«w—------ Iu-l-I-I-l-l l MARKETING *‘PUQFWWD EN THE NORTH CEN‘E’RAL REGiON Thesis §or H19! Degree of Ph. D. MICE'HGAN STATE UNIVERSNY Raisers? 3. Manihy 3963 THESIS This is to certify that the thesis entitled MARKETING PULPWOOD IN THE NORTH CENTRAL REGION presented by Robert S. Manthy has been accepted towards fulfillment of the requirements for _M_ degree in M ; t _ ' -, l 4/ 1' v r / Majoi’ professor Date January 8, 1961+ L I B R A R Y Michigan State University we Ii M W , ref“; . ‘1 Tzis tepc-tt i 32.": Central regicr. . s . ‘ _ | ...e::ed ccrzng t:: :m £31.27, t‘.’ k 1' Central Regic-r. Tue objective: ‘I. .. L... I .. “it's the presetl liais to producers fitmfactuters, ( :‘4‘3‘5 fram the st ‘5‘5 in the prese .‘l. t "-J. . “‘~~«:?-.C‘.ES 0 Std? areas t is. . team, 157 Catttal Stat; .261 til'ib {5'- , {:35 ‘ ABSTRACT MMRKETING PULPWOOD IN THE NORTH CENTRAL REGION by Robert Sigmund Manthy This report is an analysis of the marketing of pulpwood in the North Central region. It is based on a portion of the field data collected during the year 1960 for the North Central Regional Research Project HUM-27, "Timber Products Marketing in Selected Areas of the North Central Region." The objectives of this study are (l) to evaluate the efficiency withtvhich the present pulpwood marketing system conveys pulp mill demands to producers and to move producers' supplies to concentrators and manufacturers, (2) to determine the costs and margins of moving pulpwood from the stump to the pulp mill, and (3) to determine possible changes in the present marketing system which might increase marketing efficiencies. Study areas were selected in nine cooperating states-~Illinois, Indiana, Iowa, Kansas, Michigan, Munnesota, Missouri, Ohio and Wis- consin--to cover an area of active timber production. Detailed interviews were held with representatives of firms at three levels of the marketing chain--producer, intermediate market agent (dealer) and primary manufacturer. Approximately three-fourths of the existing Lake States and one-third of the Central States mills were sampled. Twenty dealers, 157 producers and 40 producer-dealers were interviewed. Central States mills draw their wood supplies from relatively localized timbersheds, ranging in size from 20 to 100 miles. Nearly all transportation is by truck. Sampled Minnesota mills reach out an A ;1_ _ aerate 3f 1.6 nut: "ti‘es. Nearly a "is is transpcrte: ll.... . Kat... Cf their p“ Re Pfircenta“ 31.35535. Hood Pr Kiss which are 5.2; I.- ~O “‘- a.“ K33: .‘ v . . s q.‘ ‘ ‘~:.V A £311 live: 'ir.’ In. ~.=.A' ..50 135.01% Q“ Li‘ I t 40 P921: | U‘ y I ‘Q, grie'mce. . h. ‘N tr. , I .3. to year qC-Q‘ :: 5th.”. I ma¥lent prOdLC' {I 9. _ ' I s. .llSE the QC._ \-. Robert S. Manthy average of 108 miles; Michigan mills 236 miles; and Wisconsin mills, 475 miles. Nearly 60 percent of the pulpwood purchased by Lake States mills is transported by rail. Many rail hauls which are more expensive than truck hauls are used because of nonprice advantages. The procurement system relied on most heavily by pulp mills is one of direct purchases from producers. Lake States mills obtain 57 percent of their pulpwood supplies from producers, Central States 111118, 86 percent. The average producer contract is approximately 200 cords. The average dealer contract, 2,300 cords. The percentage of receipts obtained from producers is increasing. Mhny pulp companies cannot produce pulpwood as cheaply as independent producers. ‘Wood procurement costs normally are higher per cord of producer supplied wood than for dealer supplied wood, but pulp com- panies which are shifting purchases from dealers to producers feel that the nonprice benefits of the producer system exceed its costs. About 40 percent of the producers depend on timber production for their full livelihood; the remaining 60 percent are part-time operators. Inability to obtain larger and more stable contracts is a chronic grievance. There is also a need for more stability in seasonal and year to year quotas. Larger and more stable contracts are required for efficient production, to hold a stable, efficient_labor force, and to raise the economic levels of those engaged in pulpwood pro- duction. Existing pulpwood prices do not pose special problems for the large-scale, specialized producers with stable contracts. Their earnings are more dependent on the ability to obtain full and efficient 2. machinery at Present psi; 3ch seasonal p31 axially desirable 1:11 writers. Hes. Ltties to limit icers and to 15515 it higher incomes “74;: ion. Robert S. Manthy use of machinery and labor employed through volume production on a Present pulpwood procurement policies which lead to widespread ‘use of seasonal pulpwood producers can be viewed in one sense as socially desirable in that they offer some earnings to a great number of rural workers. However, it might be more socially desirable for pulp companies to limit the number of contracts to a smaller number of pro- ducers and to assist these producers to lower costs and more stable and higher incomes through the use of efficient machinery and sustained production. in iMARKETING PULPWOOD IN THE NORTH CENTRAL REGION by Robert ST Manthy A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Forestry 1963 his repcrt 5.... any m... the year 19 I | mart of the 3:.- irtvz'xts Marlena] Sine state In, Kansas, Hic': Pirtici;ated in t'r. iteriaeat Static: 3. S. icrest Sen". { Tue project “5? Title 1, Sec Lgist 14, 191.6, «1:: .Ed to all \ y; ‘k FOREWORD This report is based on a portion of the field data collected during the year 1960 by the North Central Regional Technical Committee as part of the Cooperative Regional Research Project, NCM-27, "Timber Products Marketing in Selected Areas of the North Central Region." Nine state agricultural experiment stations--Illinios, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, and Wisconsin-- participated in the overall project. The Central States Forest Experflment Station and the Lake States Forest Experiment Station of the U. 8. Forest Service cooperated. The project was supported in part by regional funds provided under Title I, section 9b3, of the Bankhead-Jones Act, as amended August 14, 1946, and the Hatch Act, as amended August 11, 1955. Cooperating states followed a uniform approach. Localized study areas were selected in each state. Standardized interview schedules ‘were developed for use at each market stage considered in the study-- producer, intermediate market agent, and primary manufacturer. Definitions and procedures including sampling were standardized. .Agreement was reached to obtain coverage of the following wood-products industries: lumber, face veneer, container veneer, c00perage, wood pulp, and posts, poles and piling. This report, the third in a series of timbeerroducts reports, is limited to an analysis of pulpwood marketing in selected areas of Michigan, Wisconsin, Minnesota, Ohio, Indiana, Illinois, Iowa, Kansas, and Missouri. ii The author Serf: Central Reg: :ata used in this Deal. James for : {niece given dc: 215: wishes to t'“.:_- :f this report a: . The author wishes to express his gratitude to the membersoof the North Central Regional Technical Committee who contributed the field data used in this report. The writer is particularly indebted to Dr. Lee M; James for the immeasurable amounts of encouragement, advice and guidance given during the preparation of this manuscript. The writer also wishes to thank his wife, Carol, for her help in the preparation of this report and for her seemingly endless patience. iii H‘.¢ 1. may: :1 Objectlz Stuiy A' Proced_. 53316 E £3 REVIEW op “I m. TABLE OF CONTENTS CHAPTER I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . Objectives . . . . . . . . . . . . . . . . . . . . . . Study Areas . . . . . . . . . . . . . . . . . . . . . Procedure . . . . . . . . . . . . . . . . . . . . . Sample Size . . . . . . . . . . . . . . . . . . . . . II. REVIEW OF THE LITERATURE . . . . . . . . .4. . . . . . . Marketing of Pulpwood . . . . . . . . . . . . . . . . Incidental Studies of Pulpwood Marketing . . . . . . . Marketing Agents . . . . . . . . . . . . . . . . . . . III. THE PULP, PAPER AND BOARD INDUSTRY IN THE NORTH CENTRAL REGION 0 O O C O O O O I I O O O O O I C O I O O O I I The Paper and Paperboard Industry . . . . . . . . . . Fibrous Material Consumption . . . . . . . . . . . . Long-Term Growth . . . . . . . . . . . . . . . . . . The Wood Pulp Industry . . . . . . . . . . . . . . . . IV. PRIMARY MANUFACTURERS . . . . . . . . . . . . . . . . . Primary Products . . . . . . . . . . . . . . . . . . . Historical Dependence on Wood Pulp . . . . . . . . . . Pulpwood Consumption . . . . . . . . . . . . . . . . . Wood Supply Areas and Methods of Transportation . . . Wood Procurement Practices . . . . . . . . . . . . .a. Agent Source . . . . . . . . . . . . . . . . . . . . Wood Purchase Agreements . . . . . . . . . . . . . . Seasonal Deliveries and Wood Storage . . . . . . . . . V3 PULPWOOD MIDDLEMEN . . . . . . . . . . . . . . . . . . . Sample Size . . . . . . . . . . . . . . . . . . . . . iv PAGE 16 18 21 23 25 28 28 37 37 41 50 53 64 65 75 80 85 86 SEER Charac: Iizber Ii: PC; Aids 05 DEliVer '71. PilPi‘oon Charact Timber g Size of "Dad Prc CHAPTER Characteristics of Dealers Timber Handled . . . . . . Pulpwood . . . . . . . . Other Products Handled .-. Size of Wood Supply Area . Wood Procurement Methods and Policies Wood Purchase Agreements . . . . . . Time Period of Deliveries and Payment Points of Acceptance . . . . . . . . Aids Offered to Producers Deliveries of Pulpwood . . . VI. PULPWOOD PRODUCERS . . . . . Characteristics of Producers Timber Handled . . . . . . Size of Wood Supply Area . ‘Wood Procurement Methods and Policies Methods of Stumpage Acquisition Purchase Contracts . . . Contracts With Private Landowners Contracts With Public Landowners . Subcontracting of Logging and Hauling Operations Deliveries of Pulpwood . . . . . . . . . . . . VII . VI II . Pulpwood Prices Price Competition Among Mills LANDOHNERSHIP SOURCE OF WOOD . . . . PULPWOOD PRICES AND PRODUCTION COSTS PAGE 89 94 94 96 97 98 100 104 105 108 109 112 112 116 118 119 119 121 122 125 127 129 135 139 139 146 Traci Varia Varia Effectsl Ccsts : Stat: ”2? ‘N'E'n A. P’lh CHAPTER Trucked-to4Mill and F.o.b. Rail Prices . . . . . . . Variation in Prices by Species . . . Variation in Prices Over Time . . . Effects of Intermediate Agent Roles on Costs of Production . . . . . . . . . Stumpage Costs . . . . . . . . . . . Logging Costs . . . . . . . . . . . Hauling Costs . . . . . . . . . . . Comparison of Costs and Prices . . . . IX. CONCLUSIONS . . . . . . . . . . . . . . Size of Hood Supply Areas . . . . . . Methods of Transportation . . . . . . Wood Procurement Practices . . . . . . Prices and Costs . . . . . . . . . . . LITERATURE c ITED O O O O O O O O O O O O O O I O I O O C O O O O Pulpwood Prices APPENDIX.A. Primary Manufacturer Interview Schedule . . . . . . .APPENDIX B. Intermediate Market Agent Interview Schedule . . . APPENDIX C. Producer Interview Schedule . . . . vi PAGE 149 151 152 155 156 157 161 165 171 176 176 177 179 184 186 194 210 226 Istal reg; study Paper and state. Paper and « resi::* Fibrous as I and b; Type Of V; : and b( 1938 . lcrth cent. lected Etlber of l 'I ttDLti: study a TABLE 10. 11. 12. LIST OF TABLES Total regional sample of firms handling pulpwood by study area and market role, 1960 . . . . . . . . . . Paper and board plants in the North Central region, by state, 1958 . . . . . . . . . . . . . . . . . . . . Paper and paperboard production in the North Central region, by states, 1961 . . . . . . . . . . . . . . Fibrous materials consumed in the manufacture of paper and board, by state, 1958 . . . . . . . . . . . . . Type of wood pulp consumed in the manufacture of paper and board in the North Central region, by state, 1958 . . . . . . . . °.' . . . . . . . . . . . . . . North Central paper and board production by state, se- lected years . . . . . . . . . . . . . . . . . . . . Number of wood pulp mills in the North Central region by state and pulping process, 1961 . . . . . . . . . . Number and capacity of wood pulp mills in the North Central region, selected years . . . . . . . . . . . Number of primary manufacturers sampled and their pulp- wood consumption, by state, 1959 . . . . . . . . . . Principal products produced by sampled manufacturers, 1959 . . . . . . . . . . . . . . . . . . . . . . . . Distribution of sampled mills by size class of mill and study area, 1959 . . . . . . . . . . . . . . . . . . Pulpwood species received at sampled Lake States mills, by study area, 1959 . . . . . . . . . . . . . . . . vii PAGE 22 24 26 27 29 31 34 38 40 51 52 .. "a Pulpwood c I by spel lbde of trl Agent sourl Average n; cred mill, Asent sou: Ptlp : $4359! of I trac:g SIZQ Cld55 1939 . sampled de. TABLE PAGE 13. Pulpwood consumption (receipts) at Lake States mills, by species groups, 1946-1961 . . . . . . . . . . . . 54 14. Mode of transportation by which pulpwood was delivered to sampled Lake States mills, 1959 . . . . . . . . . 55 15. Agent source of pulpwood purchased by sampled pulp mills, 1959 . . .s. . . . . . . . . . . . . . . . . 66 16. Average number of cords per producer and dealer deliv- ered to sampled Lake States mills, by size class of mill, 1959 . . . . . . . . . . . . . . . . . . . . . 68 17. Agent source of wood supply delivered to Lake States pulp mills, by size class of mill, 1959 . . . . . . 70 18. Number of sampled mills using different types of con- tracts for cut wood purchases, 1959 . . . . . . . . 77 19. Size class of sampled pulpwood dealers, by study area, 1959 . . . . . . . . . . . . . . . . . . . . . . . . 90 20. Sampled dealers classified by market function, by study area, 1959 . . . . . . . . . . . . . . . . . . . . . 91 21. Occupations of pulpwood dealers sampled, by study area, 1959 . . . . . . . . . . . . . . . . . . . . . . . . 93 22. Timber handled by sampled pulpwood dealers, by study area, 1959 . . . . . . . . . . . . . . . . . . . . . 95 23. Size of wood supply areas of sampled dealers, by study area and size class of operations, 1959 . . . . . . 98 24. Average number of suppliers and volume supplied for sampled dealers, by study area and size class of dealer, 1959 . . . . . . . . . . . . . . . . . . . . 99 viii a: H E Source of _ 532;:1: Number of procu: Pcizts of Mber of size c slle Class hepatic: area, Iimber ha: atea2 Souch Cf (firs) him-iced tips “1:59? 01 TABLE PAGE 25. Source of contract initiation for pulpwood purchased by sampled dealers, by study area, 1959 . . . . . . . . 101 26. Number of sampled dealers using different types of wood procurement agreements, 1959 . . . . . . . . . . . . 103 27. Points of acceptance by dealers from suppliers of pulp- wood, by study area, 1959 . . . . . . . . . . . .-. 106 28. Number of outlets for sampled dealers, by study area and size class of operations, 1959 . . . . . . . . . . . 110 29. Size class of sampled producers, by study area, 1959 . . 114 30. Occupations of pulpwood producers sampled, by study area, 1959 . . . . . . . . . . . . . . . . . . . . . 115 31. Timber handled by sampled pulpwood producers, by study ' area, 1959 . . . . . . . . . . . . . . . . . . . . . 117 32. Source of stumpage harvested by sampled pulpwood produ- cers, by study area, 1959 . . . . . . . . . . . . . 120 33. Pulpwood stumpage purchased by sampled producers, by type of contract and study area, 1959 . . . . . . . 123 34. Number of sampled producers and volumes involved in subcontracting of logging and hauling operations, by study area, 1959 . . . . . . . . . . . . . . . . . . 128 35. Sales of pulpwood by sampled producers to pulp mills and dealers, by size class of producer and study area, 1959 . . . . . . . . . . . . . . . . . . . . . . . . 132 36. Points of delivery in pulpwood sales by producers, by study area, 1959 . . . . . . . . . . . . . . . . . . 133 ix 122 H Ht Perce: r? n! (F! pulp : Relatic. i prodaz Base price TABLE 37. 38. 39. 40. 41. 42. 43. 45. 46. Percentage of producers selling to different numbers of pulp mill and dealer outlets, by study area, 1959 Relation of commercial forest landownership and pulpwood production in the Lake States study areas, 1959..“., Base prices paid for pulpwood by Lower Michigan pulp mills, by species and method of delivery, 1959 . . . Base prices paid for pulpwood by Wisconsin pulp millag,m by species and method of delivery, 1959 . . . . . . Base prices paid for pulpwood by sampled Minnesota pulp mills, by species and method of delivery, 1959 . . . Base prices paid for rough pulpwood trucked to sampled Central States mills, by species and study area, 1959 . . . . . . . . . . . . . . . . . . . . . . . . Price bonuses added to the pulpwood base price for longer distances of truck haul paid by Lower Michigan pulp mills, 1959 . . . . . . . . . . . . . Value added by manufacture per cord of wood received and pulpwood price as a percent of value added by manu-— facture for sampled pulp mills, by study area, 1959 Average prices per cord of rough pulpwood delivered to mills in Wisconsin and Illinois, by species and years . . . . . . . . . . . . . . . . . . . . . . . Averages and range in pulpwood stumpage prices paid for major species by sampled producers, by study area, 1959 O O O O O O O O O O O O O C O O O O O O O O O 0 PAGE 134 136 140 141 144 145 147 153 154 159 o n, F A. '1 SJ, ,9; legging c ; | Median tr. area, tance. study Average t haul : TABLE PAGE 47. Logging costs reported by sampled producers, by study area, 1959 . . . . . . . . . . . . . . . . . . . . . 164 48. ‘Median truck-to-mill and truck-to-railroad hauling dis- tances reported by sampled producers, by species and study area, 1959 . . . . . . . . . . . . . . . . . . 166 49. Average truck-hauling costs for varying distances of haul reported by sampled producers, by study area, and costs established by formula in Lower Michigan, 1959 . . . . . . . . . . . . . . . . . . . . . . . . 169 50. Residual prices left after deducting truck-hauling costs determined by formula from delivered pulpwood prices for rough aspen in Lower Michigan, by pulp mill, 1959 . . . . . . . . . . . . . . . . . . . . . . . . 170 51. Margin and profit ratios for the production of pulpwood in the North Central region delivered to mills by trucks, by study area, 1959 . . . . . . . . . . . . 172 52. Mbrgins and profit ratios for the production of pulpwood in the North Central region delivered to railroad sidings, f.o.b., by study area, 1959 . . . . . . . . 173 xi 1932- PJIPUOOC j the 1,. .1 I Phonod 1 82:”; FIGURE 10. 