Check-offs: A New Vehicle to Advance the Forest Products Sector
Taking a lesson from agriculture, the Endowment has pioneered work to bring USDA “Research and Promotion Programs” (a.k.a. commodity check-offs) to the forest products sector.
In keeping with the Endowment’s vision to be a catalyst for systemic, transformative, and sustainable change, commodity check-offs for the forest sector have become a core focus for the Growing Traditional Markets Initiative. The Endowment’s leadership and financial investments in check-off programs could be a key to helping revive markets for America’s forest products.
Check-off programs assess fees on product producers and use the accumulated funds to increase the success of the businesses within their industry. They allow stakeholders to pool their funds and develop a coordinated program of research, promotion, and consumer information to improve, maintain, and develop markets for their products.
The 1996 Farm Bill adopted a “generic” program format and for the first time explicitly acknowledged that forest products were eligible agricultural commodities. This allows forest commodity groups to establish their own board of industry representatives who conduct promotion, market research, production research, and new product development. After several unsuccessful check-off efforts by other groups, the Endowment committed to aggressively pursing forest industry check-offs as part of the solution to revive sagging markets.
Softwood Lumber Check Off
The Endowment’s leadership and catalytic funding led to the first-ever check-off program in the forest products sector. In May 2011, global softwood producers voted overwhelmingly to approve the first-ever national check-off for forest products. In the final tally, 67 percent of voters, representing 80 percent of the volume of softwood lumber manufactured by those voting on the referendum, supported implementing the program. This first check-off for the forest industry is projected to generate about $12-18 million annually for research and promotion projects (www.softwoodlumber.org).
After receiving positive feedback regarding prospects for a softwood lumber check-off, the Endowment then convened industry leaders to review possibilities. That led to creation of the Blue Ribbon Commission on Softwood Check-off. That body of 14 U.S. and 7 Canadian producers, independent of the Endowment, developed a plan to create an international softwood check-off on almost all softwood lumber consumed in the U.S. The Endowment’s leadership resulted in the final leg of work for a Softwood Lumber check-off campaign cost being covered by the BiNational Softwood Lumber Council.
Paper & Paper-based Packaging Check-off
A robust pulp and paper industry is vital to forest retention and health as a major market for low-value wood at prices critical to support forest ownership and management. Too, pulp and paper jobs are among the best in rural communities in terms of pay and benefits. There has only been one new “greenfield” pulp/paper mill in North America in the last 25 years, and more than 40% of all facilities have been closed since 1990. It is critical that these important facilities be supported for their forest retention and family-supporting job potential.
With co-funding from the Endowment, the Paper & Paper-based Packaging Check-off was adopted in November 2013 and will, create a sustained $25 million/year program to support product and consumer research as well as promotion programs designed to showcase the overall benefits of paper and packaging products. The check-off covers all domestically-produced as well as imported paper and packaging products in the U.S. market after exemption of the first 100,000 tons of production for any producer selling into the U.S.
Hardwood Lumber & Hardwood Plywood Check-off
A robust hardwood industry is also vital to forest retention and health as a major market for high-value wood at prices critical to support hardwood forest ownership and management. As compared to paper and softwood lumber, the hardwood industry is the most fragmented segment of the forest products conversion system with hundreds of small facilities. Most of these facilities are privately owned and, while small in total numbers of employees, are vital to the rural communities where they are based.
The Endowment is co-funding the effort for a Hardwood Lumber & Hardwood Plywood check-off. If adopted, it would create a sustained $10 million/year program to support product and consumer research as well as promotion programs designed to showcase the overall benefits of hardwood lumber and hardwood plywood. The check-off will cover ONLY domestically-produced products with an exemption based on economic size of the company.
Timber Harvesting Check-off
The timber harvesting segment in the forest products value chain is made up of close to 10,000 independent businesses that contract services either to the forest landowner or to mills that have purchased standing timber. In recent years these vitally important small businesses that are the only step in the value chain that touches every forest landowner – whether public or private – have failed at an alarming rate. Some of these failures are related to the economic downturn, while others are systemic in that harvesting contractors often operate in a disadvantaged relationship with consuming mills and forest owners. Additionally, business owners are rapidly aging and are not successfully attracting new, well-trained employees, especially from the growing Hispanic labor force.
The Endowment believes that a commodity check-off may offer a new tool that could bring the fragmented harvesting sector together in ways that allow a number of positive outcomes. Funds could be used to: 1) conduct productivity research; 2) provide leverage funds to other partners to aid in new product development; 3) develop and implement an on-going education and training program; 4) engage a nationally recognized spokespeople to improve the acceptability and marketability of roundwood by raising visibility and importance of timber harvesting to management of forests and the production of raw materials that support a wide range of forest products, and 5) provide information/support to nation’s family forest owners.
While the traditional wood products industry – sawmills and paper mills – were the innovators and remain the primary producers of energy from wood wastes and residuals, a new standalone segment of the sector is emerging in the direct wood-to-energy business. Whether producing densified products such as pellets for domestic or export markets or to fire boilers directly to produce electricity, this rapidly emerging segment offers new markets for forest landowners and a welcome jobs in many rural communities. The Endowment is in the early stages of discussion with this rapidly fragmenting new segment about the potential of a check-off to benefit all.