At WoodsCamp.com, we’re building an online timber platform – connecting people who have trees to people who need them in regions where the forest industry’s supply comes primarily from non-industrial privately owned woodlands.
In North America and Europe alone, over $23Bn worth of timber is purchased from small private woodlots. Yet, landowners have a great deal of difficulty understanding how the process of selling timber works.
2016 was a big year for us
Will Martin and I began the year as team of two working with a couple of external collaborators and, as 2017 approaches, we’re a team of 6, have been nominated for or won awards from Lunenburg County to Austin, TX, and most importantly: we’ve just pressed send on the 1000th WoodsCamp report for a Nova Scotia landowner since launching WoodsCamp.com 6 months ago.
WoodsCamp has become an increasingly valuable resource for landowners looking to learn how timber supply works.
The amount of data we have gathered this year allows us to develop meaningful models about the timber markets, the state of the forest and woodlot owners. The new year is a good opportunity to share some of what we’ve been learned.
Landowners are online
One of the riskiest hypotheses we had going in to this work was whether we would be able to reach rural landowners online.
Breakdown of how our deep we reached into our pilot region during our first 6 months
The USDA reports that 45% of forested landowners in the United States are under the age of 55 — we’re finding a similar pattern in Nova Scotia. For those over 55, as we suspected, grandchildren are a powerful motivator to learn how to use the internet. Many of those who are older have devices and Facebook accounts to keep up with their families.
While plenty of woodlot owners haven’t yet heard of WoodsCamp, we have averaged 2900 unique visitors per month and a number equal to 3% of all Nova Scotians who are on Facebook have visited WoodsCamp.com. Not a bad start given there are 30,000 woodlots in Nova Scotia. Here’s the tale of the tape in the 6 months since launch:
- 12% of NS Woodlots have been searched on WoodsCamp.com
- 3% of NS Woodlot owners have requested and recieved WoodsCamp reports
- 40% of woodlots recieving reports had WoodsCamp Scores over 500
The Goals and Values being reported by Landowners signing up at woodscamp.com
The values/goals that landowners reported were consistent with other surveys of landowner values: while financial motivation is rarely unimportant, it is most often not the primary goal or value being considered. Most often, landowners say they want to make their forest healthier over time.
10% of the annual provincial wood supply from private land is represented by the qualified partial harvest opportunities on WoodsCamp. Here’s how all of our qualifed WoodsCamp reports broke down by species:
Breakdown of the species of trees in properties with WoodsCamp Scores over 500.
Spruce and fir are common species in the natural Acadian forest, but it’s interesting to see how many species make their homes in this forest — which is a good sign for resilience entering a period of warming climate. The unclassified species show a forest that has seen heavy harvests in years past and are characterized by young growth that can’t yet be identified by species in the canopy.
2016 saw a huge swing in timber markets
This year, a couple of mills in the region dramatically lowered their production or closed altogether while, at the same time, an enormous new source of wood supply from the former Bowater lands came online.
Many private landowners are currently shut out of timber markets with loggers on quotas to mills and the delivered price of wood dropping across all buyers in the region. Some believe this is an adjustment period that will even out over time, but our internal model showed this as an entirely predictable outcome that risks becoming the new normal.
While this situation may be considered by some to be an effective approach to smoothing out uncertainty during a VERY turbulent time for the forest industry in Nova Scotia, our model shows it to be a poor strategy for private landowners, sawmills and loggers in the long term.
Finding loggers to do partial harvests on private land is difficult but not impossible
Good loggers doing good work are booked solid — with much of the capacity that was working on private land now working full time on crown land.
The timber market is often thought of as having total elasticity of supply — landowners can choose to cut or not cut on their properties without enormous consequence. If you think of timber as the output of logging capacity, there’s total inelasticity of supply. A logger HAS to cut every day in order to keep their business afloat.
For the industry to grow, we’ll need more loggers and to help those who aren’t good get better. In a context where the demand for raw logs is stable or shrinking, however, the excess capacity will mean loggers go out of business or find ways to innovate their businesses models.
One way loggers can innovate their business models is to tool up for more partial harvests — if more of the wood supply is being generated from partial harvests, it will require more logging crews getting paid higher rates.
