Reinventing Timber Harvesting for a Brighter Future
Ten thousand independently-owned small businesses comprise the timber harvesting (a.k.a. logging) and transportation link in the forest products value chain. A recent survey conducted by Timber Harvesting Magazine finds that harvesting capacity is down by 28% over the past decade and the decline has been accelerating since the start of the recession. More than 7 in 10 of businesses responding report operating at a loss or are break-even at best.
With wood and fiber being the single largest cost in traditional wood products (30-50 percent for pulp & paper and 50-80 percent for solidwood products) one would think that consuming mills and forest landowners would be committed to a collaborative relationship and an economically vibrant contractor force. All-too-often, however, timber harvesters have been viewed as necessary evils rather than critical partners.
The Endowment starts with a vision where timber harvesters are widely viewed as indispensable players in the health and vitality of the nation’s forests. We seek to have their businesses founded on financial stability. Both small and large challenges must be addressed but ultimately we must create systematic change in the sector. The greatest benefits and most lasting change will come when timber harvesters/transporters view themselves and they are viewed by others as delivering enhanced value to their respective partners – landowners and consuming mills.
Endowment staff continuously seeks to strengthen the all important timber harvesting and transportation segment, which currently include four key approaches:
Sustainable Loggers Initiative
A collaborative effort led by the Natural Capital Investment Fund and Coastal Enterprises, Inc. targeting assistance for the nation’s timber harvesting sector, the “Sustainable Logger Initiative” pilot integrates a flexible investment fund with targeted technical assistance to help loggers impacted by the recent economic downturn. The program will support critical infrastructure for the forest products industry, support loggers certified by the Georgia Master Timber Harvester Program, and strengthen small businesses in forest-reliant communities. The Endowment’s modest grant will leverage a $1 million loan fund that will in turn leverage at least $1 million in additional private capital through other lending partners.
Aid the Southern Loggers Cooperative (SLC) in Expanding Their Reach
The Endowment’s early experience with the SLC suggests that advancing/expanding the cooperative’s fuel depot model beyond its current slow-growth track could accrue significant financial benefits to timber producers. We plan to work with SLC in two key areas: 1) seeking to have companies “guarantee” all or a significant portion of the initial capital investment in co-located facilities to mitigate risk of mill closure; and, 2) adding a “quasi-franchise” component to the SLC model that engages state logging associations in promotion and benefits.
Our first project with the SLC involved the Georgetown, SC, Fuel Depot. Diesel fuel (for trucks that average 4-6 mpg) is among the most volatile and significant costs to a timber harvesting firm. As prices spike – sometimes by 10-20% over a relatively short period of time – few consuming mills have a system in place to buffer the change. Thus, loggers often go into the red over this one cost.
While there have been many aborted attempts to create cooperative buying models to leverage the power of multiple purchases, the SLC is the first to gain traction. To date SLC has installed more than 20 fuel depots fmost across the southeast and one in Ohio. Loggers pay a one time “co-op membership fee” of $100 and then can purchase fuel from the depots at discount to markets of 10 cents or more per gallon. Some firms report saving $20,000 annually in a field where nearly three-quarters of all firms report breaking-even at best or suffer significant losses. SLC has recently added health insurance and tires to their programs. To date all depots have been funded (guaranteed) by one or more local area loggers supporting the average $350,000 cost. In 2013 the Endowment bought out the original investor in the Georgetown, SC, depot in an attempt to gain a better understanding of ways to engage and expand the concept. The Conservation Fund’s Natural Capital Investment Fund joined the Endowment as a co-investor in the project.
Institute an annual or periodic forum for timber producers to share needs and best practices
Loggers face many challenges. As there are no “regional or national” loggers, it is difficult to share best practices. The Endowment would work within this segment of the industry to stimulate ideas and best practices exchange.
Advance a Timber Harvesters Check-off
The Endowment believes that implementation of a Timber Harvesting Check-off supported by larger timber harvesters/transporters, a group that handles >85 percent of all roundwood harvest, could be a game-changer. A Check-off is the best tool to accomplish and sustain the type of long-term funding and resulting change that is needed.
Check-off funds could be used, among other things, to:
Conduct productivity research that improves the competitive position of harvesters;
Provide leverage funds to research organizations to aid in new product development – e.g. the Wood Supply Research Institute or USDA Forest Service;
Develop and implement an on-going education and training program to attract and retain the workforce of the future;
Engage nationally recognized spokespeople to improve the acceptability and marketability of wood by raising the 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,
Support research on the best ways to engage timber harvesters in providing information and support to the nation’s forest owners to ensure more sustainable management. In this regard, timber harvesters are the best vehicle to disseminate information to improve sustainability, insomuch as only 1 in 10 landowners use services of a professional forester but 10 in 10 engage a harvesting professional for their timber harvest.
Research (and implementation of results) to enhance efficiency within the entire value chain from forest to mill and improve the productivity and compatibility of equipment to the resource;
Addressing needs of the next generation work force including attraction of growing numbers of people of color and operation of increasingly advanced equipment; and,
Defining a catalytic role in driving cultural change among and across all three legs (landowner/harvester/mill) by working in a mutually-respectful partnership.