institute for sustainable forestry contact@newforestry.org isf state of sustainability report...

Institute for Sustainable Forestrycontact@newforestry.org

ISF State of Sustainability Report

Delusions of Viability?Meeting Community Forestry Goals

in a Global Market Context Community Planning Session:

June 26th 2004

ISF Mission

“To promote sustainable forest management that contributes to the long-term ecological, economic and social well-being of forest based communities in the Pacific Northwest.”

Global: Production / Consumption

US Exports

US Imports

Global Factors

• Currency rate fluctuations• Trade liberalization• Business cycles• Access to low cost labor and raw

materials• Environmental constraints: Pacific

Northwest / China

Industry response: Consolidation

• Major industry players consolidating in order to mitigate: – the impacts of currency volatility. – the impact of trade tariffs and other trade barriers.– national restrictions on foreign access to resources and

regional markets.– transportation costs in accessing regional markets– the business cycle itself through increasingly centralized

control over the rise and fall of regional production capacity.

• And to take advantage of low cost factors in the developing world

Softwood Lumber Agreement/Dispute

• Softwood Lumber Agreement– 1996 thru 2001– Quota 31.5% of US production– Imports above quota paid per mbf surcharge

• Softwood Lumber Dispute / Tariffs – 2001 through present (June 2004)– 27% tariff applied at conclusion of SLA

• Countervailing Duty tariff: 18.79%• Anti-dumping tariff: average 8.43% applied to

individual firms

Dispute: At Issue

• Stumpage pricing• Canadian restrictions on sawlog

exports• Tenure – “social contract”

Price Spread

Production

Canadian Imports

US Offshore Imports

Canadian Log Exports

US Log Imports

Historical Cycles: 1981, 1991, 2001

Price drop: 44%

Low Prices Continued Through 2003

Curtailments: 1996 - 2002

Overall production gains 1996 - 2001

PNW Employment

Resolution?

• Canadian forest policy expected to move inline with market principles

• BC considering separate agreement with US

• Relaxed restrictions on sawlog exports already in progress

Recent Price Increases

Housing Market

Softwood Lumber Dispute /PNW

• The US/Canada Softwood Lumber Agreement/Dispute led to: – Maintenance of high US prices in protected US market – Increased production capacity in non-targeted regions: US

South, Eastern Canada, Offshore imports– Decreasing relative competitiveness of US companies in

US and international markets– Significant curtailments and closures of older less

efficient mills in PNW: US and Canada– Increasing production efficiencies in remaining PNW

mills: Canada and US– Declining PNW wood products employment due to

increased production efficiencies– Increased access to Canadian sawlogs for remaining US

companies– Steep drop in lumber prices during relatively mild

downturn in US housing demand

Global Trends

• Increasing consolidation of global forest products manufacturing.

• Increasing productivity per worker – fewer jobs.• Increasing production in low cost regions.• Increasing liberalization of international trade

rules.

National Trends

• Increasing US demand/consumption.• Increasing competition from low cost

imports/producers including Canada and the US South.

• Continued restraint of timber harvests on federal forestland in the PNW.

• Ongoing business cycles.• Increasing liberalization of US trade policy.• Prices for small logs in the west projected “remain

weak” through 2050

California Consumption

• Harvests approximately 2 billion board feet of timber annually: approximately 22% of consumption

• Consumes 9 billion board feet of softwood annually: 15% of overall US softwood consumption

• Imports 75% of its softwood consumption from Oregon, the US South, Canada and Europe

California Timber Harvest

California Production / National Market

California Old Growth Harvest

California Timber Industry

• Number of mills declined from nearly 100 in 1988 to 40 in 2002

• FS data on capacity changes in California are inconsistent:– Spelter 2001: Five California mills closed

between 1996 and 2001 resulting in a 2% decline in capacity

– Spelter 2002: Twelve California mills closed between 1996 and 2002: ISF estimated decline in capacity for the period as 27% however this data set includes no data on revised capacity changes in remaining mills

California Timber Industry

• Between 1984 and 1994 California harvest levels on private ownerships represented less than – 65% of growth statewide – 75% of growth in the North Coast Resource

Area (Sonoma, Mendocino, Humboldt, Del Norte)

• Statewide inventory data for years following 1994 is not available

North Coast Resource Area Inventory

NCRA Growth/Harvest

NCRA Inventory

NCRA Even Aged Stands 1994

State and Local Policy: Key Issues

• Productive Capacity: – Declining land base and administrative withdrawals of

land available for timber and range production, – Risks and Impacts from increased forest stocking levels.