It’s sometimes said that partial harvests are too expensive and that’s why they aren’t recognized as a viable option. We’ve found this not to be true. It’s possible for a mill to pay the same rate at their gate for wood delivered from a partial harvest as from a clearcut. The additional cost from cutting only 20–30% of the wood on a property instead of 100% comes at two costs:
The landowner accepts less money for the work as more of the delivered price of wood must be paid to the contractor. Our model shows, however, that by foregoing this money today, the landowner comes out ahead over the long term, with preserved property value, a forest still standing and becoming more valuable still.
Higher acquisition costs for loggers and mills — If 1/3 of the wood is being removed from each property, loggers and mills have to find three times as many jobs. If one of your jobs is talking to 10 landowners to find the 1 who will agree to a harvest, this additional cost can’t be borne by a higher harvest rate. This is the problem that WoodsCamp is beginning to solve.
A lot of private land is being liquidated
There are a lot of landowners who are looking to cash out. Whether their forests are at an optimal stage to maximize value by harvesting or not (very often not), these landowners are approaching the end of their tenure (the land will still be around but, alas, they won’t). Often they bought the land for little money or inherited after it was last clearcut and have been watching it grow over the decades with a view to another harvest in their lifetimes. In Nova Scotia, there are no restrictions on harvest practices on private land. If you want to cut from boundary line to boundary line to get every last penny out of the timber while you can still spend those pennies, you’re within your rights to do so. A lot of landowners are exercising those rights.
The Tax Code contains disincentives for sustainable management
There is a tax issue that, if changed, could remove a disincentive to sustainable forestry.
In Canada, final harvests sold as lump sums payments result in harvests where the landowner is deemed to have disposed of their asset. As such, the proceeds from these harvests are taxed as capital gains. Many rural families have never used their capital gains exemptions and so the proceeds of these harvests are enjoyed tax-free. Landowners who sell wood harvested from partial harvests paid on a per tonne stumpage rate see these proceeds taxed as income — a holdover from days when farmers and landowners could generate income from working on their land and sending a couple of truckloads down to the local mill. The effect is a disincentive for sustainable forestry on private land.
As Ottawa looks for levers to reduce greenhouse gas emissions to meet Paris climate agreement targets, here’s a big one over which they have unilateral control.
Mills still rely on private wood supply
Although there is a lot of turmoil in the markets right now — more supply from Crown land and demand from fewer buyers — the majority of the industry’s supply comes from privately owned land. Wood from Crown land — while easier to coordinate and more predictable — is still more expensive than wood from private landowners. The blended average price a mill pays across its entire wood supply is very important metric for a mill’s viability — especially given a mill is a price taker for its end product — lumber — and has to support its operations inside that cost structure. As a result a mill is motivated to take wood from it’s lowest cost source. More on this dynamic
A mill takes a great deal of its supply from logging partners who deliver timber to the mill without the mill having to do anything.
This is risky for both mills and loggers as the ability to respond quickly to market forces is very limited. It’s why we see massive swings inside of 12 months from too much inventory to massive supply insecurity — some mills reporting not knowing where next week’s wood is coming from. But, outsourcing the cost associated with procurement is a positive for a mill — even if it downloads that massive pressure to loggers. If there is an oversupply, and the mill has to put its suppliers on quota, they’ll work to take care of those suppliers who are consistent and dependable producers first in line. But not everyone will make the cut.
2017 — the year ahead
While our technology is being developed and piloted in Nova Scotia — our first harvest is scheduled for January — we’re looking to bring the platform to new regions of North America and Europe where the pattern of a distributed and fragmented forestry supply chains persist and the network of human relationships that made the market work for a generation is in the process of disintegrating.
Land ownership is transitioning to a new generation who don’t know how to manage forests the way that their grandparents or even parents did. If you have forested land in your family and you’re curious to learn more how companies that buy trees for lumber evaluate forests and why it’s difficult for them to harvest in ways that match landowners goals, check out the WoodsCamp blog.
We’re grateful to our customers, our mentors and our supporters for their encouragement this year. Happy New Year from the WoodsCamp team — we can’t wait to see what 2017 brings.
Photo credit: photos.cornelissen.me