Lumber Prices Research Articles

Dynamic impacts of rising lumber prices on housing-related prices

A monthly vector autoregression model of lumber, lumber futures, construction materials, housing, and shelter prices was shocked with a 10% lumber price increase, and dynamic responses were examined. Futures and materials price increases were immediate and endured 1 and 3 years, respectively. Housing and shelter price increases required at least 9 months to begin, and endured for about 3 years. Effects on materials, housing, and shelter prices were less than one-for-one. Price effects from a 10% future price increase imposed on the model were more delayed, weaker, and less enduring than those generated by lumber price shocks. ©1994 by John Wiley & Sons, Inc.

Productive and exchange scarcity: an empirical analysis of the U.S. forest products industry

This paper has two aims: clarification of several aspects of the debate on the appropriateness of various indicators of natural resource scarcity and the empirical analysis of the trends in the scarcity of forest products in the U.S. Two distinct types of indicators are developed in the natural resource scarcity literature, which we term exchange scarcity and productive scarcity. In the neoclassical paradigm, the former is measured by price and rental rates, and the latter by unit cost. In the biophysical literature, productive scarcity is measured by quality-weighted measures of unit energy cost. We test econometrically for trends in lumber prices in the long-run period 1800–1990, for trends in stumpage prices between 1910 and 1989, and for trends in productive scarcity indicators in the shorter 1947–1990 period. The empirical evidence indicates that the growth in the price of forest products as compared with other manufactured goods, and in the rental rate of timberland, levelled off during the post-war period in the U.S. Nevertheless, these commodities are today much more scarce than in the historic past. From the end of the 1950s, absolute and relative productive scarcity declined as measured by all indicators. The levelling off of the price of forest products after 150 years of increase is consistent with economic theory that predicts that prices reach a plateau when extraction from old-growth forests is replaced by forest plantations and replanting in general.

Substitution Between Tropical and Temperate Sawlogs

Abstract Japan is the world's most important log importer. This paper develops a multi-output profit function framework to quantify the impacts of economic factors on Japan's imports of sawlogs from two temperate regions, North America and the Soviet Union, and one tropical region, the South Seas. Econometric results indicate that sawlogs from the three regions were substitutes for each other during 1970-87. Imports from each region were significantly affected by relative net prices (lumber price minus log input cost per unit of lumber), with cross-net-price elasticities between temperate and tropical categories increasing over time. Technical change (the residual trend after controlling for price effects) was significant and biased against imports from the South Seas. These findings suggest that scarcity of tropical hardwood sawlogs induced by deforestation or restrictive trade policies will lead to increased demand for temperate softwood sawlogs. Current forest-sector models, which do not treat hardwoods as substitutes for softwoods, fail to capture this emerging feature of global trade in forest products. For. Sci. 37(5):1484-1491.

An Analysis of the Effects of Northern Spotted Owl Conservation, Harvest Replanning, a Log Embargo, and Recession on the Northwest Log and Lumber Trade

Abstract Protection of habitat for the northern spotted owl (Strix occidentalis caurina) became a major feature of land management and timber production in the Pacific Northwest in 1990, with designation of about 8 million ac as Habitat Conservation Areas (HCAs), mostly on public lands (USDA Forest Service et al. 1990). Additional owl-conservation provisions were recommended for half the forestland base outside HCAs, including private timberland. Concerns were raised immediately about impacts of these proposals, now being implemented, for the region's timber economy. Our study was aimed at portraying key economic effects of the owl conservation strategy—log and lumber price changes, production and export levels–within the context of rapidly changing policy and economic climates. We estimated the effects of new forest plans (most of which carry harvest reductions independent of provisions for the owl); a new embargo on exports of logs that affects timber from state lands; and the economic recession that continued from late 1990 into 1991. Effects of these conditions were gauged separately and in concert with owl impacts, for western Washington and western Oregon, here termed the fir region. We analyzed the degree to which lumber would substitute for logs in the export market, and likely interactions between domestic and offshore markets. We also assessed the degree to which the policy-driven timber supply changes can be expected to yield less-than-proportionate volume impacts and higher-than-proportionate price movements in the short run. West. J. Appl. For. 6(4):87-90.

Factors affecting the demand for softwood lumber in the United States

This study sets out to examine whether the demand for softwood lumber in the United States is responsive to various market factors including the price of softwood lumber, the price of other building materials, and the level of economic activity (e.g., housing starts). Concern in the analysis is focused on overcoming some of the methodological shortcomings found in previous studies of this issue. The results are conclusive. The quantity of softwood lumber demanded does respond to the various economic factors considered. Moreover, when the structural stability of the estimated relationships is investigated, the results suggest that the demand for softwood lumber regionally in the United States has remained unaltered over the sample period (1950–1985).

