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Title: Potential Effects of Wood Chip Mill Harvests on Economic Returns and Forest Management Practices of Nonindustrial Private Forest Landowners in North Carolina

Author: Snider, Anthony; Cubbage, Frederick; Moulton, Robert;

Date: 2001

Source: Pages 73-78 In: M.H. Pelkki (ed.). Proceedings of the Annual Meeting of the Southern Forest Economics Workers. Lexington, KY. March 26-28, 2000.

Publication Series: Miscellaneous Publication

Description: Four approaches were used to estimate the market effects of wood chip mills for nonindustrial private forest (NIPF) landowners. First, we used economic welfare analyses to estimate potential changes in consumer and producer surplus that might be attributed to increased stumpage demand created by wood chip mills. Better markets would consistently increase economic returns for both timber buyers and sellers, up to about $5 million per year more per 1% shift outward in the demand function. Forest industry (buyers) had higher benefits in absolute terms, while NIPF owners (sellers) had higher percentage benefits. Second, changes in actual returns in the 1990s were estimated using Timber Mart-South data and timber product output (TPO) measures of changes in harvest levels. NIPF owners had decreased returns from softwood stumpage sales. However, increasing hardwood pulpwood timber production and prices would have yielded incremental returns of $553,000 per year for NIPF owners. Two-thirds of the total value accrued to owners in the Coastal Plain, but the largest percentage increase per year (6.5%) was received for NIPF hardwood pulpwood harvests in the Mountains. Third, discounted cash flow analyses of potential returns with better markets for small pulpwood material were calculated. Higher total stumpage volumes and prices, coupled with shorter rotations for softwood timber, led to sawtimber production with a chip component having the greatest returns, followed by chipping the stand entirely at a shorter rotation, and last, production of sawtimber only. These alternatives generated internal rates of return (IRRs) of about 8 to 12%. The lower timber prices and long rotations for hardwoods generally yielded much lower investment returns, ranging from about 4% to 6% IRRs depending on the management regime. Even the addition of a wood chip component did little to increase these returns. Last, analyses of potential site preparation savings for regeneration on sites with less woody debris and harvest residuals indicated that NIPF owners could save up to $800,000 per year. These economic analyses suggest that better markets will benefit NIPF landowners and timber buyers, thus prompting increased harvests for chip wood.

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Snider, Anthony; Cubbage, Frederick; Moulton, Robert 2001. Potential Effects of Wood Chip Mill Harvests on Economic Returns and Forest Management Practices of Nonindustrial Private Forest Landowners in North Carolina. Pages 73-78 In: M.H. Pelkki (ed.). Proceedings of the Annual Meeting of the Southern Forest Economics Workers. Lexington, KY. March 26-28, 2000.

 


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