Greg Latta and Darius Adams Department of Forest Resources Oregon State University

PNWPrivate: A Nested System of PNWPrivate: A Nested System of Regional Private Timber Supply Models Regional Private Timber Supply Models

for Oregon and Washington with for Oregon and Washington with Extensive Mill and Resource DetailExtensive Mill and Resource Detail

Greg Latta and Darius AdamsGreg Latta and Darius AdamsDepartment of Forest ResourcesDepartment of Forest Resources

Oregon State UniversityOregon State University

Outline

• Overview of OSU Forest Sector Models

• Regional Models

• Model Components

• Applying the Models

• Lessons Learned

• Work in Progress

Forest Sector Modeling System at OSU:Linking Subregional to International Markets

½ STATE MODELS WITH EXOGENOUS PNW LOG FLOWS

PNW REGIONAL MODEL WITH ENDOGENOUS LOG FLOWS

NATIONAL MODELS STUMP TO MILL LEVEL INCLUDE CANADA

DYNAMIC INTERTEMPORAL & EVEN-FLOW MODELS

DYNAMIC INTERTEMPORAL, MYOPIC

MARKET & EVEN-FLOW MODELS

Price and capacity (feedbacks)Harvest, inventory, capacity, management investment

Linking Regional Timber Supply Developments to National and International Markets

WESTERN WASHINGTON

MODEL

EASTERN OREGON MODEL

NORTH AMERICA AND

OFF-SHORE MARKET MODEL

PRODUCT OUTPUTPRODUCT OUTPUT

HARVESTHARVEST

LOG PRICESLOG PRICES

MANAGEMENT MANAGEMENT INVESTMENTINVESTMENT

INVENTORY & GROWTHINVENTORY & GROWTH

PRODUCT CONSUMPTIONPRODUCT CONSUMPTION

TRADETRADE

PRODUCT PRICESPRODUCT PRICES

INTER-REGIONAL INTER-REGIONAL SUBSTITUTIONSUBSTITUTION

MANAGEMENT INVESTMENT MANAGEMENT INVESTMENT TIMBER INVENTORIESTIMBER INVENTORIES

LOG FLOWSLOG FLOWS

PRODUCT PRICESPRODUCT PRICES

WESTERN OREGON MODEL

EASTERN WASHINGTON

MODEL

Regional Models

Elements of Harvest Projection Process

INVENTORYINVENTORY YIELDSYIELDS

MANAGEMENT MANAGEMENT REGIMESREGIMES

LAND BASE LAND BASE TRENDSTRENDS

HARVEST HARVEST SIMULATORSIMULATOR

Elements Of Harvest

Projection Process

Use USFS FIA inventoriesUse USFS FIA inventories

1997 WOR / 1999 EOR 1997 WOR / 1999 EOR Updated 1990 WWA/EWAUpdated 1990 WWA/EWA

Build model at Condition Build model at Condition Class levelClass level





Elements Of Harvest Projection Process


Identify 7-8 regimes Identify 7-8 regimes for WOR and WWAfor WOR and WWA

6 regimes for EOR 6 regimes for EOR and EWAand EWA




Elements Of

Harvest Projection

Process

INVENTORYINVENTORY

Project tree lists of each existing condition class under regimes

Develop projected tree lists for regenerated stands under regimes

FVSFVS / / ORGANONORGANON

YIELDSYIELDS







LAND BASE TRENDSLAND BASE TRENDS

Project loss of timberland acres to non-forest uses



HARVEST SIMULATORHARVEST SIMULATOR

1) Even-flow1) Even-flow

2) Market model:2) Market model:

> demand for logs at milling > demand for logs at milling centers > centers > supply of logs from supply of logs from timberland locationstimberland locations




Model of Log Market at Milling Center x

DEMAND FOR LOGS AT DEMAND FOR LOGS AT MILLING CENTER MILLING CENTER xx

SHIFTS WITH PRODUCT PRICE, SHIFTS WITH PRODUCT PRICE, CAPACITY, TECHNOLOGY AND NON-CAPACITY, TECHNOLOGY AND NON-WOOD COSTSWOOD COSTS

SUPPLY OF LOGS FROM SUPPLY OF LOGS FROM TIMBERLAND LOCATIONSTIMBERLAND LOCATIONS

SHIFTS WITH COSTS OF SHIFTS WITH COSTS OF MANAGEMENT, LOGGING, HAULING, MANAGEMENT, LOGGING, HAULING, INTEREST RATEINTEREST RATE