11, 12. LIST OF FIGURES Location of study areas in the North Central region in which pulpwood marketing was sampled . . . . . . . . Wood pulp production in the United States, by region, .1930-1961 . . . . . . . . . a . . . . . . . . . . . Location of sampled wood pulp mills in the North Central region . . . . . . . . . . . . . . . . . . . . . . . Pulpwood production and receipts in the Central States, 1952-1961 . . . . . . . . . . . . . . . . . . . . . Pulpwood production in the Central States, by state, 1952-1961 . . a . . . . . . . . . . . . . . . . . . Pulpwood production, imports and apparent consumption in the Lake States, 1946-1961 . . . . . . . . . . . . . Pulpwood production, imports, exports, and apparent con- sumption in Wisconsin, 1946-1961 . . . . . . . . . . Pulpwood production, imports, exports, and apparent con- sumption in Michigan, 1946-1961 . . . . . . . . . . Pulpwood production, imports, exports, and apparent con- sumption in Minnesota, 1946-1961 . . . . . . . . . . Location of pulp mills and production of pulpwood of all species in five Central States by county, 1960 . . . Location of pulp mills and production of pulpwood of all species in the Lake States by county, 1959 . . . Location of pulp mills using aspen and production of aspen pulpwood in the Lake States by county, 1959 .. xii PAGE 35 37 42 44 45 47 48 49 57 58 59 3. . A ‘7‘ c . . xix Location pine ; location prod; State» kcation .. mills purch. "aximum a: 386 a: 19:94 I l l FIGURE ' PAGE 13. Location of pulp mills using pine and production of pine pulpwood in the Lake States by county, 1959 . . 60 14. Location of pulp mills using spruce and balsam fir and production of spruce and fir pulpwood in the Lake States by county, 1959 . . . . . . . . . . . . . . . 61 15. Location of sampled dealers in the Lake States and pulp mills which recognize dealers in their pulpwood purchases, 1959 . . . . . . . . . . . . . . . . . . 88 16. Maximum and minimum prices in Wisconsin for aspen stump- age and rough pulpwood delivered to the mill, 1949-1962Cocoooocooooooooooooo 162 xiii Twenty-fin :5 lscated Vlihi.’ l irisands of full fartinn of it by aistry. In 19'. Lair of pulpvoc: iii-years of lab; {is to pulp mil Palpeoodl 1‘ Lake States. New! value of [.21 , ' " Palpucod 1: CHAPTER I INTRODUCTION Twenty-five percent of the nation's wood-pulp producing capacity is located within the boundaries of the North Central region. Many thousands of full-time and seasonal workers earn their livelihood or a portion of it by supplying the wood requirements of the pulp and paper industry. In 1961 the region's 71 pulp mills consumed 3.9 million cords of pulpwood worth an estimated $84 million. At least 10,000 man-years of labor were required to move this pulpwood from forest lands to pulp mills. Pulpwood1 is the major commercially harvested timber product in the Lake States. More than 3 million cords of pulpwood, with a de- livered value of some $78 million, were harvested in the Lake States in 1961. Pulpwood is a relatively minor forest product in the Central States, but it does have importance in localized forest areas. 1Pulpwood is any wood which has been prepared for use in the manufacture of wood pulp. Wood pulp, in turn, is used in the manu- facture of paper, paperboard and other cellulose products. In its comonly accepted usage the term pulpwood refers to a round-wood PI‘Oduct which has been cleared of limbs and cut into bolts ranging from 4 t0 8 feet in length and from 4 to 10 inches in diameter at the small end. Other forms of wood which are utilized in the manufacture of wood PUIP are distinguished from "pulpwood" and are identified either ac- cording to the form in which they are received at the mill (chips) or by "18111 (sawmill residues). In this report the term pulpwood is used in its generally accepted meaning. Despite t2:- pt-éuct, relative :erieting chain. ted to consumers possible costs co 1‘ purpose of t'r. narrating system . Kama marketing ‘35? Ire: 1- T0 eva' system and to facture 2' T0 dete the Eli IO den Chain ‘ Objectives Despite the importance of pulpwood as a commercial timber- product, relatively little is known about the operation of the pulpwood ‘marketing chain. Pulpwood marketing has the function of moving pulp- wood to consumers in the desired form and conditions at the lowest possible costs consistent with reasonable returns to resources involved. The purpose of this report is to describe the North Central pulpwood marketing_system~and to evaluate how effectively the functions of pulpwood marketing are fulfilled. The three primary objectives of this study are: 1. To evaluate the efficiency with which the present marketing system for pulpwood conveys wood-user demands to producers and to move producers' supplies to concentrators and manu- facturers. 2. To determine the costs and margins of moving pulpwood from the stump to the consumer. 3. To determine possible changes in the present marketing chain which might raise marketing efficiencies. Study Areas Study areas were delineated within each state participating in the regional project (Figure 1). They were selected, not to provide a statistical sampling of the region as a whole, but to provide coverage in each state of an area of active timber production. Attention was given to scattering the study areas so that a diversity of market con- ditions would i be sampled. Boundary lines of study areas were not considered to be rigid. Market agents outside the delineated areas were included in the Fig. 1. Location of study areas in the North Central region in Which pulpwood marketing was sampled. :a-Iiag when the 221511113 Vli'fll. «- Detailed l.’ sttzial influenc' 53:5 at three lé'l aria: agent, and sztiardized for e :all states.2 J A 100~perce 1m items was .\. s. ‘, sampling when their activities were found to be heavily influenced by marketing within a study area or if they, in turn, exerted a sub- stantial influence on marketing activities within a study area. Procedure Detailed interviews were held in 1960 with representatives of firms at three levels of the marketing chain--producer, intermediate market agent, and primary manufacturer. Interview schedules were standardized for each market level, and identical schedules were used in all states.2 Interest was focused on data for the year 1959. A.100-percent sample of primary manufacturers and intermediate market agents was sought. Producers were sampled in each study area only to the extent that the investigator felt was necessary for a reasonable cross-section. Problems of definition required arbitrary decisions. Agreement was reached as to the distinctions among producer, intermediate market agent and primary manufacturer, and the treatment of firms which exercised more than one role in the market. A producer was defined as an individual (or firm) who harvests purchased stumpage or stumpage from his own land and sells the cut product roadside or delivered to a designated point without sub- stantially changing its form. For pulpwoOd, bark peeling was not considered a substantial change of the round product. 2Interview schedules used are appended to this report. ‘1 a \ Two types of intermediate market agents were recognized. These were first- and second-stage intermediate market agents. Few active second-stage intermediate market agents handling pulpwood were found *within the region. A first-stage intermediate market agent was defined as an indi- vidual (or firm) who purchases cut products from a producer and sells them without substantially changing their form. For pulpwood, bark peeling would not be considered a substantial change of form. These firms sell their products to second-stage intermediate agents or to primary manufacturers. Second-stage intermediate market agents are individuals (or firms) who purchase products from other intermediate market agents and sell to primary manufacturers. A primary manufacturer or processor was defined as a firm that sells its products only after performing some type of processing operation which substantially changes their original form. WOod pulping mills, generally integrated with paper and board mills, usually constitute the primary stage of manufacture for pulpwood. Only one type of dual role was associated with interviewed turket agents. ‘Many of the sampled producers of pulpwood also act as .dealers. These "producer-dealers" purchase cut products from other independent producers and sell these products along with material that they have harvested as producers. Producer-dealers were interviewed both as producers and as dBalers. For example, a firm purchasing 1,000 cords of pulpwood as a dealer and harvesting 2,000 cords from its own or purchased stumpage L as srpled botu ended as a dea “F"‘ase and sale "eregarded as a is 2,300 cords c Pulp and pl 742.33% if they ixiased stutpag "satay tn :E.‘:‘rd 0f the was sampled both as~a producer and as a dealer. The firm.would be recorded as a dealer in regard to its activities associated with the purchase and sale of the 1,000 cords of pulpwood. The firm would also be regarded as a producer in regard to its activities associated with the 2,000 cords of pulpwood harvested from stumpage. Pulp and paper companies were not classified as producers of pulpwood if they obtained raw material by harvesting their own or purchased stumpage. Sample Size The total regional sample of producers, dealers, producer-dealers and primary manufacturers is shown in Table 1. Forty-seven pulp and paper establishments--representing two-thirds of the primary manufac- turers of wood pulp within the region--were included in the sample. Approximately three-fourths of the existing Lake States mills and one-third of the Central States mills were sampled. Twenty dealers, 157 producers and 40 producer-dealers were inter- viewed. By separating producer from dealer activities, it was possible to add the 40 producer-dealers to both the producer and dealer samples. fable luictal re; and mark; ' Table 1--Tota1 regional sample of firms handling pulpwood by study area and market role, 1960. 3:22: miners- P5232?" Michigan 9 13 76 17 .Wisconsin 25 15 26 16 Minnesota 6 12 22 2 Lake States ’ 40 40 124 ,35 ==a=====a========================================== Ohio 1 8 8 Indiana . l 6 1 Illinois 2 l 6 Iowa 2 11 ~Kansasa f l 2 Central States 7 9 33 1 North Central 47 49 157 36 aFirms drawing wood supplies from the Kansas study area were actually located in Missouri. CHAPTER 11 REVIEW OF THE LITERATURE Research in the marketing of forest products has generally taken one of three broad forms. These are (l) a description of the market- ing of a particular commodity in which the movement of the commodity in question is followed from the stump to the primary or final con- sumer, (2) a general description of the markets for and the marketing chains of a number of products, usually within a given geographic area, and (3) a description of one of the marketing institutions operating within the marketing chain for one of more commodities. ‘Marketing research in pulpwood has generally been confined to the first two of these classes. Pew publications, however, have been devoted exclusively to a description of the marketing system for pulp- wood. The major portion of the research in the marketing of pulpwood occurs in general descriptions of the markets for and marketing of forest products within a particular geographic area. Descriptions of marketing methods of individual institutions involved in pulpwood marketing are scarce, but a number of studies have been made which in- vestigate the efficiency of the pulpwood production process. The first portion of this literature review is concerned with research in the marketing of pulpwood in the United States. A review of the literature concerned with a general description of the market- ing of a number of forest products (including pulpwood) will follow. line to the large number of such studies, only those pertaining to the trt': Central reg :aater is C03“? misting 0P9”: An early C by: cemittee 3? 11:11:: to inves’ triencies in that 3‘3}. It was 5': 11:7: Carolina val 1 . '..‘.S‘. ve Hood pr The funct: "“35 (or com: "JET-contra tor NOrth Central region will be discussed. The final section of this chapter is concerned with analyses of the efficiency of pulpwood harvesting operation. Marketing of Pulpwood An early description of the marketing of pulpwood was provided by a committee appointed by the General Assembly of the State of North Carolina to investigate unsubstantiated allogations of monOpolistic tendencies in the purchase of pulpwood and pulpwood stumpage (Thomson, 1943). It was shown that virtually all of the pulpwood produced in South Carolina was shipped to mills by "contractors" who were assigned exclusive wood procurement territories by pulp mills. The functions of the contractor varied. Most functioned as brokers (or commission agents) but a few were actually producers. Broker-contractors received a commission for marketing services rendered. These are described as: (1) acting as an agent between pulp companies and pulpwood producers, (2) supervising the loading and shipping of pulpwood, (3) financing producers, and (4) assisting pro- ducers in locating and purchasing stumpage. Contractors who functioned as intermediate market agents were usually paid a commission on all wood shipped to pulp mills from their assigned areas, even though they may not have handled the wood or arranged for the shipment. Producers who were not recognized contrac- tors but 'who shipped pulpwood directly to pulp mills usually received the same prices that broker-contractors were authorized to pay their Suppliers. This policy was defended by pulp mills on the grounds that ;::'istauraged i: [115, thereby a"... ‘12:? of supply. Astudy b: 5.1315! for South E‘ the channels meted lt "a ti ism and that F infirm“ Who ‘I :3“ (1937) als :52 the Prevail The alithe (“Eliza the :3 33116:” mlESl iii" (2) Secure ““"Cts for all ‘33. ’ ‘ .38 in Re 10 it discouraged independent producers from shipping directly to pulp mills, thereby avoiding problems of irregular deliveries and uncer- tainty of supply. A study by Parker and Aull (1953) shows that the marketing system for South Carolina pulpwood had not changed during the decade of 1940 to 1950. In a survey designed to ascertain the methods by which and the channels through which farmer owned sawtimber and pulpwood was marketed it was'found that‘stumpage sales were made to local pro- ducers and that producers, in turn, marketed harvested pulpwood through contractors who were granted dealerships by pulp companies. A survey of pulpwood selling practices in Georgia conducted by Hamilton and others (1957) also found the producer-contractor-mill marketing chain to be the prevailing method of pulpwood marketing. The authors of both of these studies concluded that landowners can maximize the returns for stumpage sales by adhering to the follow»- ing general rules: (I) know the quantity and quality of what is being sold, (2) secure two or more bids on timber to be sold, (3) use written contracts for. all stumpage sales and (4) exercise the right of control over the logging and hauling operations. Based on the finding that 50 percent of the landowners sampled initiated stumpage sales, Hamilton also concluded (although somewhat naively) that "this indicated that the pulp and paper industry's dealer-producer system is rather effec- tive and serves its industry well." In his book, The Economic Problems of Forestry in the Appalachian 35,3131; (1949), Duerr presents an analytical description of pulpwood marketing in Kentucky, North Carolina, Tennessee, Virginia and West 11:31:11. Accor: '11: sore of the] finest their or Wies are obta ’mutors .. liéfiflite PrOCCI E “9 frequent _-_2-_.-_—-— The marks: matters "ry, 11 Virginia. According to Duerr, the Appalachian region's pulp mills ob- tain some of their pulpwood requirements from small landowners who harvest their own stumpage but that the major portion of their wood supplies are obtained from'a group of agents which are commonly known as "contractors." A pulp mill's contractor-suppliers are usually assigned a definite procurement territory, such as a county or group of counties, and are frequently discouraged from selling pulpwood to other mills. Thermarketing functions and services performed by these so-called contractors vary. It is claimed that some contractors procure wood supplies from independent producers and therefore function as inter- mediate marketagents. Othersare simply large producers who harvest purchased stumpage or who purchase stumpage and subcontract logging and hauling operations. Still others function both as intermediate agents andas producers by obtaining part of their wood supplies from their own or-subcontracted logging operations and some from independent producers. Regardless of marketing services, contractors do not function as brokers or omission agents; they are free to negotiate their own prices for wood they purchase. Duerr concludes that the major fault of the contractor system as it was foundrto be operating in the Appalachian region is that it tended to encourage unnecessary "pyramiding" of market functionaries. Pyramiding occurs when a pulp mill's contractor contracts with someone else to obtain anddeliver a specified quantity of wood at a specified Price. These "subcontractors," in turn, may also contract'with still a third party to obtain and deliver the specified quantity of wood. I)uerr concludes that each layer of the contractor pyramid adds to the :::a1ccst of re ' 2e producer vb: rats. Jeffcrds Weed in Geo: $11!: to the rec ‘ Sized is "3 tr Earned from tr e the land," "a. '71336 the nut: ”iwhnu: The rapid “1'41“ tens . :23. ,0! Md 5‘ (I) the DU: 1., my quantity 12 total cost of marketing pulpwood, thereby reducing the returns to the producer who actually does the cutting and the returns to stumpage owners. Jeffords (1956) investigated trends in the marketing of pine pulpwood in Georgia, Florida and Alabama. Particular emphasis was given to the recent use of railwood yards. The railwood yard, which is defined as "a tract of land with mechanized loading equipment to trans- fer wood from trucks to railroad cars on the siding that is located on the land," was first put into operation in the South in mid 1951. By 1956 the number of rail yards Operated by contractors or dealers and by pulp mills had grown to approximately 120. The rapid growth of rail yards is explained by Jeffords pri- marily in terms of the advantages it offers to producers and to pulp mills. For producers, the advantages of the rail yard are specified as: (1) the producer sees his wood scaled and knows what is culled, (2) any quantity of wood may be sold, (3) payment is received upon delivery, and (4) mechanical unloading of trucks reduces truck un- loading time. It is claimed that before the introduction of this marketing facility producers who shipped wood to pulp mills by rail were required to load a whole car of pulpwood before shipment to the mill, and had to wait for payment until the rail car was delivered to the mill and scaled. The author claims that the use of rail yards offers three principal advantages to the pulp mill: (1) establishment of a tail yard can stimulate production in the area surrounding the yard, (2) mills can maintain inventories of stored wood which permits better control over the flow of wood to their plants, and (3) during periods of railroad car shortages wood is still accepted. Jeffords .1 'razher serious ; snply of pulp»; I be directly a mi? and fire c. | .