Timber Supply: the Cloud on the 1981 Horizon

By N.E. Bjorklund Executive Vice President Indusrial Foresty Association Portland. Or.

I T'S impossi- I ble to view either the shortterm or longterm outlook of the forest industry in the West without discussing timber supply. It is the single most critical element in determining both the price and availability of wood products.

The short-term downturn in markets, primarily because of rising interest rates, has reduced production and taken a heavy toll among manufachrrers throughout the region. The improvement we witnessed in the latter part of the summer and early fall was encouraging, but it was offset somewhat by the increase in interest rates that prevailed during the latter part of the year. It is expected that the year-end housing starts will be around 1.2 million.

But the long-term market for housing is both bright and encouraging. The U.S. Forest Service in its recent assessment of national needs for wood predicted that the 1980s will be a decade in which the demand for wood products will soar. The postWorld War II "babv boom" will reach maturity durin! the next ten years and will attempt to form households in fine homes. In the lonqer term, demand for wood is expecied to nearly double in the next three decades, according to the same assessment.

Story at a Glance

Timber supply critical governmentcreates

All of this should be encouraging to manufacturers of wood products. It would be, if the supply side of the picture weren't so dark and depressing due to an impending artifical timber shortage. I say "artificial" because the U. S has softwood timber resources unsurpassed by any other nation, save the U.S.S.R. and Canada. but hasn't seen fit to manage them for maximum wood production.

In June of 1980 the Carter Administration issued a program for meeting the nation's wood needs of the next decade and beyond, as required by the Resources Planning Act of 1974 (RPA). That program, a companion to the assessment mentioned earlier, was totally inadequate and called for a net reduction in timber production nationally in the face of what the Administration recognized as a major increase in demand over the next ten vears.

For the National Forests, which contain over half of all the harvestable softwood timber inventory in the United States, the program offered a timid and inadequate effort aimed at maintaining the status quo. It projected no increase in National Forest production over the next five years to offset increasing demand even though the National Forest offered the greatest hope of meeting short-term demands for building pioducts.

The program offered, instead, the prospect of higher prices, or programed inflation, which could decrease demand. In short, prices would rise and cut some young-homebuyers completely out of the market, thus reducing demand. That was the rationale, believe it or not.

Increases in imports-which already account for nearly 30Vo of the total wood consumption in the counhy-were offered as one means for partly meeting short-term demands. Increasing imports, even in the face of our long-standing trade deficit in wood, was cited as ' 'anti-inflationary' ' in the program.

A doubling of wilderness, even under the lowest goal in the program, was not considered inflationary by the Administration, even though it would remove still more productive timberland and reduce still further the available supplies of softwood sawtimber.

Even before the election, Congress had expressed its displeasure with the RPA Program offered by the Carter Administration. Sen. John Melcher of Montana had hinted last summer that some legislative measures might be taken to improve RPA and present a more realistic program for meeting the nation's needs without the prospect of higher imports and pricing a majority of young homebuyers out of the American dream of homeownership. Some action is still expected on RPA in the rump session of Congress, but stronger action will probably follow after the Reagan Administration and a new, more conservative Congress take office next year.

Amendment and improvement of the RPA program is crucial to the future of Western forest indushies. most of which rely heavily on National Forests for their wood supplies. It is essential to the nation because RPA will set the tone nationally for timber supply throughout the decade.

Resolution of the RARE II controversy involving millions of acres of roadless but productive National Forests is also essential to the future of the wood products industry. The debate over the future of those lands has carried on for 15 years without satisfactorv resolution.

For thd long-term, nonindustrial private landowners, particularly in the South and East. who own most of the land capable of growing timber, must improve management of their lands to provide an ever-larger share of wood needs for the nation. It is necessary for Federal lands, especially ttre National Forests, to increase their share of the needs of the 8kthere is no other current domestic source. This can be done without jeopardizing the long-term productivity of the land. Recent timber supply studies have also shown that imports, especially from Canada, are not a viable means of increasing wood supplies, even if the outflow of dollars they would represent were acceptable.

Few in our indushy are not more optimistic now than they were two months ago about our future. But without some immediate chanee from the current direction and policies of the Federal Government, the supply side of the success formula won't balance and a generation of Americans will be left out of the American Dream.

Transition In 1981

(Continued from page 15) promising, it is much too early to fully evaluate their impact.

Inflation still will be the greatest economic problem facing the nation. We expect prices for goods and services we purchase tobe up lZ%o.

Another major cause of inflation is the cost of energy, particularly peholeum products. The current surplus of fuel is only a temporary thing; the long range shortage and resultant higher cost of energy are still gloomy economic facs of life.

Like everyone else associated with the housing industry, we at Simpson are looking forward to brighter days. More important, we remain confident about the prospects for the decade of the '80s.

More and more we recognize the long term nature of our business and are conducting ourselves accordingly. Capital investments made by Simpson over the past five years have geatly improved our competitive position. As a result. we were able to ride out the rough times of 1980 with relatively little market-related production curtailments.

Indeed, Simpson continued its heavy capital investment program. The most notable expenditures are in our Redwood Region operations in