already owned by someone, so this hurdle is not a problem for NIPFs: They own their land. Second, planted pines cannot be harvested as a cash crop until at least 15 years after planting. Many Texans are apparently unwilling to tie up their money for that length of time. Many forest management opportunities exist for landowners to increase the supply of raw material from their East Texas tim- berlands and thus create more income from their forests. There are many financially attractive opportunities on existing timber- lands as summarized below Information in this section is com- piled from recent U.S. Forest Service reports (USDA Forest Service 1987a; Vasievich 1987). All rates of return mentioned exclude three important costs: 1) land acquisition, 2) property~ taxes, and 3) income taxes. The projected rates of return are in real terms, over and above whatever rate of general price inflation affects prices and invest- ment returns. Almost any cited return on any investment altemai tive includes inflation. To compare these rates of return wit other investment alternatives, 4 or 5 percentage points should be added to allow for inflation. WORLDWIDE FORESTRY PLANTATION INVESTMENT RETURNS REGIME PIANTED SPECIE j BRAZIL, AMAZON - PW élwe/inaspp. j215 ' CHILE - PW Wnusraalbta J2s4 BRAZIL, AMAZON ~ st Pinus car/been A I204 BRAZIL, CENTRAL - PW fvwlrtwspv- A202 soum AFRICA ~ PW PM“ part/v I195 GAMBIA-SENEGAL PW ewe/hr m- j 1 18.4 BRAZIL, SOUTH ST Prim rwda Ins BORNEO a $1 P/humnma I141 GAMBIA-SENEGAL - ST fmtrtvwp- 114.1 USN 50W“ ‘ W t HIGH YIELD SITE NEW ZEALAND 13.1 U-S-M SOUTH 124 { AVERAGE YIELD SITE AUSTRALIA ~ PW PM 144mg 10.7 U.S.A., PAC. NW 9.6 Psuedotsugamenz/es/ g HIGH YIELD SITE U54- PAO NW 7-1 Psuez/otsugfl merrz/es/ 1 AVERAGE YIELD SITE EUROPE, NORDIC 5.6 Pia-q ab/es D it IiD Iii 2:0 T5 1D PW = PULPWOOD INTERNAL RATE OF RETURN (PERCENT) st = SAWTlMBER/PULPWOOD Figure 10-11. Worldwide forestry plantation investmentreturns ranked by rate of return on representative plantations. Graph assumes con- stant 1979 prices and does not include land costs. (Source: Sedjo 1983). The projected rates of return include the base level projection of timber demand and supply that produce the real price in- creases indicated on Figure 10-6. Opportunities to increase net annual growth and landowner income on existing timberland acreage include reforestation of existing timberland by planting pine stands, conversion of stands of undesirable tree species to desirable species, and ma- nipulation of stand density by thinning. There are 5.1 million timberland acres that need some type of treatment to allow them to achieve their potential productivity. That makes up almost half of the timberland acreage in East Texas. The potential re- turns on these opportunities are detailed in Figures 10-12 and l0-l3, and discussed in the following text. Investments Yielding More Than 4 Percent: More than 4.4 million of the acres needing treatment promise to earn at least a 4 percent real7 rate of return on the treatment invest- ment. If all these acres were treated, there would be an addi- tional 207 million cubic feet of timber available for harvest annually. This would be a 44 percent increase in annual softwood timber growth in Texas. Not surprisingly, the majority of the acreage needing treat- iment (71 percent) is held by non-industrial private forest 7The real rate of return is an inflation-adjusted. pre-tax rate. (NIPF) landowners. The total amount required for all NIPF investments that would earn in excess of 4 percent is $350 million. Forest industry companies have 23 percent of the op- portunities for improvement that promise to earn more than 4 percent. They would need to invest $ 102 million to realize all these opportunities. Investments Yielding More Than 10 Percent: Almost two million of the acres needing treatment promise to earn greater than a l0 percent real rate of return. If improved, this acreage alone could add an additional ll4 million cubic feet of wood each year, or a 24 percent increase in annual softwood timber growth. Three-fifths or 6O percent of these opportunities are on NIPF lands. Forest industry companies have 31 percent of these high-yielding opportunities. A l0 percent real rate of return should be an exciting pros- pect for landowners. The top five treatment opportunities available to achieve these high investment returns are de- tailed in Figure l0-l3. Most of them relate to tree planting, either after a site with low-valued or understocked stands has been prepared for planting, or after over-mature natural pine stands have been harvested. A significant amount of addi- tional acreage of high-yielding investments is in stand density control. These timber stand improvements are made either by thinning young overstocked poletimber stands that were produced from natural regeneration, or by controlling competing vegetation in a variety of stand types. To realize these high investment yields that exceed l0 per- cent, NIPFs need to invest $95 million. Forest industry com- panies need to invest $50 million. TEXAS OPPORTUNITIES TO INCREASE TIMBER SUPPLIES RATE OF RETURN _. >107- 42-10% NON-INDUSTRIAL 530 FOREST INDUSTRY o zoo 40o soo uoo r noo r zoo \ 40o moo 1aoo zooo zzuo THOUSANDS OF ACRES Figure 10-12. Opportunities to increase timber supplies in Texas. Amount of private timber/and acreage by projected pre-tax invest- ment returns on forest management activities by ownership category. Uses base level demand and price scenarios from Figures 10-5 and 10-6. (Source: USDA Forest Service 1987a). 