--d N ' ‘.‘ 0:ng the i :11th are usca first econm; 131112130115 SUPPZJ 33133 schedule; :11! done durir lusch, in mm Ed “the hr: of MING: til; "15H than :liils that becau Mi" '0“ sou Wering Pulph P. . ‘8 Sho fps! ' w Hen“, ills] l3 Jeffords also indicated that many southern pulp mills face a "rather serious problem" in their inability to obtain a continuous supply of pulpwood in the sumer months. The author claims that this can be directly attributed to the fact that thinnings and partial cuttings are usually done in the winter when the problems of insect damage and fire danger are at a minimum, and that farmer-landowners cut only during the winter when they have free time. It is suggested that the most economical method by which pulp mills can be assured of a continuous supply of pulpwood in the sumer months is by arranging cutting schedules on company owned lands so that most of the yearly cut is done during the sumer months. Busch, in an investigation of the problems of pulpwood pro- duction and marketing in Alabama (1956), claims that the seasonal nature of pulpwood production and deliveries is generated by pulp mills rather than by the seasonal nature of production. The author claims that because climatic conditions cause stored wood to deteriorate rapidly, most southern mills place heavy seasonal demands on producers by ordering pulpwood during the winter months and then curtail demand when inventories are full. The seasonal nature of pulpwood demand is viewed as short-sighted, resulting in wide fluctuations in woods labor requirements, insecure "feast or famine" employment for producers and the loss of workers who prefer more stable work and therefore move to other occupations. As a solution to this problem, Busch suggests that mills should carry at least a two months' inventory, stored under water if necessary, so thata fully employed, full-time year—round sPecialized labor force could be used to supply wood in a more uniform manner . In I 1947 States, Hcl'rctt 6: Lines: lake StaT n15 cznsiderah :zvitction and tr. and discourage tars. The pot: $.31; industry Io realistI Iechaniza‘i but bette: I lore float: lens to A compre'r... "-* vavided in «615. James in; {15338 Chaiml “f this st £12} 40 Percen. :Qelad to pulr :R‘llv 14 In a 1947 study of pulpwood production and marketing in the Lake States, McNutt estimates that 85 percent of the labor force required to harvest Lake States pulpwood was part-time, transient operators. It is suggested that employment of available pulpwood producing technology would considerably reduce the severity of seasonal swings in pulpwood production and marketing, but that the seasonal nature of pulp mill demand discouraged production by highly mechanized year-round pro- ducers. The potential long-run benefits of a highly mechanized pulpwood supply industry are summarized as follows: No realist counts on cheaper wood as a result of mechanization. His efforts are directed toward fewer but better trained men, each one of whom will work more months per year. Mechanization will provide a means to a most desirable end. A comprehensive analysis of pulpwood marketing in Michigan has been provided in a series of studies by Lee M. James and Gordon D. Lewis. James initiated the series in 1954 and 1955 when he investi- gated the market operations of the three principals of the pulpwood marketing~ chain--landowners, market agents, and pulp mills. The re- sults of this study were published in 1957. It was shown that approxi- mately 40 percent of the pulpwood produced in Michigan in 1954 was channeled to pulp mills through intermediate market agents (brokers) who usually served as agents for a number of mills. The remaining 60 percent was marketed by producers who sold directly to pulp mills. Producers, due to the relatively small volumes handled (averaging less than 300 cords), generally sold only to one mill. By comparing pulpwood prices with costs of production reported by market agents sampled, James concluded that the margins available to mixers for ri cileast for as '>::elative1y m: ': pzfitable than A .~ intion of c According Fitted wood re {a ’ p09. a! .Evured 53F] 4.. .‘, "' FreMOd Whiz 251111. Levis “5125mm p. 'I‘ . m5 PTOGucer: 311m iiencs a: £4125, that, in The {mg m marke ' quantity, depends 1: Procedure: littering} In 1950’ 0"apar- :“‘FD ‘ we; t° thick 5 . t;- a M, ‘ \\ i 15 producers for risk and profit were greatest for spruce and balsam fir and least for aspen and paper birch. Production of pine was shown to be relatively more profitable than production of aspen but less profitable than production of balsam fir. A more recent (1961) in- vestigation of costs and returns by Lewis and James shows similar results. According to James, most pulp mills which purchase Michigan produced wood rely on a combination of producer and dealer contracts for required supplies. Dealers are generally used as an agent source for pulpwood which is produced at distances in excess of 100 miles from the mill. Lewis (1961) found that Michigan producers who handle less than 125 cords per year generally market their pulpwood through dealers whereas producers who handle more than 125 cords usually bypass inter- mediate agents and sell directly to pulp mills. However, he further states, that, in reality: The transition between marketing through a middleman and marketing direct to mill would not be a definite quantity, but rather a range of volumes whose extent depends upon the pulp mill procurement policies and procedures and the producer's knowledge of pulpwood marketing. In 1960, James and Lewis published a study undertaken to deter- uune the comparative advantage of railroad transport of pulpwood as Opposed to truck transport. The need for such a study was demonstrated by James in his 1957 study of pulpwood marketing in Michigan. The anthors concluded that there is no single point or mileage zone below Vhich.it is more economical to transport wood by truck and above which it is more economical to transport by rail. Instead, the break-even point was shown to be highly variable, depending on such iatsrs ts spec: nibble, spec; ‘firzaizing chit! “BERN“! 1,1111: in tr k‘" “'5 who; x. 3‘11 ( 958) . l “finessee V: I ‘I ~ I' h. a‘.: aw 16 factors as specific mill locations, highways and rail loading points available, specific railroads and numbers of carriers involved, and bargaining abilities of those involved in rate negotiations. The methods by which pulpwood is channeled from the landowner to pulp mills in the Tennessee valley appear to be quite similar to marketing methods of Michigan pulpwood as reported by James and Lewis. ' Schnell (1958) reports that pulp mills which draw wood supplies from the Tennessee Valley obtain wood from both independent producers and from recognized dealers. Dealer wood is purchased from more distant timbersheds whereas independent producers are usually the source of wood produced within relatively short distances frmm the mill. Incidental Studies of Pulpwood Marketing Data describing the forest resources, production statistics and markets for forest products have been published in each of the nine states within the North Central region. Most of these have been primarily concerned with timber resources and forest landownership patterns. Reports based upon forest surveys carried out by the Lake States and Central States Forest Experiment Stations generally include short descriptions of the production and markets for forest products. A.report on Michigan's forest resources (Findell, 1960) shows that approximately 70 percent of Michigan's 1954 pulpwood harvest was from.poletimber trees; the remaining 30 percent came from sawtimber trees and the tops of sawlog material. In a study of Wisconsin's forest resources, Stone and Thoma (1961) reported that the pulp and our industry 1 fixed is shi; 12m also shot: i Ill! cut for if.) d W exceeded r-h fifth-1rd of the I train [ills (C; I Other It; :31 {Thornton a £55m (King, ins-tally ham. t. I “finally 0btai_ finite ape r lme & interes ted "‘a 'F 4:10,] of 17 paperindustry is the largest importer of wood to Wisconsin. More pulpwood is shipped into Wisconsin than is produced within the state. It‘was also shown that the volume of state pulpwood production exceeds that cut for any other comercial product, although the cut for fuel- wood exceeded the total volume of both pulpwood and sawlogs. Roughly one third of the pulpwood harvested in Minnesota is shipped to His- consin mills (Cunningham, 1958). Other reports have been prepared for Indiana (Hutchison, 1956), Iowa (Thornton and Morgan, 1959), Ohio (Hutchison and Morgan, "1956) and Missouri (King, 1949). Most of these reports indicate that pulpwood is usually harvested by farmers and other seasonal operators who frequently obtain stumpage from their own lands. State agricultural experiment stations and the U. S. Forest Service experimentstations within the North Central region havealso been interested in the marketing of forest products. Studies by these institutions usually have been devoted almost exclusively to the specification of what types of markets are available to farm woodland owners and to the enumeration of procedures that such owners should follow in selling their timber in order to maximize their returns and at the same time maintain or improve the productivity of their wood- lots. Studies aimed specifically at the farm and other small private woodland owners have been published in Illinois (Hutchison and Winters, 1951), Iowa (Quigley and Yoho, 1957), Ohio (Turner and Mitchell, 1950) and Missouri (Quigley, 1950). Holland's study of timber products marketing in theclaypan region of Illinois describes the marketing of pulpwood in somewhat more fetail (1962). :zzjnc'tion Hit}. The: Products ':.:c' that marke @5364. Timber tiers an active itself. Holland 1:53 in the ne Shes mold imp: N 18 detail (1962). Data presented in Holland's analysis was collected in conjunction with the North Central Region Marketing study, "Marketing Timber Products in the NOrth Central Region" (NCM927). The author found that marketing of pulpwood in the claypan region is poorly or- ganized. Timber owners were found to assume a passive role and timber buyers an active role, with each transaction being negotiated by itself. Holland concludes that greater participation by woodland owners in the negotiation, preparation and administration of timber sales would improve the efficiency of timber marketing. Marketing Agents (Descriptions of the functions of market agents Operating within the pulpwood marketing chain have been largely confined to analyses of producer operations. These studies all but ignore the marketing ac- tivities of producers. Instead, interest is focused on a quantitative or qualitative aspect of the pulpwood production process. Studies which specify the nature of factors affecting logging costs (such as harvested.volume per acre, characteristics of site, and road conditions) have been much more common than qualitative studies which indicate the numerical affect of quantitative variables. Because of the scarcity of qualitative studies and the limited applicability of quantitative studies, relatively little is known about the importance of and the relationships between individual factors of production employed in the pulpwood harvesting operation, i.e. the pulpwood production function. In 1960, .‘ stitshed five crl his States. In“: 21:11 chm the ‘ Eliot these st aflitge volume, 55PMccers har ditator is rare Studies c PM (1960), a: rre restricted : L‘tttmed with 1 9413:; of Pdet; 19 In 1960, J. S. Hensel of the American Pulpwood Association published five case studies of pulpwood harvesting operations in the Lake States. While these studies are reported in considerably more detail than the typical case study, their usefulness is rather limited. Each of these studies is a quantitative description of the operations Of large volume, highly mechanized producers. In terms Of total number of producers harvesting pulpwood in the Lake States, this type Of Operator is rare. Studies of producer operations reported by Zillgit (1950), Finer (1960), and Pfeifer (1961) are examples of studies of an even more restricted nature. Each of these investigators were primarily concerned with labor requirements of pulpwood Operations within de- lineated geographic areas. Little or no attention was given to other factors of production or to the influence Of variable site conditions. In lewdggjith Less Manpower, Guttenberg and Perry (1957) investigate the labor requirements for several systems of pulpwooding in various southern timber types. Time studies were done in the pine flatwoods of Arkansas, the rolling hills of central Mississippi and in Mississippi's bottom land hardwoods. Labor requirements for each step of the pulpwood production process were estimated by regression analysis. Factors such as tree diameter, astand density and cut per acre were dependent variables. Other than for a brief quantitative description and an estimate of average hourly costs, capital (machinery) requirements of the various Operations studies received relatively little attention. As the title of their publication suggests, the mthors were primarily interested in labor costs. They concluded that tiessioml, hi I: logging crew.- ;::d;cers or srra tr "prohrhly de 1 similar filmessee Va 119 total costs 3533 condm; lifations in ‘ 'm _—_'_——_ __ — 3": kiih Carol The and ., "shading. E11315 fort itfeud iapit. Ti‘iseloped f tilting dataa care is W '° item. “Wt 20 professional, highly mechanized year-round producers operating 5 to 10 man logging crews can produce pulpwood at a lower cost than seasonal producers or smaller, less capital intensive year-round producers and are "probably destined to be the mainstay of the industry." A similar but more detailed study was undertaken by Schnell in the Tennessee Valley (1961). Schnell's study was designed to determine the total'costs of producing and marketing pulpwood under varying logging conditions. Data were collected from 24 pulpwood harvesting Operations in a wide geographic area-~12 in Tennessee, 5 in Alabama, 3 in North Carolina, 3 in Georgia and l in Mississippi. Crew sizes of sampled operators varied from 2 to 7 men. Time and related cost data. were collected for each of the five physical steps involved in the production and sale of pulpwood: (1) felling, limbing and bucking, (2) skidding, (3) loading, (4) hauling and (5) unloading. Because he was dealing with a heterogeneous sample, Schnell was forced to aggregate diverse inputs into two variables-- labor and capital equipment. Using these data production functions were developed for each step in the production and marketing process. Resulting data are presented in a manner which allows producers to estimate per cord production costs simply by supplying their own cost .data. llo attempt was made to rank or evaluate the efficiency of different methods of operation. CHAPTER III THE PULP, PAPER AND BOARD INDUSTRY IN THE NORTH CENTRAL REGION About a fourth of the wood-pulp producing plants in the United States are located within the nine states of the North Central region. Seventy-one plants, owned by 57 companies, are located within the region--51 in the Lake States and 20 in the Central States. In the aggregate, these plants consumed about 4 million cords of pulpwood in 1961. Host of the wood pulp manufactured within the region is produced and consumed in vertically integrated plants which manufacture paper or paperboard. However, less than one-half of all establishments engaged in the production of paper and board from wood fibers'maintain wood pulping facilities. The 1958 Census of Manufactures lists. 230 establishments primarily engaged in the manufacture of paper and board in the North Central region--102 in the Lake States and 128 in the Central States (Table 2). - Only 59, or 30 percent, of these plants are vertically integrated establishments producing and consuming wood pulp at the paper or paper- boafd mill site. The remaining 171 paper and board plants either utilize other fibrous materials such as waste paper as a basic raw material or obtain wood pulp from external sources. About 40 percent 0f the wood pulp consumed within the region is imported from other regions of the united States, Canada, or Europe. #11 l. . fable 2.--Paper 1958 State Esconsin t-‘zesou Like States i31m fixatri 535 centril stat kw «a CeIltral I”: 1958, .p. 22 Table 2.--Paper and board plants in the North Central region, by state, 1958 Stat Paper Paperboard and All paper e ‘mills building paper and and board board mills mills (Number of establishments) Michigan 22 22 44 Uisconsin 38 9 47 Minnesota 5 6 11 Lake States Ohio 19 39 58 Indiana -- 14 14 Illinois 2 30 32 Iowa -- 4 4 Hflssouri l 10 11 Kansas 7 2 9 Central States North Central 94 136 230 Source: U. 8. Bureau of the Census. U. 3. Census of Manufac- tures: 1958, Pulp, paper,-and board, Industry Report MC58(2)-26A, 1961. Hide v] 35135 felt are fttuters tend t: 1'? Papers. K 3 these gradesjl 5‘45 lad hard': “1 other paper: North CE? Ftfiction and W 3121:: the regi. iimsin alone 11:, Hit!) 19 pa. Sittial ”06‘qu is“ ”my c' The relat 3123mm can 51! «$5 in this at 23 The Paper and Paperboard Industry A wide variety of paper products ranging from fine papers to roofing felt are produced within the North Central region. Paper manu- facturers tend to specialize in the production of fine, book, and sani- tary papers. More than 50 percent of total paper output is classified in these grades. Significant volumes of construction paper, insulating board and hardboard are produced within the region, but container board and other paperboard are the primary products of paperboard plants. North Central mills account for 23 percent of national paper production and 22 percent of national paperboard production (Table 3). Within the region paper production is concentrated in the Lake States. Wisconsin alone produces nearly one-half of the region's paper output. Ohio, with 19 percent of the regional paper output, is the only sub- 8tantial producer of paper in the Central States. Paperboard production 18 more evenly divided between the Lake States and Central States. The relative concentration of regional paper production in the Lake States can be attributed to both. the number and size of paper Inills in this area. The Lake States have more mills (69 percent of the total) and larger output per mill. Average annual output of Lake s”Hates paper mills in. 44,000 tons; the corresponding figure for Central states mills is 25,000 tons. PaperbOard mills are far more numerous in the Central States (73 pe"-‘cent of the total), but the great difference in size enables the lake States to manufacture nearly as much paperboard as the Central states. Average annual output of board mills in the Lake States is 55,000 tone; the corresponding figure for Central States mills is 23,000 tons. 3He3c-Paper and pf -- by state, 1: State Etigan is £835 in lizesota like States it hfiana Inigois Ian £55311“ hzuu 24 ‘Tablee3.