Forestry and the economy.

1. Matthew H. Pelkki
Professor and George H. Clippert
Endowed Chair

2.  Getting forestry on the public’s
radar
 Linking forest
health/sustainability to forest
economics
 Research in forest economics
 Direct studies in support for
economic development
projects

3. AFRC’s Role in Supporting Forest-based
Economic Development
Arkansas Forestry Association
Annual Meeting
24 September 2014, Hot Springs,
Arkansas

4.  Report by Division of
Agriculture
◦ In conjunction with Dr. Jennie
Popp of UA-Fayetteville
Agriculture contributed
$20,117,634,954
to Arkansas’s economy in 2012

5.  #4 in the US South in
saw log production
 21,375,000 tons of
timber production in
2013
 Value in timber
production of
$398,470,000 to
landowners

6.  24,736 jobs
 $1,411,000,000 in
wages
 $3,243,000,000 in
value-added

7. Employment
Wages
(millions of $)
Value Added
(millions of $)
Direct 24,736 $1,411 $3,243
Indirect
(multipliers)
27,640 $1,124 $2,222
Total Impact 52,376 $2,535 $5,465

8.  Local civic leadership
 Economic development
agencies
 Market update
presentations to
landowners and foresters

9. AFRC’s Role in Supporting Forest-based
Economic Development
Arkansas Forestry Association
Annual Meeting
24 September 2014, Hot Springs,
Arkansas

10. A
healthy
forest
industry
=
A
healthy
forest

11. 9,944,983
7,211,136
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
Softwoods Hardwoods
Green tons
Growth
Removals
Excess

12. 900,000,000
800,000,000
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
14,000,000,000
12,000,000,000
10,000,000,000
8,000,000,000
6,000,000,000
4,000,000,000
2,000,000,000
0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Growing Stock
Growth
Mortality

13. 500,000,000
450,000,000
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
16,000,000,000
14,000,000,000
12,000,000,000
10,000,000,000
8,000,000,000
6,000,000,000
4,000,000,000
2,000,000,000
0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Growing Stock
Growth
Mortality

14. 60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Softwoods North
Softwoods South
Linear (Softwoods North)
Linear (Softwoods South)

15. 120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
1975 1980 1985 1990 1995 2000 2005 2010 2015
Hardwoods North
Hardwoods South
Linear (Hardwoods North)
Linear (Hardwoods South)

16. FIA
Inventory
Year
South Arkansas North Arkansas
Softwood Hardwood Softwood Hardwood
1978 0.42% 0.83% 0.24% 0.62%
2013 0.43% 0.92% 0.86% 1.14%

17.  Carbon payments for:
◦ Carbon in forest (trees, plants, soil)
◦ Carbon in long-lived wood products
 Compared 100-year carbon accumulation
and payments from three southeast Arkansas
pine regimes:
◦ Natural even-aged pine (48-year rotation)
◦ Standard pine plantation (30-year rotation)
◦ High-intensity pine plantation (25-year rotation)

18. Carbon Sequestered in Wood Products from Three Even-
Aged Pine Regimes in SE Arkansas
Present Value
($/ac) of carbon at
$10/mT and 6%
is….
Intensive
Plantation
$110
Natural
Pine
$42
Standard
Plantation
$35

19.  Value of ash harvests in
2013 ~ $2.17 million
 Value of all ash growing
stock in AR ~ $351 million
 Estimated risk including
urban forests for
treatment, removal, and
replacement is $471
million

20. AFRC’s Role in Supporting Forest-based
Economic Development
Arkansas Forestry Association
Annual Meeting
24 September 2014, Hot Springs,
Arkansas

21.  Ouachita and Ozark National
Forests
 Economic impact of ecosystem
restoration project spending in
local communities
 Long-term economic changes
due to different timber
harvests, reduced fire risk,
hunting revenues, and eco-tourism

22.  Using numerical
methods to optimize
rotation length,
composition, and
density of forest
stands
 Potential uses in stand
valuation, and
adjusting regimes to
changes in timber
prices and interest
rates
N
f (Y ) = r (T )
N N n
n = 0 n
Objective Function:
Subject to:
Y + G (Y ) - T = Y (n=0, 1, 2, ..., N-1) n n+1 n n n+1
X - T = Y n n n
X - T = 0 N N
f (Y ) = max {r (X ,T )+ f (Y )} n n n n n n-1 n-1
(Y ,T ) n-1 n
NT
Volume
Entering value = $73
n Stage
n-1
Entering value = $75
Value of residual stand
after lookahead = $250
Value of residual stand
after lookahead = $240
A
B
rn (X , T ) + f (Y ) n n n-1 n-1
Node A = $73
Node B = $75
r G (Y )
L L L
Node A = $250
Node B = $240

23. 1000
2000
800
1500
600
1000
400
500
200
0
Cu bic foot v olum e per ac re
Age = 130 years
0 200 400 600 800 1000 1200 1400 1600
NT / acre
0
C ubic foot v olume per ac re
0 200 400 600 800 1000 1200 1400 1600
NT / acre

24.  Upland Hardwood
Management on
River Hills Tract,
Bethesda Livestock
and Forestry Branch
Station
Stand A: Diameter Limit Cut (12")
Value Today $2,730
Harvest $2,639
Residual $91
Value in 20 years $124
A 1.6% value growth rate
Stand B: Improvement Harvest
Value Today $2,822
Harvest $1,470
Residual $1,352
Value in 20 years $6,911
An 8.5% value growth rate

26. AFRC’s Role in Supporting Forest-based
Economic Development
Arkansas Forestry Association
Annual Meeting
24 September 2014, Hot Springs,
Arkansas

27.  Using FIA data and
timber market data, and
estimates of logging and
transport costs
 Short-term (5-10 year)
supply
 Long-term (25 year
supply)
$90
$80
$70
$60
$50
$40
$30
$20
Supply Curves
0 2,000,000 4,000,000 6,000,000
Delivered price per ton
Green tons of delivered wood
Current Market
Moderate Growth
Strong Growth
Demand of 2,500,000 tons

28.  Highlight major economic
and demographic sectors
 Provide impact analysis
for forest product sectors
 Ashley County 2014
Ashley County Totals
Population 21,524
Land Area 921 sq. miles
Value-Added $1 Billion
Employment 11,029
Average
Employee
$38,529
Compensation
Forest Industry Totals
--- ---
--- ---
Value-Added $456 million
Employment 1,986
Average
Employee
$77,776
Compensation

30. Questions and discussion