A co-worker sent me this email the other day:
Hi there, a very lovely elderly subscriber just called and he wants to know more about what has happened to the forest industry over the past 10-15 years; or rather, he knows the forest industry is having difficulty, and he would like to know more about the history and reasons for this. He wants to know if we have published an article (or a few articles) that would best address this and he has given his past issues away so thought he would give us a call. Do you have any suggestions that I could point him toward?
When I first started writing and editing stories about the forest industry in the Northeast I could have rattled off a handful of short answers and been completely confident in them. Time has blunted my certainty, though. I’ve come to see that the forest industry pyramid, with its various levels building on one another, look just like ecosystem pyramids, where the plants on the bottom feed the bugs, which feed the birds, which feed the foxes. Another way to draw it would be as a web, with tendrils connecting everything together on some level. Why is any given thing declining? You can follow a dozen different strings to a dozen different answers.
But I like the idea of helping a loyal reader out where I can. And I have to write a blog anyway. And the nice thing about blogs is they have comment sections where people smarter than I am can add insight to further help loyal readers out. So, here goes.
Let’s start at the bottom of the pyramid, with the wood and the landowners who grow it. It’s going to seem for a while like I’m not answering the question, but since trees are at the core of everything, we have to start there – the forest industry doesn’t exist in a vacuum.
If you live in a place with good wood – and I’m defining this as a place with well-managed forests that contain trees of multiple age and species classes – you might still live in a place with a healthy forest industry. Note I didn’t just say nice trees; the multiple age and species classes part is important to both buyers and sellers of wood in the same way that a diversified stock portfolio is good for investors. The sellers want diversity because their forests aren’t monocultures; also, because sawlogs are fashion items – prices go up and down based on consumer whims, so you don’t want to have all your eggs in one basket. They also fluctuate on manufacturer whims. In the late 1970s, white birch boltwood was really valuable. But then people found that ramin, a tropical tree species, could be used to make dowels more cheaply and the birch market collapsed. Read this story Lloyd Irland wrote for us on 50 years of log price trends in Maine to get a better sense of how species rise and fall like stocks. Industry wants diversity, too, because it allows them opportunities for symbiosis. If a landowner has a market for ugly wood, they’re more likely to harvest it, which makes their good wood better. Both the pulp plant and the hardwood mill win. Clustered industry improves trucking efficiencies, the employment pool, it gives towns and regions an identity and helps define the character of a place. If the forests and farms in a town stop working, the place transforms into something inorganic and all land-based industry withers. People in that case will make their living apart from nature, not together with it.
If you live in a place with a declining forest industry it could be the ethos of the place has changed: people stopped seeing trees as a crop. Read this story about a couple in southeastern, Vermont, and their battles with the neighbors and the town regarding their small scale firewood operation. Or it could be that poor wood or poor forest diversity are to blame. Don’t quote me on this line, but I think it’s fair to say that the majority, maybe a big majority, of timber harvests are still executed without a forester’s input. The colloquial phrase around here is “log off” – I’m going to log off my woodlot. What that means is people hire a logger, who goes in and takes only the best trees. It’s also called high-grading. Over time, this leaves a woodlot with only poorly formed trees; the landowner’s wood portfolio has been reduced to trees that are only suitable for the chipper and the industry built up around nice wood dries up. The late Mike Greason was a staunch anti-high-grading advocate; read this story he wrote for us. And here’s one by Irwin Post on diameter-limit cutting, a more sophisticated type of highgrading that can also damage a woodlot’s future potential.
Here’s a puzzling statistic for you that I gleaned from a conference (source: The Hardwood Market Report). In 2005, 60 percent of hardwood went into grade lumber (in other words nice wood that made furniture, flooring, higher-end wood products) and 40 percent went into industrial uses like pallets and cants and railroad ties. In 2013, the numbers had flipped to 60/40 the other way. The obvious culprit is the housing bubble and subsequent recession. But might it also say something about the quality of the wood being offered?
Let’s look at the markets specifically now. At the middle of the web are the low-grade markets – everything radiates from them. If there’s a pulp mill, or pellet mill, or bio-energy plant that wants to buy wood chips, and the logger can turn a profit supplying them, and the landowner can profit or at least break even on the junk wood with the idea that harvesting it is making her better trees that she’ll eventually profit on more valuable, then the system chugs along. The problem is low-grade markets are currently in the toilet – in the area around the office we’ve lost 2 million tons of market capacity in just the last two years. There are many reasons for this. The pulp mills in Maine, which were huge low-grade wood consumers that drew wood from all of northern New England, continue to close, mostly due to overseas competition and a decline in worldwide use of paper. Region-wide, we’ve lost 11 since 1999. Biomass plants are very hard to get permitted and don’t enjoy the renewable subsidies that wind or solar or hydro installations do, or the good ol’ boy subsidies that coal and oil receive, which puts them into the fight with one arm tied behind their back.