55 TEXAS OPPORTUNITIES TO INCREASE TIMBER SUPPLIES MANAGEMENT ACTIVITY . AND FOREST TYPE t SITE PREP <s¢ REFOREST 1280 UPLA/VD HARDWOOD 320 100 770 9O ‘ > 10% NON-INDUSTRIAL ZOO > 10% FOREST INDUSTRY 4-1 OZ NON-INDUSTRIAL CLEARCUT 8c REFOREST A/ATU/PAZ P/NE THIN POLETIMBER STANDS titizizizizfzQ‘ NATURAL P/NE ‘“”‘"* \ CONTROL HARDWOODS VAT/GUS FORFST D7055 4-107. FOREST INDUSTRY SITE PREP 8c REFOREST M/XED P/A/E-HARDWOOD SITE PREP 8c REFOREST NATU/PAA P/A/E 6O 4O 90 40 SITE PREP 8c REFOREST I 65o aorro/um/va HARDWOOD ’ VARIOUS OTHER ACTIVITIES WIR/OZ/S FOREST IYPES‘ 18D ‘I00 40 3O O 28° ‘(:30 53° BCIJO 1 0:00 1 2:00 '| 4:06 1 800 THOUSANDS OF ACRES Figure 10-13. Opportunities to increase timber supplies in Texas. Management activities and forest types by private ownership category, ranked by acreage of investments projected to earn greater than a 1O percent return. Uses base ieve/ demand and price scenarios from Figures 10-5 and 10-6. (Source: USDA Forest Service 1987a.) Econgmic |mpacf of Timber $upp|y “mreases this question depends on several assumptions. First, it is as- sumed that additional timber supplies beyond current harvest It is usually uneconomical to transport timber more than levels are needed to fuel industrial expansion. Many of the 5O miles because of its relatively low value-to-volume ratio. preceding points in this report support such an assertion. This explains why most all primary wood-based manufactur- Second, it is assumed that the outputs from additional timber ing facilities are located near forested areas. Research on processing capacity will have a market. Third, there will be factors that influence primary wood-based industry plant lo- no downward price effects of increased timber supplies. cations reinforces the logical presumption that local timber These assumptions all seem reasonable in relation to U.S. supply availability is very important. Also important are the Forest Service projections (Figures 10-5 and 10-6). economics of integrated wood utilization (Table 6-3), which The “average-sized” Texas lumber mill consumes 12 mil- are determined by a particular company’s system of mills lion board feet of softwood sawtimber per year. Approxi- (Cleaves 1983; O’Laughlin and Cleaves 1986). mately a 1.5 percent increase in Texas sawtimber harvests Because annual timber harvest levels in Texas are at or near would be necessary to furnish an “average” new lumber mill. the level of annual growth, further harvests cannot be ac- The estimated impact on theTexas economy of this new activ- complished without drawing down the timber growing stock ity would be $6.9 million, with 38 new jobs (Table 10-1). inventory. U.S. Forest Service surveys show that the soft- The “average-sized” Texas softwood plywood mill con- wood inventory is already beginning to decline, and will con- sumes 63 million board feet of softwood sawtimber per year. , tinue to do so at current and projected harvest levels (Figure It would take approximately a 10.1 percent increase in Texas 10-3). Without additional growth in local timber supplies, in- veneer log harvests to furnish a new “average“ softwood dustrial expansion is unlikely to occur. Indeed, Forest Serv- plywood mill. This new activity would have an estimated im- ice projections indicate that fewer forest industry jobs will be pact on the Texas economy of $57.1 million, with 384 new available in the future unless current timber management ef- jobs (Table 10-1). However, it needs to be considered tha€ forts are intensified (USDA Forest Service 1987a). new technology allowing the use of smaller-sized timber in ' If the annual growth of Texas timber increased, what wood-based panel production has changed the Texas ply- would that mean in terms of economic impact? The reply to wood industry since 1984. 56 ‘t The “average-sized” Texas pulp and paper mill consumes 212,000 cords 0f harvested roundwood per year. According t0 the Texas Forest Service (TFS Texas Forest Resource Har- ‘ vest Trends), this harvested pulpwood represents, on average, 55 percent of a mill’s wood needs. The remainder of the pulp is produced from purchased chips, or from chips and sawdust residues from lumber and plywood mills. A new “average” pulp and paper mill would require an increase of approxi- mately 11.2 percent in annual softwood pulpwood harvests in Texas. The estimated impact on the Texas economy of the new economic activity attributable only to the pulpwood por- tion of timber utilized for pulp and paper would be $75 .1 mil- lion, with 773 new jobs (Table 10-1). Policy Considerations The future success of the Texas wood-based industry de- pends upon the environment created by federal, state, and local laws and regulations. These are a function of perceived social needs and public concerns. The wood-based industry is at a critical point as it emerges from the effects of the reces- sion of the early 1980s and faces international competition. To ensure continued growth of the wood-based industry in Texas, there are several policy areas to consider. This report was prepared