Timber quality classes from cruise data for lodgepole pine sawn at a board mill in British Columbia

Information on timber quality can play an important role in a wide range of planning activities at sawmills. A system for assessing timber quality does not exist for lodgepole pine (Pinuscontorta Dougl.), which is one of the most important commercial species in the interior of British Columbia. A classification system for lodgepole pine timber was developed from cruise data collected according to procedures prescribed by the British Columbia Ministry of Forests. A sawmill lumber yield study was made to obtain the data necessary to test the grading system. Regression analysis, likelihood ratio tests, and analysis of variance were used to test for significant differences in lumber grade yields and log values among six quality classes. The findings indicate that data collected during cruising can be used to separate timber into distinct quality classes. The quality classes showed appreciable variation in average log value when current lumber prices were applied.

Factors affecting the demand for softwood lumber in the united states

AbstractThis study sets out to examine whether the demand for softwood lumber in the United States is responsive to various market factors including the price of softwood lumber, the price of other building materials, and the level of economic activity (e.g. housing starts). Concern in the analysis is focused on overcoming some of the methodological shortcomings found in previous studies of this issue. The results are conclusive. The quantity of softwood lumber demanded does respond to the various economic factors considered. Moreover, when the structural stability of the estimated relationships is investigated, the results suggest that the demand for softwood lumber regionally in the United States has remained unaltered over the sample period (1950–1985).

The Demand for Softwood Lumber in the United States and in the South

Abstract This study conclusively determines that the demand for softwood lumber in the United States responds to various market factors, including the price of softwood lumber, the price of other budding materials, and the level of such economic activities as housing starts. The analysis focuses on overcoming some of the methodological shortcomings found in previous studies of this issue. South. J. Appl. For 14(2):89-92.

Estimating the Regional Demand for Softwood Lumber in the United States

AbstractThis study examines whether the regional demand for softwood lumber in the United States is dependent on market factors including the price of softwood lumber, the price of other building materials and economic activity, as measured by housing starts. The empirical results suggest that the quantity of softwood lumber demanded does vary in response to fluctuations in the softwood lumber price in three of the four regions considered and it does change with movements in the other explanatory factors (e.g., the price of other building materials and housing starts) in all regions. Finally, in an effort to explain the insignificance of the softwood lumber price in explaining changes in softwood lumber demanded in the West region, regression diagnostics are used. The analysis, however, sheds little light on the result.

Exchange rates, Canadian lumber imports, and United States prices: a time-series analysis

Softwood lumber imports by the United States from Canada more than doubled during the past 10 years. The objective of this paper was to investigate two possible reasons for this change: (i) the increase in value of the U.S. dollar relative to the Canadian dollar, and (ii) the rise in the price of softwood lumber in the United States. The method used was time-series analysis, leading to measures of feedback and long-term multipliers between imports, exchange rate, and U.S. price. The results, based on monthly data from January 1974 to January 1986, suggested that 68% of the rise in Canadian imports during this period was due to the rise in the price of softwood lumber in the United States. The exchange rate, however, was not found to have a significant effect on imports. The findings also indicate that the increase in imports has not led to a decline in the price received by U.S. producers.

Predicting the effects of macro-economic variables on timber harvest in small regions: Method and application

This paper deals with the problem of forecasting the timber harvest in a small region, given predicted changes for the economy of the country to which the region belongs. It suggests that time-series methods be used to model the feedback between local timber harvest and non-local (macro-economic) variables. These measures of feedback could then be supplemented with multiplier analysis to predict the long-term effect of each macro-economic variable of interest on local timber harvest. This method was applied to five counties of Southwestern Oregon, an area of some 3 m ha, 75% forested, to measure the effects of housing starts and lumber prices in the entire United States on private and public timber harvest in each county. Local public harvest was found to have short-term elasticities with respect to national housing starts of 0·48 (±0·18) to 0·78 (±0·19). The corresponding long-term elasticities ranged from 0·78 (±0·18) to 0·99 (±0·21). National lumber prices influenced local public harvest in the short-term only, with an elasticity of 1·34 (±0·36). Local private harvest was not influenced significantly by national housing starts, nor by prices.

Market Value of Timber When Some Offerings Are Not Sold: Implications for Appraisal and Demand Analysis

Abstract A model of market value was developed for tracts of timber sold at auction for a minimum appraised value, when a substantial number of the tracts offered do not receive a bid. In this model, market value is a function of the characteristics of the timber and of market conditions, but market value is observed and equal to the high bid only if it is greater than the appraised value. This tobit model leads to the probability of selling a tract of given characteristics, conditional on a certain appraised value. Symmetrically, the model yields the appraised value that ensures a certain probability of selling. The expected high bid, conditional or unconditional on the occurrence of a sale, can also be computed. When this is done for all tracts offered and for various probability targets, a schedule of expected volume sold against expected price is obtained that corresponds to the aggregate demand for timber from the forest of interest. The model was estimated by maximum likelihood with data from the Chequamegon National Forest (WI) from 1976 to 1980. Variables influencing market value were: volume and quality of timber, hauling distance, hardwood lumber price, and whether the sale was a salvage operation. The corresponding parameters were used to predict the effect of setting appraised values that would have sold 95, 75, or 65% of the tracts offered for sale on the Chequamegon in 1981 and 1982. The results led to an estimate of the price elasticity of the demand for timber from that forest of -1.56. Forest Sci. 32:845-854.