--Paper and paperboard production in the North Central region, by state, 1961 Total Paper- State all Paper boarda grades (Thousand tons) ruahigan 1,828 748 1,080 7 Wisconsin 2, 252 l, 766 486 Dunnesota 850 367 483 iLake States 4,930 2,881 2,049 Ohio 1, 679 686 993 ‘Indiana 364 D D b Illinois 828 D 756 ‘Iowa D - D M1880mm, D - D nsas D - D Central States 3,059 768 2,291 N°rth Central 7,989 3,649 4,340 Tom1 U. 8. 35,585. 15,741 19,844 \ D Withheld. of aTotal includes 26,000 tons of wet machine board and 868,000 tons bu:l.1ding paper and board. bExcludes withheld wet machine board production. Ind, Source: U. S..Bureau of the Census. Pulp, paper, and board, natty Report M26A(6l)-13, 1961. F: Hood pulp 15 l byt'ae region's pap? sexed. In 1958, [ht Lilian tons of 9000 ‘erials, primarily v. State is presented 1: Fl; tonsuzption by Only tvo stat in other fibrous m 53:65 as a whole 05 Eterials, but the C 25 Fibrous Material Consumption Hood pulp is the single most important fibrous material consumed by the region's paper and board industry; waste paper runs a close second. In 1958, the region's paper and board industry consumed 3.8 million tons of wood pulp and 3.9 million tons of other fibrous ma- terials, primarily waste paper. Fibrous materials consumption by state is presented in Table 4. Table 5 presents a breakdown of wood P0113 consumption by type of wood pulp. Only two states--Wisconsin and Minnesota--consume more wood pulp than other fibrous materials in paper and board manufacture. The Lake States as a whole use nearly twice as much wood pulp as other fibrous Inatel‘ials, but the Central States use nearly three times as much of Other fibrous materials as wood pulp. The North Central region makes relatively heavier use of other fibrous materials than other regions. Fifty-one percent of the tonnage of fIlbrous materials consumed in the region is in fibrous materials other than wood pulp. The corresponding percentages in other regions are 44 in the Northeast, 14 in the South, and 22 in the West. Nearly 40 percent of the wood .pulp consumed by the North Central paper and board .industry is imported into the region. With the ex- c""Ption of Wisconsin, imports of wood pulp are large in relation to production throughout the region- 26 Table 4.--Pibrous materials consumed in the manufacture of paper and board, by state, 1958 Wood Other fibrous materials State pulp Total Waste Other paper materials (Thousand tons) Michigan 797 893 852 41 Uisconsin 1,282 370 350 20 Minnesota 839 284 D D Lake States 2,918 1,547 D D Ohio 638 746 613 133 Indiana . 33 257 176 81 Illinois 150 1,080 996 84 Iowa D 124 98 25 Missouri D D D D Kansas D D D - Central States 843 2,324 D D W Nerth Central 3,761 3,871 3,458 413 D ‘Uithheld. aIncludes rags, manila and straw. Source: U. S. Bureau of the Census. U. 8. Census of Manufac- tures: 1958, Pulp, paper, and board; Industry Report MC58(2)-26A,.1961. f 1dr): 5"ll-waders t. tale . boar 0 {ties: 27 Table 5.--Type of wood pulp consumed in the manufacture of paper and board in the North Central region, by state, 1958 b Ground Semi- a State Sulfite Sulfate wood chemical Other (Thousand tons) Michigan 242 362 53 D D Wisconsin 504 352 270 151 4 Minnesota D 162 278 D D Lake States D 876 601 D D Ohio 96 424 8 10 99 Indiana 48 21b D - D 11116166 188 25b 27 D 60 Iowa - - - D - Missouri - - D - D Kansas D - - - - Central States D 446 37 'D A D North Central 1,005 1,322 638 442 375 D ‘Withheld. aExcludes withheld unbleached sulfite volume. bExcludes withheld semibleached sulfate volume. Source: U. 8. Bureau of the Census. U. S. Census of Manufac- tures: 1958, Pulp, paper, and board, Industry Report MC58(2)-26A, 1961. 28 This is evident from the following tabulation taken from the 1958 Census of Manufactures: Production Consumption Net imports (Thousand tons) East North Central Michigan 390 797 407 ‘Nisconsin 1,181 1,282 101 Ohio 120 638 . 518 Indiana ) 150 ) Illinois ) 126 33 ) 57 Nest North Central 528 861 333 Long-Term Growth The long-term trend in the region's paper and board production has been distinctly upward (Table 6). Output increased from 4.3 million tons in 1929 to 8.0 million tons in 1961. The trend of increase is apparent throughout the region, although it is most pronounced in the Lake States. Despite a nearly two-fold increase in output, the relative im- portance of the region as a paper-producing area has declined. North Central paper and board output accounted for nearly 40 percent of national production in the early 1930's. The percentage dropped to 31 at the end of‘NOrld'Har II and down to less than 25 by 1961. The Hood Pulp Industry The wood pulp industry is composed of that segment of the pulp and paper industry which manufactures wood pulp from pulpwood. Head pulp may or may not be the principal product of firms within the industry. 29 Table 6.--North Central paper and board production by state, selected years State 1929 1935 1945 1955 1961 (Thousand tons) Michigan 1,092 1,045 1,228 1,754 1,828 Wisconsin 886 792 1,237 1,939 2,252 Mflnnesota 318 237 556 833 850 Lake States 2,296 2,074 3,021 4,526 4,930 W Ohio 937 837 1,206 1,557 1,679 Indiana 349 247 324 301 364 Illinois 597 488 669 880 828 Iowa ) a a Missouri ) 109 D 189 194 188 Kansas ) Central States 1,992 D 2,388 2,932 3,059 W North Central 4,261 D 5,409 7,458 7,989 D ‘Withheld. aIncludes Colorado. Source: ,Data for 1924 -1955 from.American Paper and Pulp Asso- ciation, The statistics of paper-~1960, 1961. Data for 1961 from U.S. Bureau of the Census, Pulp, paper and board, Current Industrial Reports Series M26A(61)-13. 30 The North Central region"s wood pulp industry is dominated by inte- grated firms which produce and consume wood pulp in the manufacture of paper and board at the pulp mill site. In total, there are 71 pulp manufacturers within the region. Only 11 of these establishments pro- duce market pulp as a principal product. By state, 5 of these firms are located in Illinois, 4 in Wisconsin, and 1 each in Ohio and Iowa (Lockwood, 1961). Wood pulp is manufactured from pulpwood by some type of chemical or mechanical reduction of pulpwood into individual wood fibers. The process or processes utilized by a pulp manufacturer depends upon a snumber of interrelated factors including the physical and mechanical characteristics of economically available pulpwood species and the nature of the final product to be produced. The number and types of pulp mills located within the region are shown in Table 7. Pulp producers generally Operate only one type of pulp mill. Nine integrated Lake States establishments, however, produce more than one type of pulp--6 plants produce two types of pulp and 3 plants pro- duce three types of wood pulp. Mills producing more than one type of pulp (1) mix pulps for use in the manufacture of a given type of paper product, (2) produce two or more products each of which reQuires a different type of pulp or (3) produce and consume one type of pulp and sell another type to other firms. Each of the nine plants operating more than one mill produces sulfite pulp, the most adaptable of the commercial pulps. Sulfite pulp is used in the production of certain grades of book, wrapping, bond and tissue papers. 31 Table 7.--Number of wood pulp mills in the North Central region by state and pulping process, 1961 State Chemical pulps Semi- Ground Miscel-a Total Sulfite Sulfate Soda chemical wood laneous Mills Plants Michigan 2 2 - 4 4 2 14 13 ‘Wisconsin 15 3 - 4 l3 1 36 29 Minnesota . 2 2r 1 1 4 3 13 9 7 9 6 Lake States 19 63 51 Ohio - - 2 - 3 6 6 Indiana - - - 2 - — 2 2 Illinois - - - 2 5 8 8 Iowa - - - 2 1 3 3 Missouri - - - - - 1 l 1 Central States - - 1 8 1 10 20 20 N0rth Central 19 7 .2 17 22 16 83 71 aIncludes defibrated and exploded.. Source: U. S. Forest Service. W00dpulp mills in the United States, Division of Forest Economics Research, Washington, D. C. 1961. 32 Most plants operating more than one mill also produce groundwood pulp. As a relatively weak pulp, groundwood is usually mixed with the stronger sulfite pulp before being utilized in the paper-making process. Roughly one-half of the region's mills produce sulfite or ground- wood pulp. The relatively exacting species recuirements of these pulping processes is reflected by the geographic location of these mills. Sulfite and groundwood mills in the North Central region are almost exclusively confined to the Lake States (Table 7). Long-fibered, low-resin-content species such as spruce and balsam.are required for these processes. Various pines and hardwoods are also utilized in the production of sulfite and groundwood pulp but generally in small amounts in comparison to spruce and balsam. The sulfate process can be used with many species, but it is pan- ticularly suited to the pulping of highly resinous softwoods, mainly pines. All seven of the region's sulfate mills are located in the Lake States pine areas. Soda and semichemical processes are used prin- cipally for the pulping of hardwoods. Since hardwood species are .widespread, soda and semichemical pulp mills are scattered throughout the region. Sixteen of the region's pulp mills produce defibrated, exploded or other types of wood pulp. For the most part, these processes are used in the production of coarse-fibered pulps composed of a mixture of single wood fibers and bundles of fibers. These miscellaneous pulping processes are generally applicable to most softwoods and hardwoods. The resulting pulps are used to produce such products as hardboard, in- . sulating board, roofing felts, linoleum felts and similar paper products. 33 Regional pulping capacity increased from 3,425 tons in 1920 to 10,130 tons in 1961 (Table 8). Expansion has come about through in- crease in the size of mills. ‘While the number of mills has remained essentially static over the past 40 years, average mill capacity increased from 40 tons per day in 1920 to 122 tons in 1961. Despite the large increase in absolute pulping capacity, the relative importance of the North Central wood pulp industry has declined. W00d-pu1ping capacity has increased at a much faster pace in the South and‘West. In relation to total United States capacity, the North Central region declined from a high of;27 percent in 1920 to its present level of 11 percent. Over this same time period, Western mill capa- city increased from 7 to 18 percent of the national total; and in the South, pulping capacity increased from 7 to 56 percent of the national total. By process, the North Central region accounted for the following percentages of national wood pulp capacity: sulfite, 20 percent; sul- fate, 2 percent; groundwood, 15 percent; soda, 24 percent; semichemical, 29 percent; and miscellaneous, 28 percent. North Central wood pulp production, both in absolute amount and as a percentage of national output, has exhibited trends similar to those shown previously for pulping capacity. Regional output of wood pulp, which averaged some one million tons annually during the 1930's, moved up to nearly 3 million tons by 1961 (Pig. 2). Despite this large absolute gain, the relative importance of the region as a.wood pulping center has declined. ,In the 1930's, the North Central region produced some 30 percent of the national total of wood pulp. By 1961, regional output dropped down to 11 percent of the national total. 34 Table 8.--Number and capacity of wood pulp mills in the North Central region, selected years North Central as a Year North Central percent of U. S. Mills 24==hour Mills 24-hour capacity capacity (No.) (Tons) ‘ 1920 86 3,425 27 22 1925 86 4,720 26 26 1930 76 4,650 25 22 1934 70 4,875 24 21 1940 61 4,655 24 16 1945 57 4,870 23 14- 1950 60 5,610 23 13 1952 73 6,615 24 13 1955 75 7,495 23 12 1956 81 7,295 24 y 11 1959 88 9,870 24 12 1961 83 10,130 23 11 Source: U. S. Forest Service. ‘Wood pulp mills in the United States, Division of Forest Economics Research, Washington, D. C., 1961. (Mom 25~ p. 26'- 393, 1'1 G $30.19 35 MHHons of short tons an I.“ 26 24 22 20 2 . . :3 ' H” NEW ENGLAND A ‘ l 1 1 1 1 l 1 1930 I935 1940 1945 I950 1955 I960 Pig. 2. Wood pulp production in the United States, by region, 1930-1961. (Source: United States Pulp Producers Association, based on data from U.S. Bureau of the Census.) CHAPTER IV PRIMARY MANUFACTURERS The attempt was made in this study to sample all primary manu- facturers purchasing significant amounts of pulpwood in the delineated study areas. Only a few firms in Minnesota, Illinois, and Ohio failed to c00perate. The sample that was obtained accounted for a major portion of the pulpwood consumption in the region. Percy-seven establishments consuming pulpwood were sampled. These mills, owned by 36 companies, represent 66 percent of the primary manufacturers within the North Central region. The locations of sampled mills and their respective size classes in terms of 1959 pulpwood purchases are shown in Figure 3. State samples of pulp mills and the volume of their 1959 pulpwood consumption are tabulated in Table 9. The Michigan sample included all Lower Peninsula mills actively engaged in the production of wood pulp or other products from pulpwood. Two mills, one producing particle board and the other wood excelsior, do not purchase "pulpwood" per se. Although neither of these firms produce wood pulp in the strict sense of the word, raw wood require- ments and wood procurement policies are nearly identical to those of sampled Michigan pulp and paper companies. The Wisconsin sample represented 86 percent of the active pulp- wood consumers within this state and 96 percent of the total 1959 Wisconsin pulpwood consumption. The six mills sampled in Minnesota accounted for 58 percent of the total 1959 Minnesota pulpwood consumption. \W N .. >— \Q \ ~< ‘ 5“ \ EW‘ “\"x‘ a. —~ x a ~ 1‘. - . \_~ ‘_N x ‘\ K s N ‘ x: N \\ . _ \ x \_ ‘ \— . '5- \\ \ I \ s k ‘ N . V.‘ I , \\ 5N 7" \ \\N \>\ N“ P1 region‘s. 3. L 37 MILL CLASSIFICATION sv VOLUME 0F ‘ 1959 PULPWOOD RECEIPTS ((201105) f “ OLess than 10.000 0 010,000-119,900 ' 050,000-991,900 o IO0,000 and up ®Unknown ’3»\ I Pig. 3. Location of sampled wood pulp mills in the North Central region. 38 Table 9.--Number of primary manufacturers sampled and their pulpwood consumption, by state, 1959 ' Pulp mills Pulpwood consumption ‘State Number Sample as Z of ' Volume Sample as 1 of in sample state total in sample state total (M cords) a 11161113116” 9 60 549 79 Wisconsin 25 86 1804 96 Mdnnesota 6 67 419 58 Lake States 40 76 2772 82 W Ohio .1 20 N.A. N.A. Indiana 1 100 ) Iowa 2 67 ) 89 100c Mflssouri l 100 ) Illinois 2 25 23 25 Central States 7 35 N.A. Not available. aPulpwood consumption data are reported in unpeeled standard cords of 128 cubic feet. One standard cord is equivalent to 0.8 of a long cord or unit, 4,500 pounds of soft hardwoods, and 5,000 pounds of hard*hardwoods or conifers. hAll primary manufacturers of pulpwood in Michigan's Lower Peninsula were sampled. cThree pulp mills were in operation in Iowa in 1959. The mill not included in the Iowa sample purchased only a negligible quantity of pulp- wood. 39 Seven mills were sampled in the Central State8--one each in Indiana, Missouri and Ohio and two each in Illinois and Iowa. The Missouri plant obtains nearly all of its wood supply from the Kansas study area. Sampled Indiana, Iowa and Missouri mills purchase all of the pulpwood consumed within these states. In some respects, the Central States pulpwood industry is quite sbmilar to the Lake States industry. Most of the region's pulp mills are well established, horizontally and vertically integrated manufac- turers of paper or paperboard. The typical pulpwood consuming firm has.been producing paper and board products at its present location since 1920. Plants are generally owned by a corporation that operates a number of wood consuming plants in various sections of the country. Aside from.these common demographic and ownership patterns, however, Central States mills are quite dissimilar to Lake States Mills. Major differences occur in the nature of final products produced, historical dependence upon wood pulp as a basic raw material, volume and species of pulpwood species consumed, landownership and agent source of wood supply, and wood procurement methods and policies. Primary Products By comparing final products of sampled firms (Table 10) with products of the regional population of paper and board mills (Table 2), it can be seen that the sampled firms may be considered fairly repre- sentative of the total regional industry. Sampled Central States plants specialize in the production of board products. Sampled Lake States mills are mainly producers of paper products. 40 Table 10.--Principal products produced by sampled manufacturers, 1959 .,Product Michigan Wisconsin Minnesota Central States (Number of firms) Pulp and excelsior 1 4 1 Papers Pine paper 2 1 Tissue 2 5 1 Book paper 1 Other papers 1 12 2 Paperboard anda building board Container board 2 1 2 Other paperboard 1 2 Building paperb 3 Building board 1 .. Total 9 25 6 7 aIncludes corrugated medium. bIncludes particle board. 41 All but one of the Central States plants sampled, an Iowa firm, produce only one type of product. Board mills in the Lake States usually produce only one type of board also, but Lake States paper mills usually produce more than one grade of paper. In fact, sampled Lake States paper mills commonly produce as many as 4 or 5 distinct grades of paper. Historical Dependence Upon Wood Pulp The Lake States pulp and paper industry has been dependent upon wood pulp as its basic‘raw material since the early 1900's (APPA, 1961). Although sample data show that Central States paper and board mills have been in operation for approximately the same length of time as Lake States mills, locally produced pulpwood did not become an impor- tant source of raw materials for these mills until the early 1950's (Mendel, 1962). These mills either utilized fibrous materials other than wood as a basic raw material or purchased wood pulp or pulpwood from other sections of the country. Less than 100,000 cords of pulp- wood were produced annually within the Central States prior to 1950. Pulpwood production in the Central States as a whole has in- creased rapidly since the early 1950's.(Figure 4). In 1952, slightly over 100,000 cords of pulpwood were produced from Central States forests. By 1961, production had increased to well over 400,000 cords, with most of this increase in output occurring since 1957. Despite a three-fold increase in local production, local producers have not been able to supply pulpwood consumers with sufficient quantities of desired pulpwood species. 