• Forest Health:– Fuels buildup risks to ecosystems and human assets

• Socio-Economic Well Being:– Increasing consumption and statewide limitation on

California commodity output, – Meeting changing demands for recreation and open

space, – Meeting costs of resource protection, – Maintaining large landholdings in resource industries– Weak economies in rural communities.

State and Local Policy: Key Issues

• Governance:– Complexity of regulatory oversight, – Limited policy integration, – Conflicts over forest and rangeland management

practices.

ISF Response:

• The industry trends, dynamics and constraints identified in this report indicate that: – Increased access to California supply will not solve periodic

overcapacity and oversupply conditions in global markets,– Increased harvest of existing inventory will not increase the

capacity of California’s operable private forestlands to produce high quality timber,

– Increased lumber production in globally competitive mills will not return rural communities to historic levels of resource based socio-economic well-being.

– Intensive short rotation forestry will not increase fire safety in California forests.

– Regulatory relief will not counteract global industry dynamics affecting states and provinces throughout the PNW.

– None of these actions will raise sawlog prices for California landowners.

Sustainable Forest Management

Long rotation, uneven-aged, selection management that maintains:

– Stocking of diverse species in the full range of age classes up to 120 years or more for softwoods,

– Habitat for sensitive species within the working landscape,

– High quality water through stream buffers and restoration of old roads and slides to stable conditions,

– Fire safety through management practices that mimic natural fire conditions and include planned fire breaks, and

– Forest productivity emphasizing high quality sawlogs.

Sustainable Forest Management Provides

• Increased productivity to meet California’s wood product needs

• Reduced fire risk• Maintenance and improvement of water

quality • Maintenance of habitat for sensitive

species of plants and animals

Sustainable Management Constraints

• Sustainable Forest Managers face:– periodic business cycles that include short-term downward pressure

on sawlog prices. – potential loss of sawlog markets if existing mills close.– mid-term downward pressure on prices from increasing industry

investment and lumber production in low cost production areas.– long-term prices projected to “continue to be weak for small-diameter

logs.” – growing stock of primarily younger age classes on private

ownerships.– increasingly monopsonistic conditions in sawlog markets

(consolidating infrastructure / fewer buyers).– a relatively (to other softwood lumber producing regions) high

harvesting cost structure.– costly and burdensome regulatory procedures.– no income from meeting social and political demands for ecosystem

services.

The Opportunity

• Californians believe that insufficient progress has been made over the past 20 years in solving environmental problems.

• Public demand for conservation practices and environmental integrity can represent an opportunity for Sustainable Forest Management, rather than a constraint.

Public Opinion

• In a 2000 Public Policy Institute opinion poll: – An overwhelming majority [of Californians] viewed overall

environmental problems such as air and water pollution, growth, traffic, and water supply as a threat to their health and well-being.

– Nearly 50% of Californians believed that urban growth and air pollution damage to the forests in the Sierra Nevada mountains, are a “big problem,” and an additional third were “concerned.”

– Approximately one-third had significant concerns regarding the logging of old growth redwoods in the North Coast, while two-thirds of the respondents rated the issue at least “somewhat of a problem.”

• In March 2002 57 % of California voters passed Proposition 40 (the California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002), despite a recession.

The Challenge

• Identify the “appropriate mix of private investments, regulation, public investments, and governance processes needed”, and

• Turn political and regulatory demands for social and ecological well-being into predictable income streams targeted at specific and documentable conservation and social-economic objectives.

Potential Forms of Support

• Increased funding for easements and other forms of conservation incentives.

• Developed markets for domestic carbon credits • Financial assistance that offsets long term interest costs for

investment in active sustainable forest management on high site forestland.

• Policies that support clustered residential development and tradeable development credits in conjunction with working easements on productive timberland – particularly on low site or constrained TPZ forestland.

• Policies that support recreation, eco-tourism and other types of economic and rural development compatible with long rotation Sustainable Forest Management on low site timberland.

• Policies that support stream and slope restoration and restorative forestry in economic development priorities as aspects of maintaining and protecting the forest products and commercial fishing economic clusters.

Conclusion

Now is the time for a clear-eyed re-evaluation of methods to support Sustainable Forest Management.

Environmental advocates, non-industrial landowners and sustainable resource managers all stand to benefit directly.

California’s citizens, forests, forest landowners, rural communities, wood products consumers and generations to come will all reap the long-term benefits.

institute for sustainable forestry contact@newforestry.org isf state of sustainability report...

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