to provide background informa- tion on the relative importance of the wood-based industry in Texas, and some future projections for the forest-based sector of the Texas economy. The crucial factor in forestry-related considerations is the long production period. But besides timber production, other policies affect the wood-based in- dustry. An adequate consideration of any of them is well be- yond the scope of this report, and would require careful and comprehensive policy analysis. However, it is appropriate to identify some areas of policy that should be addressed in a forest sector policy analysis. Among them are the following: v Transportation. The movement of timber from the forest to the mill is an expensive operation, and one that has major effects on the highway system in East Texas. The movement of manufactured wood-based products to market is also an important consideration that affects wood-based economic activity. v Income taxes. The federal Tax Reform Act of 1986 af- fected every segment of the U.S. economy. Many previ- ously favorable provisions available to wood-based companies and timber growers were lost due to tax re- form. Some of the effects of this act include the loss of investment tax credits for plant and equipment, the re- duction of depreciation on capital equipment, the loss of a capital gains income differential, and the establish- ment of new “passive loss” rulings on the deductibility of timberland ownership and management costs, such Table 10-1. Estimated statewide economic impact of an increase in Texas timber production. Assumptions: v Additional primary wood-based manufacturing capacity is to be added in the amount of an “average” mill. v Market will absorb additional timber and mill output with no price effects. Questions: (1) How much additional timber beyond the 1984 harvest level is needed to feed additional processing capacity? (2) What would be the economic impact in value added, employment, and income of additional timber harvesting and processing? Primary Industry Segments Softwood Pulp & Sawmills Plywood Paper SIC 2421 SIC 2436 SIC 262,3 Reply to question (1): (Sources footnoted) millions of units (board feet, lnt’l V4") (cords) Texas timber harvest, 1984a 815.4 626.8 1,890.4 Texas mill receipts, 1984a 868.1 630.0 1,701.5 Number of mills 71a 10" 8“ Timber requirements for an “average” mill 12.2 63.0 212.7 Percent increase in timber harvest to support additional “average” mill 1.5% 10.1% 11.2% millions of dollars Delivered value of timber to support additional “average” millad $2.3 $12.8 $11.8 Stumpage value of timber to support additional “average" millad $1.7 $ 9.2 $ 3.6 Reply to question (2): q For additional timber production to feed an additional “average” mill, induced economic impacts are: v Value addede $2.4 $16.4 $27.7 v Value of shipmentse $6.9 $57.1 $75.1 v Employeese 38 384 773 v Personal incomee $ .5 $ 6.8 $22.2 W‘ w Sources: a TFS, Texas Forest Resource Harvest Trends. ° USDC Bureau of the Census 1986a. ° Miller Freeman, Inc. 1984. ° Timber Mart-South 1984. e Table 6-3. (Induced economic impacts per dollar of timber). 58 as property taxes andinterest charges. Effects 0n timber growing were briefly addressed in Chapter 7. Property taxes. Texas timberland owners have been al- lowed to claim special use valuation for ad valorem taxes since 1979. The effectiveness of this provision as a stimulus to timber production has yet to be evaluated, but additional tax burdens on landowners would likely discourage production. Environmental quality regulations. Air and water qual- ity standards substantially impact forest land manage- ment and wood-based manufacturing. Land use changes. Shifting land use from timber pro- duction to other uses, and vice-versa, will have some ef- fect on the wood-based industry. Forest protection. Fire and pests are agents of destruc- tion that plague forest landowners and reduce timber supplies. Federal timberlands. Continuing demands for non- timber forest outputs are likely to make public forests even less important sources of raw material than they are today. This is a particularly important issue in the West, but will have major impacts on the South because almost half of the softwood inventory in the U.S. is on federal lands. Private timberlands. For decades, the forestry com- munity’s biggest challenge has been to stimulate timber production from the non-industrial private forest land- owners who hold the majority of the nation’s timber- lands. In view of the statistics presented in this report, it is clear that the challenge still remains in Texas. The Texas Forest Service (TFS 1987b) proposes several solu- tions to this challenge, including research, financial assistance, “reasonable regulations,” technical assis- tance, and protection. Timber utilization. New uses of timber and more effi- cient production processes will have major effects on timber demands and supplies. The plywood industry has been substantially affected by lathe technology, which allows the use of small diameter veneer logs. The quite recent introduction of “oriented strand board” technol- ogy in Texas also affects this segment of the industry. Because integrated wood utilization is important in the industry, it also has effects on other segments of the in- dustry. The economics of