42 Thousand cords Consumption // / 400 - 300 -— / Production /// // / 7// 100 __ 0 J I 1 1 1 L 1 1 1.. 1 1952 1954 1956 1958 1960 1962 Fig. 4. Pulpwood production and receipts in the Central States, 1952-1961. (Source: Central States Forest Experiment Station, U.S. Forest Service, Columbus, Ohio 1952 data from.Misc. Release 13. 1955-1961 data from Tech. Paper 188.) 43 Net imports3 of pulpwood averaged about 50,000 cords annually from 1956 to 1961. ‘Most imports of pulpwood into the Central States come from Wisconsin and are destined for mills in Illinois (Mendel, 1962). The trends in Central States pulpwood production by states are shown in Figure 5. Production increased steadily in this area from 107,000 cords in 1952 to 456,000 cords in 1961. The upward trend is mainly a result of increased production in Ohio, and secondarily, in Indiana and Illinois. Iowa and Missouri production trends are virtually horizontal. Lake States pulpwood production and consumption trends are shown in Figure 6. The long-term trends have been upward but yearly vari- ations clearly reflect the influence of market conditions for paper and board products. Immediately following World War II, both production and consumption of pulpwood declined. They increased sharply during the Korean War, then decreased as the demand for paper and board declined at the end of the war in 1953. Subsequent production and consumption activity continued to reflect the trend in aggregate economic activity by expanding from 1953 to 1956 and declining during the 1957-1958 recession. Lake States mills have been relying more heavily upon locally produced pulpwood in recent years. In 1951, imports into the region reached 980,000 cords, 38 percent of total consumption. By 1961, 3Net imports represent the difference between total imports and exports. Only very minor amounts of pulpwood are exported by Central States producers. From 1955 through 1960, 13,000 cords of pulpwood were exported, 80 percent of which was produced in Ohio. Thousand cords Ohio / 200 — / / / _ / ./ 150 — ./ 100 50 0 Fig. 5. Pulpwood production in the Central States, by state, 1952-1961. (Source: Central States Forest Experiment Station, U. S. Forest Service, Columbus, Ohio. 1952 data from Misc. Release 13. 1955-1961 data from Tech. Paper 188.) 45 Million cords [01- Apparent consumption __ /’ \ \ r' "'\ / \\ / \ / 351.. 1946 1948 1950 1952 1954 1956 1958 19 60 Fig. 6. Pulpwood production, imports and apparent consumption in the Lake States, 1946-1961. (Source: Lake States Forest Experiment Station, U. 8. Forest Service, St. Paul, Minn., Tech. Note series.) 46 imports had declined to one-third of their 1951 peak and accounted for only 10 percent of consumption. Figure 7, which traces production, imports, exports, and apparent consumption for Wisconsin, shows a horizontal trend in consumption and a rising trend of production. Imports, which totaled 1.6 million cords in 1951, were down to 0.9 million cords in 1961. The curtailment was sharpest in the more distant Canadian imports, less so in imports from Michigan's Upper Peninsula. For practical purposes, much of the Upper Peninsula supply area can be considered local to Wisconsin pulp mills. Figure 8 illustrates the pronounced upward trend in Michigan pulpwood production in response to increased consumption by pulp mills in the state and declining imports (largely spruce and fir from Canada). Exports, nearly all from the Upper Peninsula to Wisconsin, are an im- portant segment of Michigan production. Since the Upper Peninsula is actually part of the local supply area to Wisconsin mills, exports from Michigan have shown a great deal of stability. Minnesota's production shows an essentially horizontal trend in the face of a slight rise in consumption (Figure 9). This reflects a decline of exports (mainly to Wisconsin) rather than an increase in im- ports. The volume of imports (mainly from Canada) has moved downward fairly consistently since 1951. CCICS 6 l \ mm film l I 0 1V 1 r a... fill. . . 1 IIIFU' F \ .\ .llll -\H F ID- N. 1&5 53 96m Sir‘ 47 Million cords Apparent ,’\ consumption /’ \ /\ R / \ /’\\ / ,__ __ / \. / \ / \v \_..---\ v \ / \ / 1.5 _— \\_ ___/ /‘\ Imports \ . .. .,\ ./ .\ ,./ \ ..___ ‘ x’”’ '. . 1 0 \-~ ' / ,Production _Expor‘ts 0 1,/’I“~.1__‘i-_l._......l___1---1—-—1---l‘--1--—1’ L 1 1946 1948 1950 1952 1954 1956 1958 1960 Fig. 7. Pulpwood production, imports, exports, and apparent consumption in Wisconsin, 1946-1961. (Scurce: Lake States Forest Experiment Station, U. S. Forest Service, St. Paul, Minn., Tech. Note series.) 48 Million cords 1.2 — 1.14}— 9__ Production .8 /\ Apparent / ~\ consumption /’ \ a71— / \ / / / 5N: //-_/L\ |\ .2" I \ Imports 1946 1948 1950 1952 1964 1956 1958 1960 Fig. 8. Pulpwood production, imports, exports, and apparent consumption in Michigan, 1946-1961. (Source: Lake States Forest Experiment Station, U. 8. Forest Service, St. Paul, Minn., Tech. Note series.) ' 49 Million cords 1.1 l— 1-0 " Production Apparent consumption -—--o F,’ 1 '1 b /~‘ / ~ A ‘ ’ ‘5‘ ‘ ‘I - 0 ’ 1 1 1 1 I 11 1 1 1 1 1 1 1 1 1 1946 1948 1950 1952 1954 1956 1958 1960 Fig. 9. Pulpwood production, imports, exports, ahd apparent consumption in Munnesota, 1946-1961. (Source: Lake States Forest Ex- periment Station, U. S. Forest Service, St, Paul, Minn., Tech. Note series.) ' 50 Pulpwood Consumption Sampled pulp mills vary greatly in size (Table 11). The range is relatively narrow in the Central States (none of the mills sampled consumed as much as 50,000 cords of pulpwood in 1959), but in the Lake States, mill consumption ranges from less than 10,000 cords to several hundred thousand cords. Average consumption in 1959 was 19,000 cords in the Central States, 66,000 cords in the Lake States. Pulpwood consumption in the Central States is predominantly (over 90 percent) of hardwood species such as maple, oak, beech, aspen, and cottonwood. Hardwoods predominate in Central States forests, and the pulp industry in this area has had to adapt itself to the species available. In the Lake States, species consumption is more variable (Table 12). Hardwood species (mainly aspen) comprised 63 percent of the pulpwood consumed in Michigan in 1959, 58 percent in Minnesota, and 43 percent in Wisconsin. Softwoods used are mainly spruce, fir, and pine. Small mills in the Lake States tend to rely more on hardwoods species than the larger mills which reach out into wider procurement territories, generally operate more than one type of mill, and produce a variety of paper products. Some 85 percent of the pulpwood consumed in 1959 by mills using less than 10,000 cords was aspen. In the size class 10,000 - 50,000 cords, hardwoods comprised 60 percent of total wood consumption. Larger mills used more softwood than hardwood. 51 Table 11.--Distribution of sampled mills by size class of mill and study area, 1959 Thoushnds of cords purchased 32:2: Less than 10,000- 50,000 More than Egiaie 10,000 50,000 100,000 100,000 P (Number of mills) Michigan 2 3 3 1 9 Wisconsin 4 4 10 7 25 Minnesota 4 1 l 6 Lake States 6 11 14 9 40 011168 1 Indiana 1 1 Illinois 1 1 2 Iowa 2 2 MHssouri 1 1 Central States 2 4 7 North Central region 8Data not reported by mill. 52 Table 12.--Pu1pwood species received at sampled Lake States mills, by study area, 1959 All Species Peeled Rough Pulpwood (Thousand cords) MICHIGAN Aspen-Birch 102.1 205.0 307.1 Mixed hardwoods 1. 8 27. 5 29. 3 Spruce-Fir 78.8 - 78.8 Pine 10.4 109.9 120.3 Total 193.1 342.4 535.5 WISCONSIN Mixed hardwoods 9.4 158.2 167.6 Spruce-Fir 146.2 323.6 469.8 Pine 37.9 319.0 356.9 Hemlock 14.9 67.2 82.1 Tamarack 1.0 15.5 16.5 Other8 48.6 48.6 Total 557.8 1,146.8 1,704.6 MINNESOTA Aspen-Birch 160.5 67.7 .228.2 Spruce-Fir 14.0 62.8 76.8 Pine 9.0 58.5 67.5 Other 18.5 18.5 Total 183.5 207.5 391.0 aIncludes ponderosa and lodgepole pine. bSpecies not specified. 53 The use of hardwood species in the Lake States has increased rapidly in recent years (Table 13). In 1946, hardwoods comprised 25 percent of pulpwood consumption at Lake States mills. By 1961, the percentage of hardwoods increased to 54. Aspen is the principal pulp- wood species among hardwoods by far, although the rate of increase in the use of other hardwoods is more spectacular. All but two of the Lake States pulp mills used aspen in 1959. The movement from softwoods to hardwoods has been fostered by changes in pulp and paper technology which have made it increasingly feasible to shift from relatively scarce softwoods (particularly spruce and fir) to less expensive, locally plentiful hardwoods. Wood Supply Areas and Methods of Transportation The size, shape and location of the sampled pulp companies' timbersheds are quite variable, but fairly definite regional patterns are evident. Central States mills draw their wood supplies from relatively small, localized timbersheds which tend to assume an irregular, circular form about the mill. ‘Wood is drawn from an average distance ranging from 20 to 100 miles, depending primarily upon the volume of wood con- sumed. Lake States mills draw their wood supplies from considerably larger timbersheds, the nuclei of which may be located hundreds of miles from the pulp mill sites. Sampled Minnesota mills reach out an average distance of 108 miles for their wood supplies. Michigan mills reach out an average distance of 236 miles; and Wisconsin mills, 475 miles. Zeble 1 an 1:53.19: 54 Table 13.-~Pu1pwood consumption (receipts) at Lake States mills, by species groups, 1946-1961 Species 1946 1950 1955 1959 1961 (Thousand cords) Softwoods: Spruce-Fir 1,299 989 1,058 875 856 Pine 558 487 517 748 626 Hemlock-Tamarack 338 135 106 108 111 Total 2,195 1,611 1,681 1,731 1,593 M Hardwoods: Aspen-Birch 705 752 1,155 1,390 1,517 Other hardwoods 22 60 147 289 373 Total 727 812 1,302 1,679 1,890 W All species 2,922 2,423 2,983 3,410 3,483 Source: Lake States Forest Experiment Station. Technical Note series, U. S. Forest Service, St. Paul, Minn. Era 1100: transpcr transpor Tze high States a Fifty-n: ii the 1: af the 11 Cousin, rtCEive Iable 11 rail f0 it is [a hithry ‘ 55 Truck and rail are the principal means of transporting pulpwood from wood supply areas to pulp mills. In the Central States study areas, transportation distances are generally too short for economical rail transport. Only one mill, a Missouri firm, purchases rail-hauléd wood. The highest average truck haul distance in 1959 reported by a Central States mill was 50 miles. Maximum truck hauls seldom exceed 100 miles. Rail transportation is widely used in the Lake States (Table 14). Fifty-nine percent of the pulpwood purchased by sampled mills is moved to the mill by rail, 38 percent by truck and 4 percent by water. One-half of the mills sampled in Michigan, 95 percent of those sampled in Wis- consin, and two-thirds of the mills sampled in the Minnesota study area receive at least some rail deliveries. Table 14.--Mode of transportation by which pulpwood was delivered to sampled Lake States mills, 1959 Study Truck Railroad Water Total narea (Percent of volume) Michigan 66 23 10 100 Wisconsin 24 73 3 100 Minnesota 56 44 100 Lake States 38 59 4 100 Although truck transport is generally used for short hauls and 'rail for long hauls, there is no single point or mileage zone below which it is more economical to transport wood by truck and above which it is more economical to transport by rail. The break-even point is highly variable, depending on such factors as specific mill locations, 56 highways and rail loading points available, specific railroads and numbers of carriers involved, and bargaining abilities of those in- volved in rate negotiations (James.and Lewis, 1960). Generally, rail haul is not used for distances of less than 100 miles. Truck haul is used for shorter distances, although in some cases (particularly in Lower Michigan), truck hauls may extend beyond 200 miles. Average truck-haul distances reported by Lake States mills in 1959 range from 12 to 160 miles--the average is 28 miles in the Minnesota study area, 33 miles in Wisconsin, and 71 miles in Michigan. Locations of pulp mills and pulpwood production in the Central States are shown in Figure 10. The close relationship between mills and their procurement territories is evident here. Central States mills consume hardwoods which are widespread and abundant in relation to a small number of mills of limited size. Mills sampled in this area obtain a major part of their wood supplies within a radius of 45 miles. Figure 11 shows the location of pulp mills and pulpwood pro- duction in the Lake States. There is some geographical correspondence between pulp mill location and the location of pulpwood production, but it is evident that the relationship is not as close as it is in the Central States. The situation is at least partially clarified by reference to maps showing the locations of mills using a particular major species and the location of pulpwood production in the same species. Such maps have been develOped for aspen (Figure 12), pine (Figure 13), and spruce-fir (Figure 14). In Figure 12, it can be seen that there is some correspondence between aspen pulpwood production in the Lake States and the locations OCO1ICC- rlllL > D ZQuAVuU It .flflb MHA-ERUU outnv “It“b z. 20sh<0~.K.WM(l-HU zo-huzoflvtl 57 Some .326 £3.38 .«3 modem .53. «33 ammonium Heuuaou on... 5 souuoaseaou one .8326on @0033?” noouuoum uses—Human” uuouoh noumum neuuaou Eoum oozes—cone poor 1:3 .82 838... non: one noses of mo b.8633 6.662303 soon 28.3.33 H3": 39:53 .32 «hue—sou an moumum H9580 83m 3 seasons :m we occasion mo mowuosooua use 3:... 39a «0. :3“?qu .3 .3h ..... ....... ..... 26:86. _:E son 0 a: as 08.... I 86.7084" I mmv.~-ooo._ \\\\\ 898. E >h2300 cum momoo m0 mZKwh z. 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SH: new Banana oosumm scam .omHz condo woman one nomad mo oonuoa was mafioonm hp «OHHHE mHam amwwnuwz «mama .sum>eaoe meson he moosmfism you pwoo moowun ommmuu.mm manna 141 Table 40.--Base prices paid for pulpwood by Wisconsin pulp mills, by species and method of delivery, 1959 Aspen I iMiscellaneous Hardwoods Mill Rou h Peeled | Rough Peeled numbera Truck F.o.b. Truck F.o.b. Truck F.o.b. Truck F.o.b. to mill rail to mill rail _ to mill rail to mill rail (Dollars per cord) 1-4b 14.50 21.00 15.50 14.00 21.00 21.00 5 19.00 6°d 19.50 7-8 17.50 16.00 20.50 19.00 9: 19.50 18.00 10 14.50 13.00 15.50 14.00 11% 20.50 19.00 121 20.00 13 14.00 13.00 20.00 19.00 20.50 19.50 141 R 12.00 16.00 15-16 14.00 20.00 15.00 17i18 16.50 15.00 20.50 19.00 19 13.00 19.00 - 14.50 20.50 20.00 20m 21n 22-23° 21.00 20.00 15.00 16.50 24p 19.00 20.00 25 12.00 19.00 Spruce Balsam fir Mill Rough Peeled Rough Peeled number Truck F.o.b. Truck F.o.b. Truck F.o.bp. Truck F.o.b. to mill rail to mill rail to mill rail to mill rail (Dollars per cord) 1-4b 27.00 27.00 31.00 31.00 22.00 22.00 27.00 27.00 5 26.00 21.00 6C 7-8d 26.50 25.00 23.50 22.00 9: 28.50 27.00 33.50 32.00 ‘23.50 22.00 28.50 27.00 10 11% 28.50 27.00 33.50 32.00 23.50 22.00 28.50 27.00 121 22.00 22.00 13 28.50 27.50 33.50 32.50 22.50 21.50 27.50 26.50 143 27.00 31.00 22:00 26.00 15-16 28.00 23.00 17118 29.00 27.50 35.00 33.50 24.00 22.50 30.00 28.50 19m -27.50 27.00 32.50 32.00 21.50 21.00 26.50 26.00 20 21n 22-23° 24p 25 142 Table 40.--(Cont'd) Base prices paid for pulpwood by Wisconsin pulp mills, by species and method of delivery, 1959 Hemlock I Pine Mill a Rough Peeled ] Rough Peeled number Truck F.o.b. Truck F.o.b. Truck F.o.b. Truck F.o.b. to mill rail to mill rail - to mill -rail to mill rail (Dollars per cord) 1-4 20.00 25.00 14j R 19.50 19.00 23.50 23.00 15-16 19.00 17118 19In 18.00 17.00 23.00 22.00 18.00 17.50 23.00 22.50 20 21n 17.50 22-23° 17.50 17.50 24.00 24P 25 a FOur companies operate two or more plants in Wisconsin as separate establishments. Mills owned by one company are grouped since, in each case, the company pays the same prices at each of its mills. 1.,Commission of $1.00 added on dealer contracts. Spruce price lowered $1 and balsam price lowered $2 for f.o.b. rail purchases ori- ginating in Minnesota. c$42.50 for peeled Canadian spruce delivered to mill by railroad. d$1 added if trucking distance is over 50 miles. Commissions of $0.50, $1, and $1.50 added on dealer contracts. 8Commission of $0.50 to $1 added on dealer contracts. f$0.50 added if trucking distance is 35 to 49 miles; $1 added from 50 to 64 miles; $1.50 added for distances 65 miles and over. gCommissions of $0.50, $1, and $1.50 added on dealer contracts. $1.25 added if trucking is from Michigan. Peeled Canadian spruce de- livered to the mill by rail is purchased at an average price of $41.50. 143 Footnotes for Table 40 (Cont'd) hCommissions of $0.50, $1.00 and $1.50 added on large producer contracts. $42.00 for peeled spruce delivered to the mill by railroad. iBonuses of $0.50, $1, and $1.50 added on large producer con- tracts. $39.00 for peeled spruce and $38.00 for rough spruce delivered to mill by railroad. j$1 added if trucking distance is over 50 miles. kCommission of $1 added on dealer contracts. 1$1 added if trucking distance is 40-60 miles; $2 added above 40 miles. Commission of $1 added on dealer contracts. mNo prices given. nCommission of $1 added on dealer contracts. o$0.50 added beyond 36 miles; $0.50 added in each successive ring of townships up to $2.50 maximum. Commission of $1 added on dealer contracts. pSpruce price lowered $1 and balsam price lowered $2 for f.o.b. rail purchases originating in Minnesota. 144 .mowoomu coco mo ouoo you unmask ooufiomuocsum mo wanna :0 ocean pwoo o no oouuomou we use nomad? he oomsnouom voosnasmn .uuoaooo no muounooum owuma ou monsoon Huaomnm oouuomouc: spouse“ uoc op mesa .OOOfium some one mooaun HH«E.ou xonuhm om.na om.NH o w¢.n~ o~.mH Am o¢.mH oo.m~ sq oo.mH oo.oH oo.m~ oo.HN oo.cH oo.¢~ m oo.mH oo.¢~ N oo.m H , Aouoo can muofiaonv Hana HH«e_ou A Haws Haas Ou Haas Ou Haas Haas on 7 flash Haas ou Haws Haws ou .n.o.h moose .n.o.m assay xoous .n.o.m xosua .o.o.m moons .n.o.m sassy ,uooess Illllmmmmm a amuse .1_eueuum canoe _ vacuum canoe see: new afloasm . oosumm ‘1 scam . comu< mamas .suusafiuu mo ooauua one mowoomm he .mfiawa mass suomoccaz ooagaom an oooaaanm you been moowum omens-.He manna 145 Table 42.--Base prices paid for rough pulpwood trucked to sampled Central States mills, by species and study area, 1959 Study Mixed area hardwoods Pine (Dollars per cord)a Ohio 12.80 Ind ianab 14 . 75 Illinois Mill 1 12.37 Mill 2 12.40 14.80 Iowa Mill 1 14.00 11111 2° 13.50 17.50 Missouri 11.96 aPrices are reported in terms of the standard 128~cubic-foot- cord. One standard cord is equivalent to .8 of a long cord or unit, 4,500 pounds of soft hardwoods and 5,000 pounds of hard hardwoods or conifers. b$0.75 added if trucking distance exceeds designated minimum distance. An additional $0.75 is paid for each of five successive distance zones. c$1.25 bonus to Tree Farmers and producers who out according to a forester's recommendations. 