Timber Speculation: A Growing Crisis

The price increases in OPEC oil over the past decade have.justifiably received a great deal qf'attention. But the./brest products industry has .faced an even greater increase in the cost o/ its primary ran, material, and that aspect of' our inflationary crisis has gone largely unnoticed.

Thc ayerage cost o/ timber./iom national ./brests in the U.S. rose 700"/, during this past decade. That's a bigger.jump Ihan viftuallJ) anv other ma.jor resourceinclLtding OPEC oil. Ever)tone leels the impact in terms ol higher prices.fbr n'ood and paper produt.ls.

Louisiana-Pacilic has addressed this issue in the lollou'ing u'hite paper u'hich pro,',ides background and a proposed solution.

In the western states. where the problem of speculation is most acute. National Forests account for more than half of the total commercial forest acreage and more than one-third of the timber harvested.

In recent years, the cost of that timber has been escalating dramatically and those increases represent a major contributor to the current inflation crisis.

What's the cause of that price escalation? Primarily, the failure of Congress year after year to fund a reasonable level of timber sales from our national forests. This artificial shortage of tinrber results in increased demand and hisher prices for the timber that is soi-d.

Lately, however, another lactor has been contributing to the upward spiral of federal tinrberspeculation. Speculation which in effect, is underwritten by current government regulations which allow and even encourage artificially high bids on federal tinrber sales by purchasers betting on continuing inflation.

Virtually all tinrber sold from our national forests is subject to a competitive bidding process. The high bidder on a timber sale normally must put up a modest deposit, either cash or a perfornrance bond, and then has anywhere fronr two to seven years to harvest the tinrber he has purchased.

Current procedures pernrit a speculator to bid more for the tinrber than it is worth under present market conditions, sit back while inflation drives up the value of the timber. then turn around and sell the timber at a profit without even having to have the intention of harvesting a single tree hinrself.

This practice is seriously inflationary. The regulations encourage a practically risk free withdrawal of large volunres of timber from production. The results are higher finished product prices to consunrers and loss ofcurrent revenue to the government.

The big loser, of course, is the legitinrate forest products operator who needs reasonably priced tinrber to keep his mills running at a profit as well as the consunrer. who pays

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