integrated wood utilization are poorly understood. International markets and competition. Exports and imports of wood-based products represent opportunities and threats for wood-based companies. This report barely scratched the surface of this increasingly impor- tant dimension of the wood-based industry. Education, research, and extension. The answers to many of the questions posed in the aforementioned policy areas likely can best be addressed by sustained commitments in research accompanied by extension to communicate acquired knowledge to those who can benefit from it. Because forestry is technical and spe- cialized, educated professionals can best use the results of current research and assist landowners with the de- velopment of management plans that will help ensure the wise use of timberland acreage in accordance with the landowners objectives. Research and education, not only at universities, but also through other public and private agencies, keeps forestry professionals at the leading edge of knowledge in forestry practices. Conclusions The forest products or wood-based industry in Texas grew rapidly during the 1960s and 1970s, taking advantage of an abundance of timber. Texas became a prominent leader in many facets of the southern and national wood-based indus- try (Figures 5-11 and 5-13). The industry has recently recov- ered from the effects of a severe and prolonged economic recession in the early 1980s. ‘ Timber harvests are now being conducted at levels very close to timber growth (Figure 9-4). When annual timber har- vests exceed annual growth, the timber capital, or growing- stock inventory, is reduced. The U.S. Forest Service reports that without additional timber supplies, the wood-based in- dustry cannot sustain current levels of employment (USDA Forest Service 1987a). This is an unhealthy situation for the wood-based industry, and the downward trend in timber in- ventory is already underway (Figure 10-3). But the U.S. Forest Service is quick to point out that it is not too late to remedy the situation—specifically, to plant trees on non- industrial private forest lands. According to the U.S. Forest Service, annual timber growth in Texas could be increased by 24 percent if private landowners were encouraged to invest $145 million. These investments would earn a real (inflation-adjusted) pre-tax rate of return in excess of 10 percent. Two-thirds of these in- vestment opportunities are on non-industrial private forest lands. The remaining one-third are on lands owned by com- panies in the wood-based industry (USDA Forest Service 1987a). If half of these high-yielding opportunities to increase timber growth were realized, a one-time investment of $72.5 million would be required. The economic impact of the re- sulting 12 percent increase in annual Texas timber production could be as much as $187 million per year if all the additional timber production was processed through new processing ca- pacity in Texas. Of this total, $63 million would be value added, and $33 million in personal income resulting from 1,300 new jobs (Table 10-1). Growth opportunities in the Texas wood-based industry are worth considering, given the presence of an already strong forest products industry and the comparative advantages of the South as a timber-growing region. The wood-based indus- try is the leading manufacturing industry in East Texas, em- ploying more than one-fourth of the rural populace engaged in manufacturing. Timber grown in East Texas is one of the state’s most valuable agricultural crops. Current economic indicators call for a reexamination of the . Substantial markets for forest products are established i future direction of the Texas economy. The world energy glut continues to keep oil and gas prices at levels that imply a need for further diversification of an already quite diverse Texas economy. New opportunities for jobs and income for Texans need to be discovered. nN. the state. And they will grow as the Texas population grows. Everyone needs wood-based products, and many Texans de- sire the non-timber outputs of the forest. The companies with mills to make wood-based products are operating in the state. They are ready to grow. Indeed, they must grow to survive. Timber is available in Texas to support current levels of wood-based manufacturing activity. According to the U.S. Forest Service, at today’s levels of timber management inten- sity, it is doubtful that increased timber supplies will be avail- able to support growth in the industry without cutting deeply into timber growing-stock inventories. The U.S. Forest Service has identified opportunities to in- crease the productive potential of the Texas timber resource by up to 4O percent with present levels of forestry technology. With biotechnology and other developing techniques, growth potential can be improved further. But these high technology approaches are not yet economically viable. By increasing annual timber growth by one-fourth, the U.S. Forest Service projects that landowners could receive more than a l0 percent real (inflation-adjusted) pre-tax return on their investment. To accomplish this, landowners must identify and take advantage of appropriate forest manage- ment opportunities. 