146 Price Competition Among Mills Prices paid for pulpwood generally vary among the mills of a given study area, although some similarities can be noted in a few instances. However, the degree of similarity of dissimilarity is not easily seen. Prices listed in Tables 39 to 42 are "base" prices and do not necessarily reflect the prices paid or the actual costs to the mills. A number of pulp companies pay special bonuses on large producer or dealer contracts. The size of these bonuses are footnoted to the tables. Trucknto-mill prices can be particularly deceptive if one looks .only at stated base prices. Seven of the mills sampled in Lower Michigan, eight in Wisconsin, and one in Indiana offer suppliers a "delivery bonus" for wood trucked to the mill yard from beyond a specified minimum distance. Delivery bonuses paid by the eight ‘Wisconsin mills and one Indiana.mill are footnoted in the price tables. Bonuses paid by Lower Michigan mills are not footnoted but shown in some detail in Table 43. Delivery bonuses are variable, so that the prices paid for trucked wood vary between mills much more than is re- flected in the base prices listed in Tables 39 to 42. F.o.b. rail prices are more standardized than prices for truck deliveries. Usually a pulp mill pays the same price for a particular species from all loading points from which it will accept pulpwood.15 15Four Wisconsin mills which purchase f.o.b. rail at loading points in Minnesota and Wisconsin partially offset the higher costs of transportation from Minnesota by paying $1 to $2 less per'cord for the Minnesota pu lprOd. 147 Table 43.--Price bonuses added to the pulpwood base price for longer distances of truck haul paid by Lower Michigan pulp mills, 19598 Distance M111 M111 M111 M111 M111 Hill of haul 1 5 6c 7 Ba, 9 (Miles) (Dollars per cord) 0-25 26-50 .50 .50 51-75 1.00 1.00 1.00 .50 76-100 1.50 1.50 1.00 101-125 2.00 2.00 1.50 126-150 2.50 2.50 2.00 151-175 3.00 2.50 176-200 3.50 3.00 201-225 3.50 0-30 31-45 .40 .50 46-60 .80 1.00 61-75 1.20 1.50 76-100 1.60 2.00 101-200 2.00 2.50 8Unless otherwise noted, price bonuses apply to all species purchased. bBonuses offered, but data not available. cSliding price scale shown applies to peeled aspen. For pine, $1.50 is added if trucking distances are from 51 to 75 miles; $2.50 is added from 76 to 100 miles; $3.50, from 101-150 miles; and $4.50, over 150 miles. dSliding price scale shown applies to peeled aspen. For rough aspen, $0.50 is added if trucking distance is 31 to 45 miles; and $1 is added over 45 miles. 148 However, since transportation costs vary and these are paid by the mill, the total unit cost paid for rail wood varies by delivery points. Prices in the Central States study area are variable, but price competition is not involved. For the most part, each mill operates in an isolated local timbershed. The price it offers for wood is deter- mined by the relationship between its wood requirements and supply conditions in its timbershed. The price policy of one mill is not affected by the policy of another mill operating in a separate timber- shed. The situation is different for sampled mills in Lower Michigan and Minnesota in that there is more overlapping of supply areas in particular species. However, overlapping of supply area applies only to a portion of the pulpwood sought by an individual mill, and both standing timber and labor supply are generally plentiful. Under these circumstances, mills do not vie strongly with each other for wood supply. Some price leadership may be present, but it would be difficult to determine. The fact is, as Tables 39 and 41 indicate (together with the observations presented on various bonuses), substantial differences do show up in the prices paid by different mills for a given species. In Wisconsin, timbersheds overlap to a large extent. Mills are clustered and must compete for local wood supply, particularly in the less plentiful species. Under these circumstances, it might be ex- pected that prices would be fairly uniform. Some elements of price uniformity can be detected in Table 40, but in general, the variation in prices paid by different mills for a given species resembles that in other study areas of the region. 149 The comparisons by mills in the price tables do not throw much light on the competition among mills for wood supply, but there are other ways in which competition may be expressed easily offsetting small differences in price. Nonprice competition in pulpwood purchase is in such terms as these: financial, equipment, and other aids to suppliers; promptness of payment for delivered wood; and the size, duration and renewal of contracts. Truckednto4Mill and F.o.b. Rail Prices Since rail-delivered wood is nearly always purchased f.o.b. railroad within the region and truck-delivered wood is purchased at the mill yard, the pulp companies assume an added cost in rail deliveries. Consequently, with one exception16 a lower price is offered for rail purchase. The price differential, as reflected in the price tables, is highly variable. 'Wisconsin mills, which use rail haul much more ex- tensively than mills elsewhere in the region, generally hold to a differential of $1.50 per cord. In Lower Michigan, the differential ‘may range up to $7 per cord, but despite the larger differentials here, another study has shown that in all cases of comparisons, railroad transportation costs the Michigan pulp mills more than the added dis- tance bonuses to truckers for direct-to-mill deliveries (James and Lewis, 1960). 16One Minnesota mill reported paying $2 more for wood delivered to designated railroad loading points than for truck deliveries to the mill. 150 Despite the transportation cost comparisons of the James and Lewis study, Lower Michigan pulp companies purchase nearly one-fourth of their wood requirements f.o.b. railroad. Obviously, some nonprice factors influence their willingness to accept more expensive deliveries. To some extent longer rail hauls are encouraged to spread out wood supply areas and thus avoid overcutting within short trucking radius of the mill. Decisions are also affected by the number of contracts the company is willing to negotiate, the advantage of maintaining supply channels from areas that may be needed for wood supply over the long run, and the comparative yard space and unloading facilities available for rail and truck deliveries. Delivery timing may also tend to favor some rail haul since a few, but not all, companies assume the rate of delivery can be better controlled by rail than by truck. To pulpwood suppliers, the choice in terms of price received between delivery to railroad or directly to the mill is not always ‘self-evident. In the common situation where the buyer pays an additional $1.50 per cord for truck-toemill delivery over rail delivery, the supplier almost always gains by delivering to railroad. (There is an assumption here that truck haul to a loading point will average about 15 miles and will not exceed 30 miles.) It will not take many miles to eat up the $1.50 bonus for direct delivery to a mill. Where bonuses for truck delivery are scaled upward with greater distances, as in Lower Michigan, the producer's price comparison is variable. James and Lewis (1960) found that a seller located 5 to 10 miles from a rail loading point and 180 miles from a mill designated as “Mill A" faced an indifferent choice. At distances of less than 180 miles, he would 151 be better off to haul directly to the mill; at longer distances, to the rail loading point. However, if the same seller were to sell to “Mill B," the break-even point would be about 100 rather than 180 miles. Variation in Prices by Species Price variations by species are considerable. In each of the study areas, prices are lowest for aspen and other hardwood species. Pine averages about $5 per cord higher. Where used, balsam fir is several dollars higher than pine. And at the top of the price structure, some $4 to $5 higher than balsam fir, stands spruce. In all species, bark peeling adds to the price from $3 to $6 per cord. These relationships are a result of economic forces Operating on both the supply and demand side of the pulpwood market. On the supply side, price is affected primarily by the quantity of suitable timber and its location in respect to mill users, production costs, and the skill required of producers. Hardwood species are abundant throughout the region; they are accessible to all mills; and they frequently occur on sites which do not require special equipment or talents on the part of producers. Economically mature stands of pine are more restricted in location and are less abundant in relation to demand. Spruce and fir are relatively scarce species and they often occur on sites difficult to log. Since spruce and fir logging frequently requires special equip- ment and greater ability on the part of producers, higher prices are necessary to encourage production. On the demand side, the unit value of paper products manu- factured from various pulpwood species may also influence the prices 152 that pulp mills pay for these species. Other things being equal, the higher the value of the final product, the higher the price which can be paid for pulpwood. In this connection, Table 44 is illuminating. There is a great variation in value added by manufacture among the region's pulp mills, even for those mills using the same species. Nevertheless, the general pattern shows value added to be greater in softwood-using mills than in hardwood-using mills, and value added is usually highest in mills using spruce and fir. Spruce users may pay twice as much per cord of pulpwood as hardwood users, but in relation to value added by manufacture, the price may be similar. Variation in Prices Over Time A.characteristic tendancy of pulpwoOd prices to exhibit slug- gishness in changes over time has been noted elsewhere (James, 1957). This particular point cannot be checked by data obtained in this study, although a number of sampled producers complained about the failure of pulpwood prices to rise more rapidly over time. However, pulpwood price series published by various agencies in a number of states throughout the country reflect a tendency toward stability in prices. In the NOrth Central region, published price series of more than a few years duration are available only for Wisconsin and Illinois. Pulpwood prices for a number of species in Wisconsin and mixed hardwoods in Illinois are traced over a periodof years in Table 45. In general, prices have been sticky,especially so during the period of 1952 to 1962. The pattern does not seem to be strongly affected by the degree of competition among pulp mills for wood supply. The relative 153 Table 44.--Value added by manufacture per cord of wood received and pulpwood price as a percent of value added by_manufacture for sampled pulp mills, by study area, 1959 Hill Pulpwood price number Principal Value added as a percent and species by of value added study area consumed manufacture by manufacture (Dollars per cord) Michigan 2 Aspen 126 9°10 3 Aspen 260 12-14 5 Aspen 99 13-14 6 Pine 329 5-6 7 Aspen 124 11-15 8 Spruce-fir 271 11-12 9 Aspen 95 21-23 ‘Wisconsin 1‘4 Spruce-fir 392 7-8 5 Aspen 208 11-12 6 Aspen 74 27-30 7 Aspen 120 18-21 10 Aspen 207 7-8 11 Spruce-fir 257 11-12 13 Aspen 150 15-18 14 Aspen 136 15-16 15 Aspen-spruce 289 7-10 19 Pine 125 19-24 21 Pine 210 9-10 22-23 Aspen 187 10-11 24 Aspen 110 17-18 Minneso ta 1 Aspen 76 11-12 2 Spruce-fir 218 10-11 Iowa Hardwoods 119 13-16 aWeighted average pulpwood prices calculated based on prices paid for wood trucked-to-mill, water-borne to mill, or delivered to railroad loading points. Where rail delivery is significant, especially to many Wisconsin mills, pulpwood costs to mills are higher than the prices used in these calculations. 154 Table 45.--Average prices per cord of rough pulpwood delivered to mills in Wisconsin and Illinois, by species and years Wisconsina Illinoisb Mixed Balsam Mixed Year Aspen hardwoods Pine Hemlock Spruce fir hardwoods (Dollars per cord) 1962 12.75 14.00 17.75 19.25 26.75 20.75 12.50 1961 13.00 13.75 18.00 19.00 26.75 21.75 12.25 1960 13.00 13.75 18.25 18.75 27.75 22.50 11.75 1959 13.00 13.50 18.75 18.75 27.75 22.50 11.50 1958 12.00 14.75 18.50 18.75 27.75 22.75 13.00 1957 13.00 14.75 17.75 18.75 27.75 22.75 12.00 1956 13.50 14.50 17.75 19.50 26.75 20.75 12.50 1955 12.75 17.50 18.25 25.75 20.75 12.50 1954 13.00 17.75 19.00 25.25 21.25 11.50 1953 13.00 17.50 16.25 22.75 20.75 1952 13.00 12.50 18.00 16.25 25.75 21.50 1951 15.00 18.25 17.75 26.00 18.75 1950 10.50 14.50 20.50 17.50 1949 10.25 14.25 19.50 16.50 aPrices expressed on basis of truck deliveries to mills. bPrices quoted at local delivery points. These would not always represent truck deliveries to mills. Sources: Wisconsin data from Forest Products Price Review; Univ. of Wisconsin Extension Service, Madison, semiannual reports. Illinois data from.Timber Prices, Illinois Cooperative Price Reporting Service, Springfield, periodic reports. 155 price movements are similar for species like spruce and fir which are relatively scarce and sought by a number of mills reaching into the same areas and for species like mixed hardwoods (both in Wisconsin and Illinois) which are so abundant that little, if any, competition among mills for wood supply is necessary. One factor which limits price fluctuations is inherent in the method of purchasing. Most pulpwood is purchased under contract. Both oral and written contracts are used in which a pulp company commits itself to buy a specified volume over a specified period at a specified price. Contracts are usually negotiated several months in advance of the beginning of wood deliveries. The contract period it~ self is of variable length, but 6-month to lZ-month contracts are not uncommon. Thus the pulp companies commit themselves in advance to a given price level which will hold for a period which may extend up to a year or more in length. However, the major explanation for limited fluctuations in pulp- wood prices rests in the behavior of stumpage prices which are highly variable. As logging costs vary (and they will vary as logging shifts from one group of forest stands to another group of stands), stumpage prices vary inversely, thus lessening market pressures on pulpwood prices to change. This point will be explained more fully in a later discussion of stumpage costs. Effect of Intermediate Agent Roles on Pulpwood Prices Dealers who function as agent middlemen are required to adhere to the price policies of pulp companies with which they have delivery 156 contracts. Recognized middlemen transmit price information between buyers and sellers, but other than acting in an advisory capacity, they have no control over the absolute prices paid to producers. Prices re- ceived by producers who sell through agent middlemen are those offered by pulp mills. As payment for their services, recognized middlemen are paid a commission of $0.50 to $1.50 per cord handled. Merchant middlemen perform essentially the same marketing functions as agent middlemen but their special services are not recog- nized by pulp and paper companies. They are regarded as producers by the companies and receive the same price for delivered pulpwood as producers. In turn, merchant middlemen act independently of the price policies of pulp companies; they buy from producers at prices deter“ mined by their own negotiations with producers. Producers who sell pulpwood to merchant middlemen receive a price below that offered by pulp mills or agent middlemen. The size of this differential is extremely variable and no meaningful average can be derived. The maximum price a merchant middleman will pay producers is very close to the price he receives from pulp companies. The minimum price he will pay is the minimum he can persuade a producer who has no alternative markets to accept. Costs of Production Operating in a highly competitive industry and supplying oli~ gOpolistic buyers, the pulpwood producer in the North Central region has virtually no control over the delivered price of pulpwood. The amount he is able to earn depends on his ability to hold down costs, not his ability to affect price. 157 In this section, costs of pulpwood production will be discussed by the principal categories--stumpage, logging (felling, bucking and skidding), and hauling. Stumpage Costs One of the cost items that appears to be most susceptible to the producers influence is stumpage. In the common situation where forest ownership is dispersed among numerous holders of small tracts, where owners sell stumpage infrequently and with inadequate knowledge of the volumes and values involved, and where more timber is available for sale than can be sold, buyers frequently hold the initiative and the market power. This is not the universal situation. Some owners of .small tracts are better informed and better located geographically to permit bargaining with pulpwood buyers on more equal terms. Large land- holders, particularly public agencies, are often able to negotiate stumpage sales on equal terms. But in general, stumpage buyers in the region have a bargaining position superior to that of stumpage sellers. Unlike the situation with most commodities, costs of production have little effect on stumpage prices. Most stumpage is wild or volun- teer growth. As such, it is established without cash outlay on the part of the landowner. Fixed costs faced by private landowners—-taxes and interest charges--have to be paid whether stumpage is sold or not; they do not influence owners' decisions to sell at particular prices. Even public landowning agencies, which often assume costs of soil preparation, planting, protecting, and tending of forest stands, do not consider such costs in determining stumpage values. 158 Stumpage value is derived from "conversion return," which is the residual between the selling price of pulpwood and the costs of logging and hauling (Lewis and James, 1961). The conversion return includes both profit allowance (an estimated margin for profit, risk, interest on borrowed capital, and income taxes) and stumpage value. Imperfect knowledge on the part of both buyers and seller results in widely varying estimates of conversion return. Unequal bargaining abilities and local precedent result in different apportionments of conversion return into stumpage value and profit allowance. Stumpage prices would vary greatly simply as a result of the abilities» of buyers and sellers to estimate conversion return and break it down into stumpage value and profit allowance. An even more compelling influence is the infinite variation in forest conditions-- species composition, volume per acre, size and quality of trees, location, accessibility, topography, and the costs of conversion. Averages and range in pulpwood stumpage prices paid by sampled producers in 1959 are shown in Table 46. There is a wide range of price for each species in each study area. In comparing species, it will be noted that the highest hardwood prices are below the lowest softwood prices. Aspen prices tend to be close to mixed hardwoods prices. Balsam fir prices tend to be higher than pine prices (except in Minnesota), and spruce prices are the highest of all. Stumpage price represents from less than 10 to more than 30 percent of the price of delivered pulpwood, but the percentage represented by stumpage is usually higher in the more expensive than in the cheaper species. In aspen, stumpage price averages 10 to 12 percent 159 El . ; in nu HE W41§MIA.XW.;MEE .uaouuoa «H commence“ on oasonm moowua «woos ooaomn Home ms.n - om.o «mama. mo.