PRICEPRICE

HARVESTHARVEST

Model of Regional Log Market

MARKET BALANCE MUST BE FOUND ACROSS ALL MILLING CENTERS AND MARKET BALANCE MUST BE FOUND ACROSS ALL MILLING CENTERS AND LOG SOURCESLOG SOURCES

LOG BUYERS TRADE-OFF SOURCES TO MINIMIZE COSTS LOG BUYERS TRADE-OFF SOURCES TO MINIMIZE COSTS

LOG SELLERS TRADE-OFF DESTINATIONS TO MAXIMIZE NET RETURNSLOG SELLERS TRADE-OFF DESTINATIONS TO MAXIMIZE NET RETURNS

TIMBERLAND TIMBERLAND AA

TIMBERLAND TIMBERLAND BB MILLING MILLING CENTER CENTER XX

MILLING MILLING CENTER CENTER YY

Original Regional ModelsFixed Model Structure With Preset OptionsFixed Model Structure With Preset Options

Applying the Models

• New Riparian Rules• Eastside Mill Closures• USFS Restoration Thinning• Older Forest Structure• Carbon Markets• Public Forestlands and Carbon• Future Harvest and Inventory by Log

Quality

New Riparian RulesOregon Department of Forestry wanted to analyze the market

impacts of two potential riparian policy changes– Increasing the leave tree basal area requirements– Changing some stream designations from non-fish to fish

bearing

INVENTORY More detail on riparian plots

YIELDS Rerun the yield tables with more detail in riparian

What:What:

How:How:

Original Plots More Detailed Riparian Plots

New Riparian Rules

0

500

1000

1500

2000

2500

3000

Lan

d a

nd

Tim

ber

Val

ue

($19

92)

Large Fish Medium Fish Small Fish No ControlledStream

Stream Class

Current Riparian Policy

Increased Basal Area Retention

Eastside Mill Closures

Initial eastern Oregon log market runs showed up to 50% reduction in harvest volumes which caused log prices to rise too high

HARVEST SIMULATOR Endogenous mill capacity via a binary capacity utilization scheme with shutdown point

WhatWhat

HowHow

LOG QUANTITY

LOG PRICE

CAPACITY

SHUT DOWN

LOG QUANTITY

LOG PRICE

Original Linear Demand Curve

New Demand Curve

USFS Restoration Thinning

Eastern Oregon public forests contain over a million acres of forestland in need of fuel reduction / forest health thinning

INVENTORY Public forestlands added to model

YIELDS Volumes calculated for potential thinning

HARVEST SIMULATOR Harvest, haul, disposal and subsidy

WhatWhat

HowHow

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USFS National Forest

Eastern Oregon Timber Market

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Demand Centers

LoggingdLumberêPlywoodð

FIA Pots

private, for indÝprivate, not for indÝ

USFS Overstocked Plots

1 - 2000Ý2000 - 4000Ý4000 - 6000Ý6000 - 10000Ý10000 - 40000Ý

Public Forest Lands

BLM

State Lands

Revised Market

Eastside Mill Closures with USFS Restoration Thinning

Num

ber

of M

ills

in O

pera

tion

Year

Creating Older Forest Structure

Incentives and opportunity cost of producing older forest structure (OFS) on private forestland

MANAGEMENT REGIMES Heuristic optimization of NPV and OFS silvicultural regimes

HARVEST SIMULATOR Management incentives added as well as targets for OFS creation

WhatWhat

HowHow

Net Present Value (NPV) maximization

Reserve Older Forest Structure (NPV) generation

Creating Older Forest Structure

4050607080901001101200

1

2

3

4

5

6

7

billi

on d

olla

rs (1

992)

Time limit, to meet OFS target

<=60%

<=40%

<=20%

Net

Su

rplu

s R

ed

uct

ion

(C

ost

)

<= 20%, <=40%, and <=60% requires more than 20%, 40% and 60%, respectively, of the private timberland base to have older forest characteristics by the time limit

Carbon Markets

Estimate impacts of carbon tax/subsidy system on private timber harvest and management in western Oregon

Add forest carbon accounting to market model

WhatWhat

HowHow

$50

$100

$50

$100

0

10

20

30

40

50

60

70

80

-90 -80 -70 -60 -50 -40 -30 -20 -10 0

Average timber production (ft3/ha)

Avera

ge c

arb

on

pro

du

ctio

n (to

nn

es/h

a)