Looking specifically at things from the forest landowners perspective, then, you have bad low-grade markets, which means the second and third logs in many of your trees are worthless. It also means any timberstand improvement work you do will be done at a financial loss, which disincentivizes improving your woods. The softwood you’re growing mostly feeds home construction, and housing starts are flat. Landowners looking to sell softwood in northern New England are also dealing, at the moment, with a trade war with Canada – read this story to learn more.
Hardwood markets are lean, too. The US furniture manufacturing industry lost $50 billion in market share to Asian countries over the last two decades, resulting in over 300 plant closures in the eastern hardwood region, which hasn’t helped things. (That stat from a book called The Furniture Wars by Mike Dugan.) According to Paul Frederick, who tracks wood utilization for the State of Vermont, there were 26 hardwood mills in Vermont in 1990 that milled over a million feet a year; today there are 11. Of course, besides a lack of markets, there’s all the other stuff landowners deal with: taxes, regulation, finding good foresters and loggers to work with, on and on.
Let’s talk about loggers, who have their own suite of issues to deal with. I’m most familiar with the lay of the land in Vermont, and in this state worker’s comp rates are a big problem – read this to learn more. Forestry equipment in Vermont doesn’t get a sales tax exemption, which puts our loggers at a disadvantage compared to neighboring states. Non-synchronous road weight limits put them in a perpetual cat and mouse game with the DMV – guys around here who are selling logs in New York have to run overloaded and risk fines until they hit the border and become legal. They get bullied by landowners who think their junk wood is worth more than it is, and bullied by mills on the scale of the nice stuff. When weather conditions for logging are good, mills fill up and markets close. When conditions are bad, mills empty and are screaming for wood that can’t be cut. Equipment costs are through the roof and the newer high-tech stuff is harder to maintain. You have to cut mountains of wood to pay off half-a-million dollar loans. It’s just a hard job to make money at, and that’s true in every state.
Of course the mills and secondary manufactures have their own suites of challenges, some of which I’ve already alluded to. They’re dealing with a global business environment that’s ruthless. A strong dollar makes their exports less valuable. Global trade wars and tariffs twist them in knots. They get bullied by regulators on one end with their never-ending series of hoops and bullied by landowners who sit on their wood and loggers who don’t reliably deliver logs and workers who don’t show up for work on the other end.
So these are some of the reasons why things are difficult. But it’s important to say, here, that things are difficult for most of us. The publishing industry is hard. Teaching is hard. Whatever line of work you’re in is hard. This is not to diminish at all the challenges the forest industry faces – I think it’s fair to say that their row is an especially hard one to hoe. It’s just that by dwelling on the negative you miss all the opportunities and success stories.
There are forest landowners who are growing very nice timber and doing very well at it. Good wood is still worth good money, and land values still appreciate.
There are successful loggers who have found a sweet spot. I spent a wonderful afternoon a few months back with a group of 20-, 30-, and 40-something loggers and farmers in the Mettowee Valley and was struck by how optimistic they all were. They were doing it. They were making it work. Obstacles were hurdles, not roadblocks. They were the future of the working landscape in this area and it was a bright future.
In every issue we do a “Field Work” profile of someone in the primary sector of the wood business, and all feature some glimpse at how various people and companies are making it work. The one we just worked on – it will run in the autumn issue – is a profile of Bob Moses who owns Britton Lumber. Here’s a guy who bought a mill and 15 months later it burns to the ground. Time to go into Tech, right? No. The company literally rises from the ashes, with help from its competition, and the boards keep rolling off the mill.
See this article series we did with the Northern Forest Center that lays out the challenge faced by those in secondary wood manufacturing, then highlights four successful businesses – one in Maine, one in New Hampshire, one in Vermont, one in New York – that have adapted to the times. In fact, visit the Northern Forest Center’s web site for a dose of contemporary optimism.
Anyway, there’s my stream-of-consciousness answer to your question. I’m mostly an observer where it comes to all this, not a doer. That colors my perspective. I’m hoping there are doers reading this – men and women participating in some boots-on-the-ground sector of the forest product industry supply chain – and that they add their own perspectives in the comment section.