Empirical indicators of the logging industry in the US South

Abstract

Timber harvesting is a critical component of the US forest products supply chain. Despite the importance of the logging industry, relatively little reliable data are available on the composition and performance of logging contractors either within a given geographic region or nationally. We develop methods for estimating logging capacity across a ten state region in the US South and provide a quarterly index which describes changes in logging costs for the southern timber harvesting industry. Logging capacity was found to have declined between 12% and 14% across the US South from 2006 to 2012 with some variation between multi-state sub-regions within the South. The excess or surge logging capacity within these regions measures the amount of logging capacity in excess of the actual demand for harvested products. The variation in this excess capacity was found to vary much more significantly across the South. The UGA Logging Cost Index was developed using data gathered in face-to-face interviews with logging contractors. Based on the percentage breakdown of annual logging costs from these contractors in 2011, we created a logging cost index using publicly available data on costs of diesel, equipment, maintenance, labor, interest, and other factors. Labor (32.8%), fuel (22.8%), and depreciation (19.3%) represented the greatest proportion of costs amongst respondents. The calculated cost index was found to match historical trends in logging costs. In addition, cost data gathered from contractors in 2012 and 2013 aligned well with the cost trends represented by the UGA Logging Cost Index. After correcting for inter-year production variation, the deviation of predicted costs (as represented by the UGA Logging Cost Index) and actual costs was 0.1%. The gap between prices paid for logging services (logging rates) and logging costs shrank between 2006 and 2013, indicating a reduction in the potential profit in the logging industry. Over this timeframe, logging capacity shrank considerably. Initial data from 2014 indicate that logging rates have increased relative to logging costs. While data are not yet available to indicate the impacts on capacity, the measures described here allow us to determine the effect of market forces on the logging industry.