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Reforestation incentives: Tax incentives and cost-sharing in the south. Journal of Forestry, August 1987, 85(8): 45-47. SAF. 1983. Terminology of forest science technology practice and products. Second printing. Society of American Foresters, Bethesda, MD. Schallau, C.H., and W.R. Maki. 1986. Economic impacts of inter- regional competition in the forest products industry during the 1970’s. Research Paper PNW-350. USDA Forest Service, Portland, OR. Schallau, C.H., W.R. Maki, B.B. Foster, and C.H. Redmond. 1987. Texas’ forest products industry: Performance and contribu- tion to the state’s economy, 1970-1980. USDA Forest Service Re- search Paper PNW-389, Portland, OR. (One of a series of 13 re- ports, one for each southern state; the material cited herein was from a review draft). Schoenbaum, T.J . 1982. Forest resources: Texas Committee on Nat- ural Resources v. Bergland. U.S. Court of Appeals, Fifth Circuit, 1978. 573 F.2d 201. Pages 293-304 in: Environmental policy law: Cases, readings, and text. Foundation Press, Mineola, NY. Sedjo, R.A. 1983. The comparative economics of plantation fores- try: A global assessment. Research Paper 0-8018-3107-5. Re- sources for the Future, Washington, DC. Siegel, W.C. 1987. The timberland owner & the new tax law. Amer- ican Forests, March/April 1987, 93(3&4): 14-15, 71-75. "Skove, D.J., and R.G. Lord. 1986. Texas forest resource harvest trends, 1985. Publication 141. Texas Forest Service, Texas A&M University System, College Station, TX. (Latest in a series of an- nual reports, starting in 1972). qSlatin, B. 1986. The southern paper industry: Demand at new highs. ~, Southern Pulp and Paper, October 1986 Directory Issue, 49(11): 25-45. TAEX. 1985. East Texas timber income statistics, 1984. Texas Tim- berline, November 1985, 7(4): 11. Texas A&M University Sys- tem, College Station, TX. TAEX. 1986. Leasing land for recreation and hunting. Texas Timber- line, November 1986, 8(3): 4-5. Texas A&M University System, College Station, TX. TDWR. 1984. Long range water requirements and water supply de- velopment needs of Texas, with emphasis upon the East Texas area. Paper presented at the Texas Forestry Association annual meeting. Texas Department of Water Resources, Austin, TX. Texas Almanac. Various issues. The Dallas Morning News, Dallas, TX. TFA. 1987. Corps rejects Rockland Dam. Texas Forestry, Sep- tember 1987, 28(9): 4. Texas Forestry Association, Lufldn, TX. TFA and TSAF. 1986. Texas Foresters. Texas Forestry Association and the Texas Society of American Foresters, Lufkin, TX. TFS. 1970. Tree regions of Texas. Circular 75. Texas Forest Service, Texas A&M University System, College Station, TX. TFS. (Annual since 1972). Texas forest resource harvest trends. Texas Forest Service, Texas A&M University System, College Station, TX. (1985 edition is cited as Skove and Lord 1986). TFS. 1983. Lone Star State forestry: A forest resource plan. Publica- tion 133. Texas Forest Service, Texas A&M University System, College Station, TX. TFS. 1985a. Expanding export markets for southern forest prod- ucts. TF News, Fall 1985, 65: 3-5. Texas Forest Service, Texas A&M University System, College Station, TX. TFS. 1985b. Report of activities for 1984-1985. Circular 270. Texas Forest Service, Texas A&M University System, College Station, TX. TFS. 1985c. Texas timber price trends. Bi-monthly market report, vol. 3. Texas Forest Service, Texas A&M University System, College Station, TX. TFS. 1987a. Forest products industries inTexas, 1987 directory. Cir- cular 275. Texas Forest Service, Texas A&M University System. College Station, TX. TFS. 1987b. East Texas forests: Status and trends 1986. Circular 276. Texas Forest Service, Texas A&M University System, Col- lege Station, TX. Timber Mart—South. 1984. Monthly report of the market for raw forest products of the Southeast [by state and sub-state regions]. Timber Mart—South, Inc., Highlands, NC. TPWD. 1982. Texans’ opinions on parks and recreation issues in A 1982. (Unnumbered publication) Texas Parks and Wildlife De- partment, Austin, TX. TPWD. 1983. Texas Outdoor Recreation Plan 1985. (Unnumbered publication) Texas Parks and Wildlife Department, Austin, TX. TPWD. 1984. Reservoir controls raise questions. Texas Parks and Wildlife News, July 1984, Austin, TX. TPWD. 1986. Hunting opportunities on Texas Parks and Wildlife, Wildlife Management Areas. (Unnumbered pamphlet) Texas Parks and Wildlife Department, Austin, TX. TTDA. (Undated). Texa$ touri$mz What it mean$ to you. (Unnum- bered pamphlet) Texas Tourist Development Agency, Austin, TX. Uehling, M.D., D. Shapiro, and B. Cohn. 1986. Napalming Amer- ican forests: Smokey the Bear gives and takes some heavy heat. Newsweek, October 20, 1986, page 36. 61 U.S. Congress Office ofTechnology Assessment. 1983. Wood use: U.S. competitiveness and technology. OTA-ITE-210. Washing- ton, DC. USDA8. 1983. Conversion of southern cropland to southern pine tree plantings: Conversion for conservation feasibility study. (Unnumbered publication) Office of Budget and Program Analysis. Washington, DC. USDA. 1984. Southern pines: Better profits for marginal lands. Pro- gram Aid No. 1361. Extension Service, Forest Service, Economics Research Service, Soil Conservation Service, and Agricultural Stabilization and Conservation Service, Washing- ton. DC. USDA. 1986. Agricultural statistics, 1986. Washington, DC. USDA Forest Service. 