Industrial lands

Nonindustrial lands

Carbon Price/Subsidy

Effects of Carbon Price / Subsidy on Carbon and Harvest Levels

Changes in Federal Timber HarvestOptions for offsetting forest carbon flux reductions due to increments in timber harvest from federal lands

INVENTORY Add Federal forest land plots to model

YIELDS Generate yields under alternative silvicultural regimes HARVEST SCHEDULER Find market solutions with alternative federal harvest levels subject to regional carbon flux constraints

WhatWhat

HowHow

INDEPENDENT INDEPENDENT MANAGEMENTMANAGEMENT

10.25

10.75

11.25

11.75

12.25

12.75

13.25

3.4 3.6 3.8 4.0 4.2 4.4

Average annual total harvest (BILLION BOARD FEET)

An

nu

aliz

ed

to

tal c

arb

on

se

qu

es

tra

tio

n(M

ILL

ION

TO

NN

ES

)

MAX SUSTAINABLEFEDERAL CUT

Rising Carbon Targets

Coordinated Management To Limit Carbon Flux ImpactsCoordinated Management To Limit Carbon Flux Impacts

Federal Land Only

All Owners

Future Harvest and Inventory by Log Quality

Project future private timber harvest by log size and species

YIELDS Store and retrieve individual tree projection detail for post-solution processing

WhatWhatHowHow

0%

5%

10%

15%

20%

25%

30%

35%

40%

5-8.9 9-12.9 13-16.9 20-23.9 24-27.9 28-31.9 32-35.9 36+

LOG SMALL END DIAMETER (INCHES)

PE

RC

EN

T O

F T

OT

AL

HA

RV

ES

T 2007

2022

Future Harvest and Inventory by Log Quality

Individual Milling Center DetailMill

Period Center Lumber (mbf lumber/year) Plywood (msf 3/8"/year)

2004 Riddle 147,849 409,1292009 Riddle 143,234 324,3592014 Riddle 143,234 270,4592019 Riddle 143,234 244,474

Mill Capacity

Riddle Milling Center Sawlog Price

0

100

200

300

400

500

600

700

1970

1980

1990

2000

2010

2020

2030

2040

2050

1982

$/m

bf

scri

bn

er

History

Projection

Riddle Milling Center2004-2009 Distribution of Logs by log Small-end Diameter

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0 5 10 15 20 25 30 35 40

Diameter in Inches

Lessons Learned• Fixed structure models with preset options always lag

current “hot” policy topics—policy analysts seldom revisit a topic, or if they do it’s with a different focus

• Develop a set of market and harvest scheduling model components that can be readily modified and grouped to meet changing analytical needs

• Maintain inventory database at most disaggregated level to allow maximum flexibility in aggregation

• Develop modules to automate aggregation of plots and generation of yields under alternative silviculture regimes

Future Work

• Satellite imagery to reduce effective plot size through “nearest neighbor” methods—analysis below the county level

• Explicit links to land-use models with sensitivity to returns to forestry (log prices) so land base is endogenous

• Expansion to regions beyond the PNW

LONG-RANGE POTENTIAL TIMBER SUPPLY

IN OREGON BY REGION

EASTERN OREGONEASTERN OREGON

SOUTH WESTSOUTH WEST

WEST CENTRALWEST CENTRAL

NORTH WESTNORTH WEST

WESTERN OREGON PRIVATE HARVEST BY OWNERWESTERN OREGON PRIVATE HARVEST BY OWNER

0

0.5

1

1.5

2

2.5

3

3.5

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET FOREST INDUSTRYFOREST INDUSTRY

OTHER PRIVATEOTHER PRIVATE

WESTERN OREGON TOTAL PRIVATE WESTERN OREGON TOTAL PRIVATE HARVEST AND INVENTORYHARVEST AND INVENTORY

INVENTORY

HARVEST

0

20

40

60

80

100

120

140

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LO

N B

OA

RD

FE

ET

0

0.5

1

1.5

2

2.5

3

3.5

4

MIL

LIO

N B

OA

RD

FE

ET

INVENTORY

HARVEST

NORTH WEST NORTH WEST OREGON OREGON PRIVATE PRIVATE HARVEST HARVEST

AND AND INVENTORYINVENTORY0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

-

5

10

15

20

25

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

HARVESTHARVEST

INVENTORYINVENTORY

ADJUSTMENT TO DECLINING INVENTORY, RISING COSTS AND SHIFTING CAPACITY

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

-

5

10

15

20

25

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

WEST WEST CENTRAL CENTRAL OREGON OREGON PRIVATE PRIVATE HARVEST HARVEST

AND AND INVENTORYINVENTORY

HARVESTHARVEST

INVENTORYINVENTORY

-

5

10

15

20

25

30

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET SOUTH WEST SOUTH WEST

OREGON OREGON PRIVATE PRIVATE HARVEST HARVEST

AND AND INVENTORYINVENTORY

HARVESTHARVEST

INVENTORYINVENTORY

EASTERN EASTERN OREGON OREGON

HARVEST AND HARVEST AND INVENTORY BY INVENTORY BY

OWNEROWNER0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1940 1960 1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