~ owsuo>¢ "moumum Houuamo oo.m - m~.m oo.m - oc.~ co.m - ma.s om.u - os.o seems He.s sn.~ ow.~ mo.n mmmuos< "muommaaax oo.ou- oo.a co.» - om.e ma.m - mo.m co.m - mk.o oo.m - oo.n swans mm.» ma.m oo.m om.~ an.~ mmmuw>< "camcoomws mm.n - om.m mN.e - o~.m oo.e - oo.~ c~.H . oo.H «meme mo.e ma.m oe.m em.H omuum>< "cmwwsoaz Avuoo you mumHHonv Ham mooosoumn museum Banana scam ooxfit. ammo< «mucosooua ooaaamm he woaooAm acnma mmmfl «sous hogan he now mama smouaum owmQESum oooaaaam aw swoon one mmwmuo>uom :onsouxu caucoomfis .>«n= asmfi>mm mogum muosvoum amouom camaoumas “mounomv .Nomaumoma «Haws may on oouo>a~oo oooanaam swoon one ommmanum comma How :Hmnoomas.ow museum Enaaawa was Banana! .oH .wum use» Nome Homa coma. mmma mmmHanaH- omma mmma «mag mmma «mag flame snag fl _ _ _ A a _ _ _ _ _ _ a n 4 ‘\ / 7x > < \ /, ommnanum \ xx \ , > \ / \Iu- \ V e\// N z, \ I. L\ , W I w .(1 A \ ’\\ /<\ [a \ d W < m uH .ugm one manage ca om.¢w can «comma aw pwoo pom cm.m» usonm .oapmu on» a“ cacao uoc_aouu umoo Huaowuwoom as aw aocoo sons awcHHmom xummm oo.m n on.~ among mc.m owouo>¢ "moumum Hmnuamo om.HH- oo.~ om.HH . co.“ om.HH - oo.m oo.m - oo.n amuse e~.m mm.“ ma.e mm.o mmmtm>< "muons—EH: oo.HH- oo.a oo.HH - co.“ co.“ - oo.o oo.~ . oo.m swans om.m HH.m oo.~ -.on mmmums< ”camcoougz oo.on- oo.n oo.oa - so.“ on.“ - oo.m om.e - n~.e «meme mm.» mm.» -.o am.m owouusa "coma—Lug Apnea you mumHHonv uwu moooaoumn . monumm Emmflmn mafia omxfi: sound mmma «mono hwsum he «muooaooua ooamaam he nouuoamu amumoo unawNOAnu.n¢ manna 165 Costs of workmen°s compensation insurance represents another logging cost paid by some producers but not by others. Several of the Michigan and‘Wisconsin producers sampled report that insurance payments add from $1 to $2 per cord to production costs. Operators who employ fewer than two or three men (the specified number varies by state) and producers who subcontract logging operations are not legally required to carry workman's compensation insurance. Hauling Costs Hauling, as used here, refers to truck haul from roadside loading points to pulp mills or to railroad reloading points. Railroad trans- portation is not considered here because the cost does not comprise part of the suppliers' costs of production.17 Distance of direct truck haul to pulp mills is highly variable, depending on access to mills and company policy in encouraging longer truck hauls. In Wisconsin and the Central States study areas, dis- tances above 50 miles are avoided (Table 48). In Minnesota, the median distance is 55 miles.18 In Lower Michigan, where longer truck hauls are encouraged by sliding price scales, the median distance ranges from 70 miles in aspen to 200 miles for a small amount of spruce and fir. 17Pulpwood produced within the region and delivered by rail is nearly always purchased at railroad loading points. The pulp company buyer pays the freight. 18This contrasts sharply with the 30-mile median truck haul distance reported by Minnesota pulp mills sampled, but is explained by the fact that many Minnesota producers sampled market their pulpwood in Wisconsin. -..--q I 4.6..." no. .‘ lfl' -I.u_‘.\-I—me V -‘ 166 Table 48.--Median truck-to-mill and truck-to-railroad hauling distances reported by sampled producers, by species and study area, 1959 Central Species Michigan Wisconsin Minnesota Sggtes Mill Rail Mill Rail Mill Rail Mill (Miles) Aspen 70 15 35 13 53 19 Mixed hardwoods 32 Pine 75 15 38 18 67 20 Balsam. ) ) 200 25 31 17 48 21 Spruce ) -_ ._.___.._.A _.r§(s A) . n - , 167 Distance of haul to rail loading points is much more limited. It is usually 10 to 20 miles, while the longer hauls do not often ex- ceed 25 miles. Producers haul pulpwood when they have their own trucks, but often, pulpwood hauling is contracted out to independent haulers at a stated rate per unit of volume. Contracted rates vary, depending on distance, road conditions, size and quality of trucks, bargaining abilities, and customary rate patterns within localities. Producers' estimates of hauling costs with their own trucks are affected by the same factors and, perhaps most important, their ability to judge their actual costs. Many producers and part-time contract haulers do not understand the nature of fixed costs and often underestimate or exaggerate their costs of operation. For example, some producers report hauling charges for distances of less than 30 miles which are far in excess of those reported by most producers for hauls of 100 or more miles. Other producers, who apparently base their estimates on variable costs, re- port hauling costs for hauls of 50 to 70 miles which are lower than most producers report for distances of 30 miles or less. If the fixed costs are underestimated, operators frequently discover that when trucks have to be replaced, their out-of—pocket cost-accounting system has failed to provide adequately for such replacement. In the latter case, they may return to wage-earning occupations and their enterprises are taken over by new recruits eager to move from the wage earner to the independent operator role (James, 1957). 1-m. an nuns...- “- . . 168 Reported truck-hauling charges (both contracted and noncontracted) are shown in Table 49. These are summarized by distances and study areas. For comparison, the rate schedule set up by formula in Lower Michigan by the largest pulpwood-buying mill and its chief contract carrier is also shown (James and Lewis, 1961).19 Reported hauling costs begin at $3.75 per cord for minimum- distance hauls and increase, roughly, to $4 at 20 miles, $5 at 50 miles, $7 at 90 miles, and $9 at 140 miles. This progression in costs is not uniform within each study area, and the shape of the cost curve varies by study area. These differences may reflect actual differences to some extent, but they also reflect differences in the understanding of costs, as noted previously. It is believed that the formula rates shown for Lower Michigan are a more accurate reflection of hauling costs in the region than those reported by sampled producers. Hauling costs commonly represent from 12 to 35 percent of the delivered price of pulpwood. Because of their magnitude, these costs are frequently a determining influence on the decision to produce pulpwood in a given locality or stand of timber. An indication of the impact of hauling costs on pulpwood operations is given in Table 50 which shows residual prices after de- ducting trucking costs (as indicated in the formula rates reported by James and Lewis, 1961) from delivered pulpwood prices at pulp mills in 19In this schedule, the following formula rates apply: Distance Rate per mile per cord (miles) (dollars) 100 or less 0.065 101 to 150 0.055 over 150 0.049 :‘E‘I’W 169 Table 49.--Average truck-hauling costs for varying distances of haul reported by sampled producers, by study area, and costs es- tablished by formula in Lower Michigan, 1959 Distance Egztzlih Hauling costs reported by producersb 1: Lower Mi hi W1 1 Mi Central ‘mi es Michigana c gan scons n nnesota States (Dollars per cord) 10 3.00 3.75 20 4.00 4.00 3.85 4.25 5.60 30 4.50 4.04 6.50 4.86 40 5.00 4.88 50 5.00 5.33 4.91 5.00 4.79 60 5.00 6.20 70 5.50 6.13 4.16 7.00 80 5.50 6.01 90 6.00 7.25 7.00 100 6.25 7.01 110 6.25 120 6.60 130 7.20 140 7.70 9.00 aWhen hauling is to railroad reloading points rather than to pulp mills, an average of $1 should be added to the charges shown to cover the additional costs of loading and unloading necessary to place pulpwood on rail cars. (Source: James, LJM. and Gordon D. Lewis. Transportation costs to pulpwood shippers in Lower Michigan, Mich. Agric. Expt. Sta., Quart. Bull. 42(3): 444-469. 1961.) bAverage hauling cost figures shown represent averages of re- ports by at least three producers. Michigan data based on reports of 51 producers; Wisconsin, 45; MHnnesota, 38; and Central States, 18. .II 11" III I I'll J‘llll‘lll 11.1.... I 170 Table 50.--Residua1 prices left after deducting truck-hauling costs den termined by formula from delivered pulpwood prices for rough aspen in Lower Michigan, by pulp mill, 1959 Hauling Mill Mill Mill Mill Mill Mill Mill Mill Mill distance 6 11a 2 3b 40 5 68 7 8 9 (Miles) (Dollars per cord) 25 12.75 7.75 7.75 13.50 7.75 8.75 8.25 50 12.25 7.00 7.50 13.25 7.40 9.00 7.50 75 11.75 6.50 7.50 13.25 7.30 8.50 7.50 100 11.00 5.75 7.25 13.00 6.95 7.75 7.25 125 10.35 5.10 7.40 13.15 7.00 7.10 7.40 150 9.05 3.80 6.30 12.05 5.40 5.80 6.30 175 8.65 3.40 5.90 12.15 5.00 5.40 5.90 200 6.95 1.70 4.20 11.95 3.30 3.70 4.20 8Prices shown are for peeled aspen. Mill does not purchase rough aspen. bPrice data not given. cDetails of delivery bonuses paid not given. I In- ..‘x-‘_.¢-4-..a cum-o." .. -n o v‘ 171 Lower Michigan. These residuals indicate the amount available to cover stumpage costs, logging costs, and the margin for profit and risk. Despite the fact that Lower Michigan mills offer price induce- ments for longer truck hauls to an extent not encountered elsewhere in the region, the residual prices shown in Table 50 decrease steadily for each 25'miles of hauling distance by $0.25 to $1.70 per cord.20 The EU possibilities for profitable operations by producers decrease steadily with increasing distance (even where sliding price scales are used) except in those special instances where longer hauls are contracted r out at rates below actual costs. Comparison of Costs and Prices Costs of production are compared with delivered pulpwood prices in Tables 51 and 52. Table 51 shows the comparison for pulpwood den livered to mill yards by truck, and Table 52, for pulpwood delivered to rail sidings and placed on cars. Data were inadequate for-price- cost comparisons for pulpwood sold at other locations. Margins shown in both tables should be interpreted with caution. Prices received are averages. They are weighted by bonuses which some mills pay but which all producers do not receive. Costs are also averages, reflecting stumpage purchases and contract rates. However, it is important to recognize that many producers use their own stump- age or their own labor and equipment in logging and hauling; their 20There are two exceptions. In hauls to Mill 6, the residual price is calculated to be higher at 125 miles than at 100 miles. In hauls to Mill 8, the residual price is calculated to be higher at 50 miles than at 25 miles. 172 Table 51.=4Margin and profit ratios for the production of pulpwood in the North Central region delivered to mills by trucks, by study area, 1959 Price Stumpage Logging Hauling Profit Species receiveda cost ‘cost cost Margin ratio (Dollars per cord) (Percent) Michigan '5 Aspen rough 13.50 1.34 5.81 5.50 0.85 6 peeled 19.75 1.50 9.31 5.50 3.44 17 Pine 18.75 3.46 6.22 5.50 3.57 19 Spruce 32.00 4.69 8.55 9.80, 8.96 28 Balsam fir 28.00 3.79 8.55 9.80 5.86 21 5 Mixed hdwds. 13.75 i Wisconsin Aspen rough 13.00 2057 6.22 4.75 “0.54 peeled 19.50 2.95 9.77 4.75 2.03 10 Pine 18.75 5.06 6.48c 5.00 2.21 12 Spruce 27.75 8.53 9.30 4.50 5.42 20 Balsam.fir 22.50 5.79 9.11 4.50 3.10 13 Mixed hdwds . 13. so 2 . 30 7.00 4. 25d -0 .05 Minnesota Aspen peeled 17.75 1.21 10.38 5.00 1.16 6 Pine 17.50 2.89 ,~6.75 5.50 2.36 14 Spruce 23.25 4.41 8.24 5.00 5.60 24 Balsam fir 19.00 2.57 7.52 5.00 3.91 21 Central States Mixed hdwds. 13.11 1.87 5.05 4.50 1.69 13 8Unless otherwise noted, prices and costs are for unpeeled wood. bProfit ratio is the ratio of the margin to price received. cSample data inadequate. Assume Michigan-Wisconsin average of $6.48. dSample data inadequate. Assume average hauling distance of 25 miles at a cost of $4.25. 173 Table 52.--Margins and profit ratios for the production of pulpwood in the North Central region delivered to railroad sidings, f.o.b., by study area, 1959 Price Stumpage Logging Hauling ' Profit Species received cost cost cost “at in ratiob (Dollars per cord) (Percent) Michigan Aspen rough 12.50 1.34 5.81 4.50 0.85 7 peeled 17.50 1.50 9.31 4.50 2.19 12 Pine 18.00 3.46 6.22 4.50 3.82 21 Spruce 25.00 4.69 8.55 5.25 6.51 26 Balsam fir 21.00 3.79 8.55 5.25 3.41 16 Wisconsin Aspen rough 15.50 2.57 6.22 4.00 2.71 18 peeled 19.40 2.95 9.77 4.00 2.68 14 Pine 17.33 5.06 6.48c 5.00 0.79 5 Spruce 26.80 8.53 9.30 5.00 3.97 15 Balsam fir 21.75 5.79 9.11 5.00 1.85 8 Minnesota Aspen rough 10.75 1.05 6.83 5.00 -2.13 peeled 16.25 1.21 10.38 5.00 -0.34 Pine 16.00 2.89 6.75 5.00 1.36 8 Spruce 21.75 4.41 8.24 5.00 4.10 19 Balsam fir 17.50 2.57 7.52 5.00 2.41 14 aUnless otherwise noted, prices and costs are for unpeeled wood. b Price ratio is the ratio of the margin to price received. cSample data inadequate. Assume Michigan4Wisconsin average of $6.48. 174 out-of-pocket expenses are low. Such producers often impute lower costs to their operations than if stumpage had to be purchased or logging and hauling contracted. Despite these limitations, the margins shown indicate the rela- tive profitability of handling different pulpwood species. For truck— delivered wood, the margins are consistently highest for spruce, followed in descending order by balsam fir, pine, peeled aspen, mixed hardwoods, and rough aspen. For pulpwood delivered to railroad, the margin relationships for different species are roughly similar except for a few deviations. In a few cases, the calculated margins are negative--for trucked wood, rough hardwoods in Wisconsin and rough aspen in Minnesota; for rail wood, rough and peeled aspen in Minnesota. Some reservations apply to these calculations, particularly in the case of aspen moved by rail in Minnesota (data were limited and may not reflect average conditions). Nevertheless, comparisons of margins appear warranted. Spruce and fir are the most profitable species for producers in the Lake States. Rough aspen is clearly the least profitable species. The last column in Tables 51 and 52 expresses the profit margin as a percentage of the price received for delivered wood. This measure of profitability--termed profit ratio-~18 often considered a more re- vealing measure of profits than is the absolute margin (Weintraub, 1958). As in the case of margins, profit ratios should be interpreted with caution. There is sufficient reservation about the accuracy of the price and cost figures used to raise questions about the precision of 175 the profit ratios calculated. Moreover, we do not have sufficient ex- perience to judge how satisfactory the various profit ratios are. What we can do, as in the case of margin calculations, is to draw comparisons of relative profitability. By species, there is a general pattern in which some species yield higher profit ratios than other species; but it is not as clear-cut as in the case of calculated margins. Spruce usually yields the highest profit ratio in the Lake States, followed in descending order by balsam fir, pine, peeled aspen, and rough aspen. The striking exception is in rail deliveries in Wisconsin where profit ratios for aspen are relatively high. By method of delivery, profit ratios are generally higher for truck deliveries than for rail deliveries, again with the notable exception of aspen in Wisconsin. By study areas, no meaningful comparisons can be drawn. Profitability also needs to be considered in terms of size of operations. The average profit margin of $2.50 per cord in the Lake States, representing a profit ratio of 14 percent, may appear to be an adequate return; but judged alongside the size of operations, profit is low. The average output of Lake States producers in 1959 was 153 cords which translates into a profit of $382. Average profit in the Central States was considerably lower. However, it mmst be remembered that the major returns obtained by pulpwood producers are not fOund in profits, but in payment for contributed labor, and secondarily, for contributed stumpage and the use of producers' equipment. CHAPTER IX CONCLUSIONS Although the long-term trend in regional pulpwood consumption has been upward, pulpwood production has increased more rapidly. In- creases in local forest inventories and improvements in wood pulping technology permitting a shift from softwoods to the more abundant and widespread hardwoods have increased the relative use of local timber and decreased mill dependence on imports. These shifts in wood sources, although by no means uniform throughout the region, have had considerable effect on all aspects of pulpwood marketing--size of wood supply areas, methods of transportation, wood procurement practices, delivery patterns and wood storage, and prices and costs. Size of Wood Supply Areas Central States mills draw their wood supplies from relatively small, localized timbersheds. They reach average distances ranging from 20 to 100 miles, depending primarily upon the volume of wood consumed. Lake States mills draw their wood supplies from considerably larger timbersheds. Sampled Minnesota mills reach out an average of 108 'miles; Michigan mills, 236 miles; and Wisconsin mills, 475 miles. 