1981. Forest economic data for Texas, 1981. (Unnumbered publication) Southeastern Area State and Private Forestry, Atlanta, GA. USDA Forest Service. 1982. An analysis of the timber situation in the United States, 1952-2030. Forest Resource Report No. 23. Washington, DC. USDA Forest Service. 1986. A statistical history of tree planting in the South. Misc. Report SA-MR 8. Southern Region, State and Private Forestry, Atlanta, GA. USDA Forest Service. 1987a. The South’s fourth forest: Alternatives for the future. (Review Draft, January, 1987, with subsequent revi- sions and supplements; final report scheduled for release in May 1988, as Forest Resource Report No. 24) Washington, DC. USDA Forest Service. 1987b. Final land and resource management plan, National Forests & Grasslands—Texas. Management Bul- letin R8-MB7. Southern Region, Atlanta, GA. USDA Forest Service. 1987c. Final environmental impact statement (on USDA Forest Service 1987b). Management Bulletin R8- MB9. Southern Region, Atlanta, GA. USDA Forest Service. 1987d. U.S. forest planting report, 1986. (Unnumbered publication) Washington, DC. USDC‘; Bureau of the Census. 1985a. Annual Construction Re- ports, 1984. C40-84-13. Washington, DC. 8 USDA is an abbreviation for the U.S. Department of Agriculture. “USDC is an abbreviation for the U.S. Department of Commerce. 62 USDC Bureau of the Census. 1985b. Census of Manufactures, 1982. Lumber and Wood products MC82-l-24A,B,C,D;' Furni- ture and fixtures MC82-1-25A,B; Paper and paper products MC82-1-26A,B,C (and similarly numbered reports from previ-Q)‘ ous censuses). Washington, DC. USDC Bureau of the Census. 1985c. Census of Transportation, 1982. TC82-T-44. Washington, DC. USDC Bureau of the Census. 1985d. Censusjof Wholesale and Re- g tail Trade, 1982. WC82-A-44 and RC82-A-44. Washington, DC. USDC Bureau of the Census. 1985c. Census of Construction, 1982. CC82-1-1 to 28. Washington, DC. USDC Bureau of the Census. 1986a. Annual Survey of Manu- factures, Geographic Area Statistics, 1984. M84(AS)-1. Wash- ington, DC. USDC Bureau of the Census. 1986b. Personal income by major sources; and state personal income, 1982-1984. Survey of Cur- rent Business 65(7). Washington, DC. USDC Bureau of the Census. 1986c. County business patterns— 1984 Texas. CBP-84-45. Washington, DC. USDC Bureau of the Census. 1986d. Current industrial reports— Lumber production and mill stocks, 1985. MA24T(85)-1. Wash- ington, DC. USDC Bureau of the Census. 1986e. Current industrial reports- Pulp, paper, and board, 1985. MA26A(85)-1. Washington, DC. USDL“) Bureau of Labor Statistics. 1986. Producer price indexes for major commodity groups, 1947-86. As reported in Table B- 62, Economic Report of the President, 1987. Washington, DC. Vasievich, M.J. 1987. Summary of timberland investment oppor- tunities in Texas. Unpublished manuscript prepared for USDA Forest Service ( 1987a). USDA Forest Service, East Lansing, MI. Wisdom, H.W. 1986. U.S. forest products [international] trade. Pages 65-87 in: Proceedings, Forest management and use of mar- ginal agricultural land in the southern region. Southern Rural De- velopment Center No. 93, Mississippi State, MS. Wright, B.A. 1985. An empirical assessment of behavioral aspects and other determinants of rural landowners hunter access policies. Ph.D. dissertation. Texas A&M University, College Station,TX. ‘OUSDL is an abbreviation for the U.S. Department of Labor. GLOSSARY \ - Note: Cross-referencing to other definitions is indicated by italics. 3 Board foot. A piece 0f lumber measuring one foot square and one inch thick. MBF, an abbreviation for one thousand board feet, is the common measure for both sawtimber and lumber. Capital expenditure. Money spent on fixed assets such as a manufacturing plant and equipment with a useful life of more than one year, such as a truck or machinery. Monies spent to reforest timberland are considered capital expenditures. Construction. Activities involved in the fabrication of houses, non-residential buildings, and other fixed structures from lumber, plywood, and wood-based building board (Phelps 1980). Cord. A pile of stacked wood containing 128 cubic feet within its outside surfaces. The standard dimensions are 4 feet by 4 feet by 8 feet (USDA Forest Service 1982). There are approximately 82 cubic feet of wood in a cord (TFS 1985c), the remainder being air and bark. Diameter at breast height (DBH). A measurement used to determine diameter of a tree at a standardized point, which is 4 feet 6 inches above the ground level, a convenient height for girth-tape readings (SAF 1983). Establishment. An economic unit, generally at a single physical location where business is conducted or where serv- ices or industrial operations are performed (USDA Forest Service 1982). Forest type. A classification of forest land based upon the tree species comprising the plurality of live-tree stocking (USDA Forest Service 1982). Forest products industry. A general term for the collection of industries involved in the growing, harvesting, primary manufacture, and secondary manufacture of timber and wood products. Also see wood-based industry. Forest land. Land at least 10 percent stocked by forest trees of any size (USDA Forest Service 1982). Subcategories are timberland and