Economic Impacts of Forestry

Karl Davies karl at
Mon Sep 11 06:38:21 EST 2000

There's agreement on the scale of economic impact from forestry in
Southern New England and Virginia.  The range is from 50 to 60 times
stumpage values.  The Massachusetts calculations grossly underestimate
volumes and values actually cut, and the same probably applies for
Virginia, due to very sloppy reporting.  To compensate for these errors,
values should be doubled or tripled.

The potential economic impacts from good management (as opposed to
repeated high-grading which is the norm) would probably double or triple
values again.  It looks like we're talking serious money here folks.  KD

Quantifying Public Benefits on Private Forestland in Massachusetts
by the Massachusetts Forest Stewardship Program’s Task Force on
Reforming Forest Taxation
January, 2000

"Compared to other industries, the chain of production from raw material
(stumpage) to finished wood product is longer than for almost any other
major commodity. Thus the economic value-added ratio of the finished
product to the raw material is high. Two recent efforts to document the
economic impacts of the wood industry point to value-added multipliers
that might be used for our purposes here. The MDC-Quabbin report on
community and economic benefits from forestry (National Wildlife
Federation, 1999) uses a value-added ratio of 20:1 within the forest
products sector. Further, it states that a dollar generated in the wood
products industry circulates 2.5 times before being banked or leaving
the state. Effectively, the value-added ratio is then 50:1 when total
economic impacts are addressed. A Connecticut wood industry study
(Broderick and others, 1997) shows similar results, though arrived at by
different methodology. In this case the effective ratio for total
economic impacts is 59:1. In the absence of current Massachusetts wood
industry data, we will use high and low ranges to suggest a reasonable
range of economic impact values."

"For Massachusetts, two reports give the annual wood volume harvested,
and when a stumpage value is generated, we have the base number to which
the economic multiplier may be applied. A study of cutting plan filings
(MA Dept. of Environmental Management, 1999) shows an average annual
harvest from recent years of 83 million board feet from 30,682 acres. A
recent federal inventory (USDA-Forest Service, 1998) suggests an
alternative annual harvest of approximately 121 million board feet. A
state expert (Rivers, pers. com.) estimates that less than 10 percent of
the above forest products harvesting occurs on public lands. Thus, these
two figures can delineate another dimension of the range. Assuming a
value of $140 per thousand board feet (Boyce, pers. com.) when the tree
is sold at the stump, these two volume estimates generate $11.6 and
$16.9 million dollars. Applying the value-added multiplier of 20 to the
stumpage revenues generated by the low and high annual harvest figures,
we get $232 and $338 million, respectively. The "ripple effect," as
these dollars further circulate within the state, would increase the
economic impact of 2.5 times (cited above) for a total economic impact
range of $580 to $845 million." [Implies multiplier effect of 50:1]

Economic Impact of the Forest Industry in Virginia
August 04, 2000

"The forest resource of the Commonwealth:
1. Contributes $11.5 billion annually to Virginia's economy.
2. Continues to support one of the largest manufacturing industries in
the state ranking first in employment, second in wages and salaries and
fourth in value added.
3. Contributes $196 million back to Virginia landowners for selling
their timber. [Implies multiplier effect of 59:1]
4. Provides recreational opportunities to two-thirds of Virginia's
citizens totaling $1.7 billion.
5. Generates an estimated $35.2 million through minor forest products.
6. Protects Virginia watersheds from erosion and sedimentation.
7. Provides long-term carbon sequestration through forest management on
16 million acres of forest land, which contributes to clean air and
enhances our quality of life.
8. Provides important social benefits including attractive sites for
homes, scenic beauty, wildlife habitat, a draw for visitors and
potential new residents."

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