Inflation or Deflation: Which Is It?

A. The concern throughout the economy and its markets stems from the scissors effect of price deflation coupled with debt inflation. After rising with the economic recovery in 1983, commodity prices peaked out in the spring of this year. Since then, all broad commodity indices have been falling off sharply. Prices of all products from aluminum to zippers have been falling, primary products and end products together. Aluminum prices dropped 35 percent in three months; that industry's depression portends a setback more severe than a mere slowdown in the economy. Copper, my favorite indicator these fifty years, plunged from 80 cents to 60 cents. Lumber prices are hitting important new lows. Gold has dropped. Oil is off and continuing to weaken. On the end products side, IBM has broken its mainframe computer prices by 18 percent and absorbed another cut as deep in the form of concessions to dealers. Bonneville cut industrial power rates by 18 percent. Newsprint is the only firm price I know. Q. But the general price indices are still moving up. That's inflation, not deflation. Consumers see prices of cars, furniture, housing rising. A. I beg your pardon. Not just key commodity prices are falling. Prices of manufactured goods that reflect real activity are falling, too. Just hang on here, I'm not talking about consumer perceptions, but about the take-home pay to the vendor. Here I see three forms of subsidynone reflected in the consumer price indices-that amount to price-cutting. We saw a price cut this week of a very important end product IBM mainframes-and a 22 percent cut in the IBM desktop computer. The second price cut takes the form of credit charges; the auto industry has relied on single-digit rates for consumer paper to move more cars than the televised Olympics could. The third is in slow payment of bills. The whole economy is on slow pay. At today's interest rates, slow pay is a calculated form of price cutting and subsidy to buyers. That means that the vendors and distributors of major products like the auto distributors are caught in the squeeze between price deflation and debt inflation at high interest rates. The slowdown in the statistical economy has been pep-

Stumpage and Lumber Price (Knowledge on Forest Economy (17))

Stumpage and Lumber Price (Knowledge on Forest Economy (17))

The Effectiveness of an Export Restriction on Logs

Although others have discussed the U.S. federal log export restriction initiated in 1968 and 1974 (relevant discussions and studies include Hamilton, Weiner, Stanford Research Institute, Darr, Haynes, and Wiseman and Sedjo), no theoretical or empirical studies have been done on the impact of past or current restrictions on log exports. The major objectives sought by advocates of export restrictions-lower domestic lumber prices, a larger processing industry in general, and higher employment-can occur only if total log exports are reduced. The analysis here concerns the effectiveness of federal log export controls in achieving these objectives. First, we briefly review log trade flows and the nature of the export restrictions. Lindell's discussion contains detailed information on the history and nature of the restrictions. Wiseman and Sedjo provide more detailed information on log and lumber trade flows. Next, a market model is developed to examine conditions for, and predicted market price effects of, log export restrictions. Then log price data are used to test the hypothesis that the restrictions actually have reduced log exports. Our general conclusion is that, for major grades that constitute most exports, we are unable to find evidence that past and present U.S. log export restrictions are effective. However, the evidence suggests that the restrictions on higher grades are effective. Virtually all U.S. softwood log exports come from Washington, Oregon, California, and Alaska. Washington is the dominant exporter, accounting for about two-thirds of the total. Oregon exports the bulk of the remainder, with California and Alaska together accounting for less than one-tenth of all exports. The major species exported are Douglas fir and hemlock. Some varieties of cedar, spruce, and fir also are exported. Almost half of the world's international softwood log trade consists of exports from the Pacific coast states, of which about 90%0 goes to Japan. In the 1970s, exports fluctuated between 1,700 and 3,000 million board feet, averaging about 15% of the annual harvest. The first major official action on log exports was a joint determination by the secretaries of agriculture and interior in 1968.1 Stating that a log export restriction was necessary to maintain a viable domestic wood-processing industry, the determination limited log exports from federal lands-under U.S. Forest Service and Bureau of Land Management (BLM) administration-in western Washington and western Oregon to 350 million board feet annually. This was superseded in the same year by the socalled Morse Amendment to the Foreign Assistance Act which maintained the 350 million board feet quota and extended the control area to the entire western half of the United States. The restriction now in effect began as a rider to the Department of the Interior and Related Agencies Appropriation Act of that year. This rider, which has been attached to all subsequent annual appropriations bills, results in a complete prohibition on log exports from federal lands in the western United States. To implement the rider, both the Forest Service and the BLM adopted regulations intended to prevent the substitution of federal timber in domestic use for nonfederal timber which is exported. Details of these regulations are not discussed here, except to note that they neither prohibit existing firms from increasing their exports of nonfederal logs nor prohibit new firms from making nonfederal log exports. Such firms are merely constrained in their purchases of federal logs.