woodland. Forest land ownership classifications. (adapted from USDA Forest Service 1982). A Private: Non-industrial private forest (NIPF ). In general, all private ownerships except forest industry NIPF own- -\ ers do not have manufacturing facilities to process timber. There are three subclassifications: Farmer (NIPF). Owned by a person who operates a farm, doing the work or directly supervising the - work. fi Corporate (NIPF). Business organizations that own forest land but do not have wood-using process- ing plants. This is a new category used by the U.S. Forest Service for classifying land ownership. Individual (NIPF). All other non-industrial pri- vately owned forest lands. Forest industry. Individuals or business organizations that own wood-using processing plants to process timber. Public: National forest. Federal lands designated by Execu- tive Order or statute as national forests or purchase units, and other lands under the administration of the U.S. Department of Agriculture, Forest Service (USDA Forest Service 1982). Other public. Other federal forest lands, including In- dian reservations; and state, county, and municipal forest lands. Forest site productivity class. A classification of forest land based on the potential cubic-foot volume of wood growth per acre at the culmination of mean annual increment in fully stocked natural stands (USDA Forest Service 1982). Growing-stock. Live sawtimber trees, poletimber trees, sap- lings, and seedlings meeting specified standards of quality and vigor. Growth. See net annual growth. Harvest. Amount of timber products removed from the forest by harvesting activities. Distinctly different than timber removals. Harvesting. The cutting of trees into sawlogs, pulpwood, or chips and transportation of these products to primary man- ufacturing facilities (Phelps 1980). Hardwoods. A conventional term for the timber of broad- leaved trees, and the trees themselves (SAF 1983). Di- cotyledonous trees, usually broad-leaved and deciduous (USDA Forest Service 1982). Industrial Wood. All commercial roundwood products ex- cept fuelwood (USDA Forest Service 1982). Industry. Generally defined as a group of establishments pro- ducing a single product or a closely related group of products (USDC Bureau of the Census 1985b). Integrated utilization. The grouping together of comple- mentary production processes in order to secure maximum re- turn frorn common inputs (Cleaves and O’Laughlin 1986). Multipliers. Economic impact multipliers are used to esti- mate changes resulting from the addition of one unit in a particular industry on a state or regional economy. Type I multipliers measure the change due to interactions among in- dustries. Type II multipliers measure the changes resulting from industry interactions and the induced effect of house- hold spending (Porterfield and others 1978). A? Net annual growth. The net increase in the volume of trees during a specified year. Components include the incremental growth in net volume of trees at the beginning of the year, plus net volume of trees reaching the minimum size class dur- ing the year, minus trees that die, and minus trees that become rough or rotten (USDA Forest Service 1982). NIPF. An acronym for non-industrial private forests. See forest land ownership classifications. Oriented strand board. A panel product or board comprised of flakes of wood that are aligned and bonded in a glue matrix under heat and pressure. One of a family of substitutes for sheathing grade plywood; others in the family are flakeboard, waferboard, and waferwood. Plantation. A man-made forest; a forest crop or stand raised artificially, either by sowing or planting (SAF 1983). Plywood. A composite panel product composed of cross- banded layers of veneer, bonded with an adhesive under heat and pressure. Poletimber. Trees of commercially valuable species at least 5.0 inches DBH but smaller than sawtimber size, and of good form and vigor (USDA Forest Service 1982). Primary manufacture. Activities involved in the processing of logs and related products into lumber, plywood, veneer, pulp and paper, turpentine, and other products. An establish- ment is classified by the Census of Manufactures into an SIC group according to the products manufactured. Wood-based industry segments of primary manufacture include the fol- lowing, listed by SIC code (Phelps 1980): SIC 24: Lumber and wood products, includes: logging (SIC 2411), sawmills (SIC 242), hardwood veneer (SIC 2435), and softwood veneer (SIC 2436). SIC 26: Paper and allied products, includes: pulp mills (SIC 261), paper mills (SIC 262), paperboard mills (SIC 263), and building paper mills (SIC 266). Productivity class. A classification of forest land in terms of potential growth in cubic feet of fully stocked natural stands (USDA Forest Service 1982). Pulpwood. Wood that is cut for manufacture into paper prod- ucts, which must first be converted to wood pulp during pri- mary manufacture. Removals. The net volume of growing-stock or sawtimber trees removed from the inventory by harvesting; cultural op- erations, such as timber stand improvement; land clearings; or changes in land use (USDA Forest Service 1982). Roundwood. Logs, bolts, or other round sections cut from trees (USDA Forest Service 1982). Saplings. Live trees of commercial tree species 1.0 inches to 5.0 inches DBH and of good form and vigor (USDA Forest Service 1982). 