Trees are the No. 1 agricultural commodity in Louisiana. More than half of the state is covered by forest land. The Forest Inventory and Analysis (FIA) data showed that the volume of live trees on forest land in Louisiana was 28.1 billion cubic feet in 2018, with the removal of about 696 million cubic feet (2.5% of the total standing volume). Timber Products Output (TPO) surveys conducted by the U.S. Forest Service FIA estimate the industrial uses of roundwood in a state. The TPO surveys of 2020 estimated that the volume of timber imported into Louisiana was 172,563 million cubic feet (MCF), which was roughly equivalent to a quarter of the annual production (619,459 MCF). One might wonder why we still import timber from other states given that the timber market has been suffering from an oversupply issue for a very long time in Louisiana.
Table 1. Volume (MCF) of industrial timber in Louisiana, 2020
Source: TPO; Visualized by Huizhen Niu; Numbers may not sum due to rounding
Before answering this question, we first need to understand the difference between stumpage price and delivered price. Stumpage price refers to the price received by the forest owners for selling their standing timber. It is a common way to estimate the market value of standing trees before harvest and removal. Delivered price, on the other hand, is what a logger gets paid for delivering timber to the sawmills which implicitly includes the logging, hauling and transporting costs alongside the stumpage cost. Delivered prices reflect the value of harvested timber when purchased by mill facilities.
According to an IBISWorld report, timber purchase is the single largest operating expense at sawmill facilities. In order to maximize the profit made from each log purchased, the sawmill managers will strive to raise lumber prices and/or reduce the operation costs, which is more under their control. Sawmills usually draw timber from a certain mile radius of the plant to keep the hauling costs down. TimberMart-South estimated that the average haul distance (miles) was around 48 miles. This is also considered procurement distance.
If we add a 50-mile buffer around each mill and treat them as the primary source of timber, it’s not surprising to see that there will be a lot of buffer zones crossing the state’s boundary. For illustration purposes, only seven buffer zones are marked on the map. If we factor in accessibility and harvestability, harvesting timber across state boundaries becomes commonplace. Timber purchased from other states will be recorded as the import volume in TPO surveys. Figure 2 also explains why Louisiana’s domestic trading partners are mainly our neighboring states. A similar concept can be applied to explain our exports. Sawmills in our neighboring states that are close to Louisiana’s border may prefer to buy logs from our state when the hauling and cutting costs exhibit a comparative advantage in Louisiana. If this is the case, timber purchased by other states will be recorded as the export volume in TPO surveys (Figure 2).
In summary, importing or exporting timber doesn’t mean there is not enough timber to sustain the existing mill demand, but it’s quite the opposite. The timber resources are abundant. The South is known as the “wood basket.” Sawmill/loggers can choose the resources that are more accessible and available, to reduce the operational costs and maximize their profit.
Dr. Jinggang Guo is a forest economist with the LSU AgCenter.
Figure 1. Sawmill operating costs components Source: IBISWorld industry research reports
Figure 2. Industrial roundwood movement, Louisiana 2020 Source: TPO; Visualized by Huizhen Niu