0

2

4

6

8

10

12

14

1980 2000 2020 2040 2060 2080

MIL

LIO

N B

OA

RD

FE

ET

HARVESTHARVEST

INVENTORYINVENTORY

INDUSTRYINDUSTRY

INDUSTRYINDUSTRY



SUMMARY OF LONG-TERM TRENDSSUMMARY OF LONG-TERM TRENDS• Clear demographic basis for resurgence of

US housing activity

• PNW will continue to play a major role in US softwood lumber supply

• Aggregate private harvest in western Oregon may drop slightly over next 15 years but rise thereafter—much regional variation

• Aggregate WOR inventory roughly stable

• NW Oregon source of near-term harvest decline—inventory and capacity shifts

• Eastern Oregon faces declining inventory and declining harvest on private lands

For More Information

Adams, D.M. and G.S Latta. Future Prospects for Private Timber Harvest in Eastern Oregon. Western Journal of Applied Forestry 22(3): 197-203..

Im, E., D.M. Adams and G.S. Latta. 2007. Potential impacts of carbon taxes on carbon flux in western Oregon private forests. Forest Policy and Economics 9(8): 1006-1017.

Busby, G.M., C.A. Montgomery and G. Latta. 2007. The opportunity cost of forest certification on private land in western Oregon. Western Journal of Applied Forestry 22(1): 55-60.

Adams, D.M. and G.S Latta. 2007. Timber Trends on Private Lands in Western Oregon and Washington: a New Look. Western Journal of Applied Forestry 22(1): 8-14.

Montgomery, C.A., G.S. Latta and D.M. Adams. 2006. The cost of achieving old-growth forest structure. Land Economics 82(2):240-256.

Adams, D.M. and G.S Latta. 2005. Costs and regional impacts of restoration thinning programs on the national forests in eastern Oregon. Canadian Journal of Forest Research 35(6):1319-1430.

Adams, D.M. and G.S Latta. 2005. Timber harvest potential from private lands in the Pacific Northwest: biological, investment, and policy issues. P. 4-12 in Understanding key issues of sustainable wood production in the Pacific Northwest, Deal, Robert L.; White, Seth M (eds). USDA For. Serv. Gen. Tech. Rep. PNW-GTR-626.

Latta, G., and Adams, D. 2005. Analysis of an extensive thinning program on eastern Oregon national forests using a dynamic spatial equilibrium market model with endogenous industry capacity. In Systems Analysis in Forest Resources: Proceedings of the 2003 Symposium, 7–9 October 2003, Stevenson, Wash. Compiled by M. Bevers and T. Barrett. USDA For. Serv. Gen. Tech. Rep. PNW-GTR-656.

Adams, D.M. and G.S Latta. 2004. Effects of a Forest Health Thinning Program on Land and Timber Values in Eastern Oregon. Journal of Forestry 102(8):9-13.

Latta, G. and C.A. Montgomery. 2004. Minimizing the cost of stand level management for older forest structure in western Oregon. Western Journal of Applied Forestry 19(4): 221-231.

Adams, D.M. and G. Latta. 2003. Private Timber Harvest Potential in Eastern Oregon. Research Contribution 42, Forest Research Laboratory, Oregon State University. Corvallis. 42p.

Schillinger, R. R., D. M. Adams, G. S. Latta, and A. K. Van Nalts. 2003. An Analysis of Future Private Timber Supply Potential in Western Oregon. Western Journal of Applied Forestry 18(3):1-9.

Adams, D.M., R.R. Schillinger, G. Latta, and A. Van Nalts. 2002. Timber Harvest Projections for Private Land in Western Oregon. Research Contribution 37, Forest Research Laboratory, Oregon State University, Corvallis. 44p.

Visit our website at: http://www.cof.orst.edu/cof/fr/research/tamm/MainFrame.htmEmail us at: [email protected]:

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Greg Latta and Darius Adams Department of Forest Resources Oregon State University

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