64 Sawlog. A log meeting minimum standards of diameter, length, and defect, including logs at least 8 feet long, sound and straight, and with a minimum diameter inside bark of 6 _ -,__ inches for softwoods, and 8 inches for hardwoods (USDw Forest Service 1982). ‘ Sawtimber trees. Live trees that are of commercially valu- able species, contain at least a 12-foot sawlog, and meet re- gional specifications for freedom from‘, defect. Softwoods. A must be at least 9.0 inches DBH, and hardwoods at least 11.0w inches DBH (USDA Forest Service 1982). The lower-grade “tops” of sawtimber trees may have considerable volumes of pulpwood. Secondary manufacture. Activities involved in the remanu- facture of lumber, plywood, paper, and other products into in- termediate or finished goods such as millwork (doors and window frames), furniture, writing paper, newsprint, and paper packaging materials, including cartons and boxes. An establishment is classified by the Census of Manufactures ac- cording to the products manufactured. Wood-based industry segments in secondary manufacturing include the following, listed by SIC code (Phelps 1980; Ellefson and Stone 1984; Schallau and others 1987): SIC 24: Lumber and wood products, includes: mill- work (SIC 243, except hardwood veneer SIC 2435, and softwood veneer SIC 2436), wood containers (SIC 244), wood buildings (SIC 245, except mobile homes SIC 2451), and mis- cellaneous wood products (SIC 249), including wood preserving (SIC 2491). SIC 25: Furniture and fixtures, includes wood furniture only: wood household furniture (SICs 2511, 2512), wood television, etc., cabinets (SIC 2517), wood office furniture (SIC 2521), and wood partitions and fixtures (SIC 2541). SIC 26: Paper and allied products, includes: miscellan- eous converted paper products (SIC 264) and paperboard containers and boxes (SIC 265). Seedlings. Established live trees of commercial species less than 1.0 inches DBH and of good form and vigor (USDA Forest Service 1982). SIC (Standard Industrial Classification). A system of classifying establishments into industries, based on consider- ations such as similarity of manufacturing processes, types of materials used, types of customers, etc. There are 20 major groups (two-digit SIC), 143 industry groups (three-digit SIC), and approximately 450 four-digit SIC industries (USDC Bureau of the Census 1985b). Softwoods. Coniferous tree species, usually evergreen, hav- ing needle or scale-like leaves (USDA Forest Service 1982). Stand. A community of trees possessing sufficient uniform‘ ity in relation to species, age, spatial arrangement, or condi- tion to be distinguishable from adjacent communities (SAF 1983). it Stumpage. The value of timber as it stands uncut (SAF 1983). {Iimben A general term for forest crops and stands (SAF ‘1983). Timber inventory. Growing-stock volume of live sawtimber and poletimber measured t0 a minimum 4-inch top (USDA Forest Service 1981). “Timberland. Forest land that is producing, or is capable of producing crops of industrial wood and is not withdrawn from timber production (Lang and Bertelson 1987). Transportation. Activities involved in the transportation of logs and related products from local delivery points to man- ufacturing plants or other customers; transportation of pri- mary and secondary products from points of manufacture to final customers (Phelps 1980). Value added. A measure of manufacturing activity derived by subtracting the costs of materials, supplies, containers, fuel, purchased electricity, and contract work from the value of shipments for the products manufactured (USDC Bureau of the Census 1985b). The remainder (value added) is the All programs and information of The Texas Agricultural Experiment Station are available to everyone without regard t0 race, color, religion, sex, age, handicap, or national origin. x Mention of a trademark or a proprietary product does not constitute a guarantee or a warranty of the product by The Texas Agricultural amount available for salaries, wages, and profits in that par- ticular establishment or industry. Value of shipments. The received or receivable net selling values of all products shipped from an establishment, exclu- sive of freight and taxes (USDC Bureau of the Census 1985b). Veneer. A thin sheet of wood of uniform thickness produced by rotary cutting or by slicing or sawing. Used to produce ply- wood, and with high grade hardwoods to produce furniture. Wood-based industry. Another term for the forest products industry used by some economists (Ellefson and Stone 1984; Foster, undated; Gregory 1987). The industry is also vari- ously referred to as timber-based industry (Phelps 1980), forest-based industry (Flick 1986), paper and forest products industry (Business Week magazine), and forest industry. Woodland. Forest land incapable of yielding crops of indus- trial wood because of adverse site conditions. Wood pulp. Wood fibers separated by mechanical or chemi- cal means for use in manufacturing paper, textiles, and many other products derived from cellulose (SAF 1983). Experiment Station and does not imply its approval to the exclusion of other products that also may be suitable. 3M 2/88 11¢’ . $3 , i ... . ¢ . . . ~ . ..