Log Export Restrictions: Some Findings

Abstract Economic efficiency and income distributional consequences of a ban on log exports from the United States were studied under alternative assumptions about Japanese response. The study predicts modestly lower log prices and a decreased cut. Lumber prices, however, may rise or fall. The redistributional effect largely favors log processors at the expense of log producers, and effects on lumber consumers are small.

The Behavior of General Trading Companies as Reflected in Lumber Prices

My own views on the issues involved are summarized in Kenchiku-yō Mokuzai no Ryūtsū — Kakaku Taisaku ni tsuite [On the Distribution and Price Policies of Lumbers for Construction Use] (a part of which is cited at the end of this chapter), issued on July 30, 1975, as a proposal to the Conference on Price Stabilization Policy, which I drafted as the principal investigator.

A Monthly Model of the United States Demand for Softwood Lumber Imports

Abstract To analyze monthly imports of softwood lumber in the United States, five alternative hypotheses have been formulated and tested with monthly data relating to the period January 1965 to August 1978. The selected hypothesis suggests that imported lumber is only an imperfect substitute for domestically produced lumber. In addition, the decision to import softwood lumber depends upon importers' expectations regarding future levels of construction activity, domestic and foreign prices of softwood lumber, and domestic price of other goods. Expectations are adjusted from month to month by a constant fraction of the relative difference between observed and previously expected levels of the variables. This hypothesis led to a model expressing imports in a given month as a function of construction activity and prices in the same month, and of imports in the previous month. The resulting model had good statistical characteristics and provided the most accurate postsample forecasts. The results indicated that imports are more responsive, in terms of partial elasticity, to the price of domestic softwood lumber than to any other factor. Other things being equal, a 10 percent rise in domestic price leads to a long-term 11.6 percent increase in imports. The same rise in import price, which might result from a 10 percent increase in foreign price or from an equal decline in the value of the U.S. dollar, leads to a long-term decline in imports of 4.5 percent only. A similar decrease in imports would result from a 10 percent increase in the price of other U.S. goods which behave as complements for imported softwood lumber. A 10 percent inflation in all prices tends to cause as increase in imports of 2.8 percent. Full adjustment of imports to changes in construction activity and prices takes some 2 months. Construction activity and price variation explain most of the seasonal fluctuations in softwood lumber imports. Residual monthly deviations captured by dummy variables indicate that, other things equal, imports tend to be higher in February, March, June, and July than during the rest of the year. Forest Sci. 25:641-655.

Impacts of RARE II Withdrawals on Softwood Prices, Consumption, and Production

Abstract Market simulation studies suggest that withdrawing all RARE II roadless areas could raise U.S. lumber prices by about 4 percent and reduce domestic lumber consumption by 3 percent by the year 2000. Total annual wholesale expenditures on lumber and plywood might rise by $110 million. Price and consumption effects at the consumer level would be moderated by a 19-percent increase in lumber imports from Canada. Reductions in domestic wood products output would be concentrated in the Douglas-fir and the Rocky Mountain regions, with 17- and 28-percent declines in lumber output, respectively. Southern lumber output would increase by 1 percent. If Canadian lumber imports were restricted to a maximum of 13.25 billion board feet, lumber price and consumption effects might double by 2000 with only modest reductions in the regional impacts.

Community stability and forest policy in British Columbia

Many jurisdictions including British Columbia have adopted sustained-yield forest management as the cornerstone of their forest policies. It has been argued that one consequence is 'community stability.' This paper examines the origins of the argument and its validity in the current context. It is concluded that the permanence or survival of forest industry centres is neither assured by nor solely dependent upon the perpetual maintenance of nearby forests at or near sustained-yield levels. Rather the size and distribution of wood-processing centres seems to be determined by technological economies of scale and location with respect to means of transportation. Secondly, even-flow regulations perse cannot achieve short-term stability of employment or incomes when the forest industry of a region produces primarily for volatile export markets.Evidence is presented to show that the logging, processing, and associated occupations are unstable, relative to other occupational groups, in each of the forest industry centres examined. The instability of total employment seems much greater in a single-industry town than in a diversified city. Much of the short-term employment instability is correlated with changes in the price of lumber destined for export markets. Some means of reducing the instability are discussed.