Richard Vlosky | 8/21/2017 4:04:51 PM
Richard P. Vlosky
The Great Recession of 2007-2008 marked two consecutive years of loss in many forest products supply chain sectors, from timberland owners to sawmills and wood product manufacturers. Housing starts, the dominant demand sector for wood products, have never fully recovered. Single-family housing starts fell nearly two-thirds from their peak of 2.3 million in January 2006 to 872,000 starts in 2008, the lowest annual pace since January 1991.
In 2007, Southern forests, known collectively as the “wood basket” of the nation, accounted for 58 percent of the total timber volume harvested in the United States. Softwood output fell 22 percent and hardwood output fell 30 percent during the recession years. Between 2005 and 2009, the three primary forestry sectors — wood manufacturing, paper manufacturing, and forestry and logging — lost more than 110,000 jobs in the Southern United States. The Gulf South was hit hardest by the recession and has not yet recovered (Figure 1). Southern Arkansas, northern Louisiana and southern Mississippi are still 20-35 percent below 2006 levels despite recent mill expansions. Similarly, Louisiana’s 2008 total sawlog harvest decreased by 29 percent from 2007. Pine sawtimber harvest decreased by 30 percent while hardwood sawtimber harvest fell 21 percent. The Southern U.S. logging sector was also negatively affected by the recession with an estimated loss of 7,000 employees.
In 2016, 2,500 randomly selected logging companies were surveyed by mail in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. Of these, after adjusting for undeliverable surveys, deceased survey recipients and incomplete surveys, 350 surveys were usable for a 17 percent response rate. Undeliverable surveys are typically companies that have gone out of business. In this study, they represented 16 percent of surveys mailed, accounting for an estimated loss of 3,328 jobs, and were relatively smaller firms compared to those that responded, averaging nine employees.
On average, respondents that weathered the recession have been in the logging business for 29 years. Across all respondents, 39 percent of employees are over 50 years old; 57 percent are white; 33 percent are African-American; and 8 percent are Latino or Hispanic. American Indian and Asian employees account for the balance. Regarding gender, 77 percent of employees are male and 23 percent are female.
The questionnaire focused primarily on what had transpired since the recession for respondent companies across a number of dimensions. Sixty-four percent of respondents said the recession negatively impacted their logging business. During the past eight years, 48 percent saw a reduction in employees and 35 percent saw a decrease in workload. More than 50 percent of respondents said hauling distances from the forest to customers increased, and 34 percent changed their customer base, many attempting to enter export markets or provide the biomass sector small-diameter logs for products such as pellets (17 percent of respondents). The average respondents were operating at 80 percent of capacity. Respondents experienced an estimated decline in employees of 13.3 percent since the beginning of the recession. Relative to out-of-business firms with an average of nine employees, current organizations had an average of 13 employees pre-recession and have 11 employees today.
Those companies that made it through the recession were asked to rank the significance of 14 possible causes for current constrained business operations and downtime. The top five current issues are shown in Table 1. Respondents also were asked to evaluate the significance of 19 variables regarding barriers they expect to face in maintaining or expanding their logging business in the next five years. The top five most significant issues are shown in Table 1.
Table 1. Constraints to business operations, ranked from most important to least important
|2 Mill quotas|
|3 Inefficient operations|
|4 Road conditions|
|5 Mill closures|
|Constraints in Next Five Years:|
|1 Cost of replacing equipment|
|2 Workers compensation costs|
|3 Low market prices for logs, pulpwood|
|4 Health insurance costs|
|5 Fuel costs|
Gaining or maintaining competitive advantage can be accomplished through many business practices. In this vein, 80 percent of respondents said they had Master Logger Certification. The top five reasons why they became Master Loggers are shown in Table 2. The Master Logger Program in Louisiana recognizes a logger’s conformance with Louisiana Recommended Best Management Practices for safety, environmental stewardship on harvested sites, and compliance with all federal, state and local laws. Earning Master Logger status shows the logger’s commitment to professionalism and sustainability of Louisiana’s forest resources.
Table 2. Eighty percent of survey respondents said they had Master Logger certification for these reasons, from most important to least important.
|1 It is required to be competitive.|
|2 Keeps me current on industry trends.|
|3 Improves the way I log.|
|4 Helps me gain respect from the landowner.|
|5 Helps me gain respect from the public.|
Another way to gain competitive advantage is through training and education. From a list of 15 possible training areas, the top five are shown in Table 3. This is valuable information for Extension Service specialists to tailor workshops and outreach materials to address client needs.
Table 3. Training and educational needs, ranked from most important to least important.
|1 Logging safety|
|2 Equipment operation/maintenance|
|3 First aid/CPR|
|4 Logging efficiency|
|5 Insurance for loggers|
Overall, 65 percent of respondents said they expected to be in the logging business in five years while 21 percent said they didn’t expect to continue logging. The remaining 14 percent were unsure. Results from this study support previous work and government statistics that examined the logging industry in the South since the Great Recession. All sectors in the forest products supply chain were negatively impacted, with many enterprises not surviving. The housing economy remains weak, and as such, the logging and wood products sectors tied to housing will remain in a holding pattern until housing activity increases.
Richard P. Vlosky is director of the Louisiana Forest Products Development Center and the Crosby Land & Resources Endowed Professor of Forest Sector Business Development in the School of Renewable Natural Resources.
Acknowledgments: Funding for this study: Crosby Land & Resources LLC, Weyerhaeuser Company, Plum Creek Timber Company, RoyOMartin Company, Hancock Timber Resource Group, the Louisiana Forestry Association and the Louisiana Logging Council. Survey instrument material and guidance: Bob Tjaden, University of Maryland; Dalia Abbas, University of Georgia; and Shaun Tanger, LSU AgCenter.
A piece of equipment called a feller buncher is used to cut down a tree at a RoyOMartin timber cutting site off state Highway 10 outside of Oakdale, Louisiana. Photo by Olivia McClure
Figure 1. Change in Southern pine grade capacity (sawmills and plywood plants) 2006 to 2016. Source: Forisk Consulting and U.S. Forest Service
Stephen Dye, a land managment forester with RoyOMartin, displays the piece of wood he removed from a tree using an increment borer at a 16-year-old pine plantation near Oakdale, Louisiana. The forest was thinned for the first time in 2015. Foresters drill into trees with increment borers to remove pieces of wood so they can count the number of rings and determine age. Photo by Olivia McClure
Logs are being loaded on a truck at a RoyOMartin timber cutting site off state Highway 10 outside of Oakdale, Louisiana. Photo by Olivia McClure
Sawdust flies as timber is cut into more manageable pices at a RoyOMartin timber cutting site off state Highway 10 outside of Oakdale, Louisiana. Photo by Olivia McClure