176 177 Obviously, the preference of pulp companies is for small, lOcalized timbersheds, but mill size, nearness of competing mills, location of forest resources, and species requirements dictate different policies in regard to procurement territories. Another factor of significance is in considerations of the short term versus the long term. Crop trees take many years to grow. Pulp- wood procurement which ignores the need to replace timber stands through the slow growth process could exhaust timber supplies close to the mill and force enlargement of supply areas over time. However, most companies in the region are cognizant of this problem. The fact that forest inventories are increasing while many timbersheds are decreasing in size is evidence that timbersheds have not generally become overly constricted in size. Again, nearly all Lower Michigan mills and many Wisconsin mills offer price bonuses for wood trucked in over longer distances. Such sliding price scales are geared, at least in part, to the desire to spread cutting operations out over large areas so as to avoid local forest depletion. Methods of Transportation Truck and rail are the principal means of transporting pulpwood from wood supply areas to pulp mills. In the Central States, where maximum hauls seldom exceed 100 miles, nearly all transportation is by truck. In the Lake States, 59 percent of the pulpwood is moved to mills by rail, 38 percent by truck, and 4 percent by'water. Distance of haul has a considerable influence on method of trans- portation. From the point of view of the pulp companies, trucking is cheaper where hauls are short, rail is cheaper where hauls are long. 178 The break-even point is highly variable, but as a generalization, it can be placed in the vicinity of 100 miles. From the point of view of the pulpwood supplier, faced with the typical bonus of $1.50 per cord for direct delivery to the pulp mill and an average distance of 15 miles to a rail loading point, direct truck delivery to the mill will usually be more profitable up to a distance of about 100 miles. With increasing price bonuses for longer truck hauls, as is characteristic in Lower Michigan, break-even distances may move out to 200 miles. The percentage of wood moved to mills by truck has been increasing. This process has been facilitated by the increasing use of price bonuses for longer truck hauls, the increasing tendency of pulp companies to deal directly with producers rather than intermediate agents, and the tendency toward shrinkage in wood supply areas with the broadening in species use. The process may be expected to continue because of economies in cost. Many rail hauls being used are more expensive to pulp companies than truck hauls from.the same area. However, rail transportation will continue to be used by Lake.States mills, not only because it is cheaper for long hauls, but because it offers some non- price advantages in intermediate-distance hauls where rail transport may be more expensive than truck. To some extent longer rail hauls are encouraged to spread out wood supply areas and thus avoid over- cutting within short trucking radius of the mill. Decisions are also affected by the number of contracts a company is willing to negotiate (intermediate agents with large contracts usually prefer to ship by rail), the advantage of maintaining supply channels from areas that may be needed for wood supply over the long run, and the comparative yard 179 space and unloading facilities for rail and truck deliveries. Some companies also assume that the rate of pulpwood delivery can be better controlled by rail than by truck. Wood Procurement Practices Sampled Lake States mills obtained 57 percent of their 1959 pulpwood supplies from producers, 26 percent from intermediate market agents, and 16 percent from.cmmpany logging Operations or contract cutters. Central States mills purchased mainly from.producers; only 14 percent of their total receipts were obtained from intermediate agents. The procurement system relied on most heavily is one of direct purchase from pulpwood producers. MOreover, the region's pulp companies have been increasing the percentage of wood receipts Obtained by this system. The percentage of receipts Obtained from-dealers (intermediate agents) has been decreasing, as has the percentage obtained from campany logging operations or contract cutters. The gradual shift frmm company Operations is readily understood. Such operations require more planning, supervision and actual manage- ment on the part of wood procurement staffs. They also place more responsibility on the pulp companies for adherence to workmen's com- pensation insurance, Social Security, and other-labor laws. MOreover, it is doubtful that many companies can produce pulpwood as cheaply as independent producers are willing to produce it. The shift in purchases from dealers to producers is not as readily understood. The dealer system simplifies wood procurement. 180 The average dealer contract in the Lake States is for 2,300 cords. (It could be much larger except that most companies using dealers prefer to have dealers contract with a number Of companies.) In contrast, the average producer contract is for 153 cords. Thus, in working with dealers, pulp companies greatly reduce the number of agreements that need to be negotiated and coordinated. Dealers assume the responsibility for farming out their contracts to a number Of pro- ducers. They generally Offer loans to producers in advance of de- liveries. They assume some responsibility either in providing stumpage or aiding the producer to locate stumpage. Some dealers assist pro- ducers in financing equipment purchases. Other forms of aid Often include the furnishing of technical advice on methods Of pulpwood production, assistance in finding markets for timber products other than pulpwood, and posting of market supply and demand conditions. One type of dealer is the merchant middleman who is not recog- nized as a dealer by pulp companies. He receives the producer price for delivered wood, but Obtains remuneration for his services by purchasing from producers at lower prices. Since he is, in effect, merely a producer to the pulp company, there is no recognizable policy of en- couraging or discouraging his role. The more significant intermediate agent role is that of the agent middleman who acts as a broker or commission agent. Agent middle- men account for 85 percent of the wood handled by dealers. They do not actually take title to the pulpwood they handle, but receive a commission for their services from the pulp companies ranging from $0.50 to $1.50 per cord. 181 The agent middleman's average charge Of $1 per cord for his services cannot be viewed as excessive. His services eliminate a major portion of the purchasing costs on the part Of the pulp companies. Pulp companies relying on dealers exclusively report nominal pur» chasing costs other than the commissions paid. In contrast, companies buying exclusively or mainly from producers report purchasing costs ranging up to $2.40 per cord, and averaging about $2. Thus, it 'appears that the agent middleman system can Often supply pulpwood to mills at lower total cost than a system of direct purchase from pro- ducers, thereby lowering the overall cost of pulpwood marketing. In view Of the comparative costs, it is worth considering the possible advantages pulp companies gain by eliminating middlemen. One advantage is in the increased ability of a company to locate cutting Operations in such a pattern as to more effectively regulate the sustained-yield capacity Of a supply area. This has soma.va1ue to a company which does not encounter much intermill competition within its timbershed. Another advantage claimed by some companies is that the procurement staffs which need to be built to handle the many producer contracts can be used in slack periods to engage in public relations work and the Offering Of forest management assistance to small land- owners. Again, there may be a gain of flexibility in regulating the flow Of pulpwood to mill yards. Another possible advantage, not generally claimed, is that the bargaining position of the pulp com- panies is stronger when dealing with large numbers of small producers rather than a more restricted group of economically stronger dealers. 182 Advantages and disadvantages of direct producer contracts need to be weighed against those of the dealer system. One system or the other may appear to have the advantage in the framework of each com- pany's appraisal. No clear-cut generalization can be made, but in terms of short-run wood procurement costs, the advantage usually lies with the dealer system. An aspect of procurement practices that needs much more attention is the size and duration of producer contracts. The average number of cords per producer contract is 153 in the Lake States, 210 in the Central States. These are small contracts which, even under conditions of continuity in contract renewal, would yield small returns. Gross sales value of the pulpwood produced averages about $2700 per producer both in the Lake States and Central States. The return in profit and labor wage might be less than half this figure. Despite the lack of precision in the calculations, it is clear that the average contract is too small to employ a producer gainfully throughout the year. About 60 percent Of the producers are part-time operators. As wage earners, farmers or other binds Of workers who engage in timber production on a part-time basis, they may prefer part-time employment in the pulpwood industry. On the other hand, some 40 percent of the pulpwood producers depend on timber production for their full live- lihood. Too many of them, as well as too many of the currently part-time producers, inability to Obtain larger contracts is a chronic grievance. Larger contracts are needed to lower the unit costs Of the machines and equipment required for efficient production, 183 to hold a stable, efficient labor force, and to raise the economic level of those engaged in pulpwood production. Related to the greater need for contracts large enough to permit efficient Operators to achieve economies of scale and adequate earnings is the need for more stable Operations. Seasonality in pulpwood pro- duction and deliveries caused by adverse weather conditions and temporary highway weight restrictions is, at least to some extent, unavoidable. The widespread practice of concentrating purchase activities during those periods of the year when rural labor is unem- ployed also produces seasonal swings in production and deliveries. Pulp company procurement and inventory policies which are independent of natural forces and the availability of woods labor also prevents stabilization of producer operations. Procurement policies tied to policies of having a minimum level of inventories on hand at the time of property tax assessment or of maintaining small stockpiles of wood by regulating purchasing activities in accord with short-term fluc- tuations in pulp mill wood requirements compound the problems Of the full-time heavily capitalized producer. Such producers require sta- bility of Operations to maintain low per cord production costs by continuous employment of machines and equipment. There is also a need for more stable operations over a period of years. An efficient, dependable woods labor force cannot be built and held if drastic changes in contracts are made from year to year. Such changes are a common complaint. They are understandable in terms of pulp company needs to adjust wood supply to fluctuations in their product markets, but it might be possible for the pulp companies to 184 gain more stability in production for at least the full-time segment Of the producer populations. This might be accomplished by such ‘means as a greater willingness to stockpile pulpwood, or by compen- sating for year to year fluctuations in wood requirements by varying the volume of purchases from seasonal producers. Prices and Costs In comparing average costs and prices, it has been noted that producers' profit margins per cord of pulpwood appear to be generally adequate. The margins are greatest for those species which are relatively scarce or more difficult to log; margins are least for the more abundant species and those which can be logged on a part-time, nonspecialized basis. Obviously, all producers would like to receive higher prices for pulpwood which would increase the profit margins to them. However, this is not the basic problem in the industry. Large-scale, specialized producers with stable contracts often point-out that existing pulpwood prices do not pose special problems. Their earnings are more dependent on their ability to obtain full and efficient use ' of machinery and labor employed through volume production on a full-time basis. There is a widespread surplus both of timber growing stock and labor in the pulpwood-producting areas of the region. Under conditions of present pulpwood producing technology the productive capacity of producers who are willing to produce pulpwood under existing price patterns is excessive relative to demand. This is apparent both from 185 the interviews with pulp companies and with producers. In light Of this excess supply, it is quite likely that some pulp companies could reduce prices paid and still meet mill requirements for wood, at least in the short run. Present policies which lead to widespread use of seasonal, part-time pulpwood producers can be viewed in one sense as socially desirable in that they offer some earnings to a great many rural workers. In another sense, such policies contribute to the redundancy and underemployment Of labor and capital in the pulpwood-producing regions. They may provide income which, when added to that available from other marginal forms of employment, is enough to hold an abundance Of low-income labor in the area. The primary need is for the transfer of redundant capital and labor to other, more productive uses. It might be better long-run policy for the pulp companies to limit the number of pulpwood contracts to a more restricted number of producers and to assist these producers to lower costs through the use of the most efficient machines and equipment and to attain attractive, stable income levels through large-scale, sustained pro- duction. ‘Whether such a policy will lead to a more socially desirable use of resources is difficult to determine. The ability of the small, part-time producer who would be displaced by such a policy to find more socially productive employment will depend upon his abilities and skills and economic conditions exogenous to the pulpwood industry. LITERATURE CITED American Paper and Pulp Association. The statistics Of paper--l960. New York: American Paper and Pulp Association, 1961. Busch, T. N. Problems of pulpwood production. Southern Pulp and Paper Manufacturer 19(9): 108-110. September, 1956. Central States Forest Experiment Station. Central States timber resources. Central States Forest Experiment Station, Miscellaneous Release 13, 1957. Christen, H. E., g£_§l, A survey Of the capability of the Lake States forests to support an expanding pulp and paper industry. Unpublished Ph.D. Thesis, Michigan State University, East Lansing, 1961. Cunningham, R. N. Lake States timber resources. Lake States Forest Experiment Station, Station Paper 37, 1958. 31 pp. Duerr, William A. The economic problems of forestry in the Appalachian region. Cambridge: Harvard University Press, 1949. 317 pp. Falk, Harrij., Jr. Timber and forest products law. Berkeley: Howell-North, 1958. 365 pp. Findell, Virgil E., ggpgl, Michigan's forest resources. Lake States Forest Experiment Station, Station Paper 82, 1960. 46 pp. Fixmer, F. N. Key to survival has been mechanization, produce more with less men. Pulpwood Annual 1960, pp. 119-120. 187 FWD Corporation. Truck and trailer size and weight restrictions. FWD Corporation, Clintonville, Wisconsin, 1961. 64 pp. Guttenberg, Sam and Joe D. Perry. Pulpwooding with less manpower. Southern Forest Experiment Station, Occasional Paper 154, 1957. 34 pp- Hamilton, J. R., E. T. Paris, and R. Dixon. Pulpwood selling practices in Georgia. Georgia Agricultural Experiment Station, Bulletin 279, 1953. 16 pp. Hensel, J. S. An Upper Michigan aspen pulpwood operation. American Pulpwood Association, Technical Release NO. 60-R9, 1960. . A pulpwood Operation in the Central Upper Peninsula of Michigan. American Pulpwood Association, Technical Release No. 60-R10, 1960. h. A pulpwood operation in Northeastern Minnesota. American Pulpwood Association, Technical Release No. 60-Rll, 1960. . .A Northeastern Minnesota Pulpwood Operation. American Pulpwood Association, Technical Release No. 60-R12, 1960. . A jack pine Operation in North Central'Wisconsin. American Pulpwood Association, Technical Release No. 60-R15, 1960. Holland, 1. I. Timber products marketing in the Claypan region Of Illinois. Illinois Agricultural Experiment Station, Bulletin 689, 1962. 40 pp. 188 Horn, Arthur G. Pulpwood production in Lake States countries, 1959. 'Lake States Forest Experiment Station, Station Paper 85, 1960. Hutchison, 0. Keith. Indiana's forest resources and industries. Central States Forest Experiment Station, Forest Resource Report 10, 1956. 44 pp. :.and J. T. Morgan. Ohio's forests and wood using industries. Central States Forest Experiment Station, Forest Survey Release 19, 1956. 40 pp. and Robert K.'Winters. Marketing the farm forest products of southern Illinois. Central States Forest Experiment Station, Technical Paper 123. 1951. 39 pp. Illinois Cooperative Crop Reporting Service. Timber prices. Springfield, Semiannual reports. James, L. M. Marketing of pulpwood in Michigan. Michigan Agricultural Experiment Station, Special Bulletin 411, 1957. 67 pp. sand Gordon D. Lewis. Transportation costs to pulpwood shippers in Lower Michigan. Michigan Agricultural Experiment Station Quarterly Bulletin 42(3):444-469. February, 1960. Jefforis, A. L. Trends in pine pulpwood marketing in the South. Journal Of Forestry 54(7):463-466. July, 1956. 189 King, D. B., EELS}: Forest resources and industries of Missouri. Central States Forest Experiment Station, Research Bulletin 452, 1949. 89 pp. and R. K. Winters. Forest resources and industries of Illinois. Illinois Agricultural Experiment Station, Bulletin 562, 1952. 95 pp. Lewis, Gordon D. An analysis of pulpwood marketing in Michigan. Unpublished Ph.D. Thesis, Michigan State University, East Lansing, 1960. and Lee M; James. Costs and returns for pulpwood production in Michigan. Michigan Agricultural Experiment Station Quarterly Bulletin 44(2):210-225. November, 1961. Lockwood Trade Journal Company. Lockwood's directory Of the paper, and allied trades. New York; Lockwood Trade Journal 00., Inc., 1961. Manthy, Robert S. and Lee M; James. Marketing posts, poles and piling in selected areas of the North Central region. Michigan State University Agricultural Experiment Station, Technical Bulletin 290, 1963. 63 pp. 'McCauley, Orris D. Forest products prices in Ohio--l958. Central States Forest Experiment Station, Technical Paper 161, 1959. 10 pp. 190 iMcCauley, Orris D. Forest products prices in Ohio-~1959. Central States Forest Experiment Station, Technical Paper 170, 1960. 14 pp. McNutt, J. W. New developments to improve methods Of pulpwood procurement in the Lake States. TAPPI MOnograph Series NO. 4, 1947. pp. 95-1040 Mandel, Joseph J. Pulpwood production and consumption in the Central States, 1960. Central States Forest Experiment Station, Technical Paper 182, 1961. 14 pp. . Trends in pulpwood production and consumption in the Central States. Central States Forest Experiment Station, Technical Paper 188, 1962. 11 pp. Office Of Iron Range Resources and Rehabilitation. Minnesota forest products marketing and pricing review, Quarterly reports. Parker, Reid J. and Aull, G. H. Farm marketing Of sawtimber and pulpwood in a selected area of South Carolina. South Carolina Agricultural Experiment Station, Bulletin 403, 1953. 29 pp. Pfeifer, Ray E. The economic importance Of the forests in the Upper Peninsula of Michigan. Michigan Department Of Conservation, Forestry Division. Unnumbered mimeograph, 1961. 6 pp. Phillips, Charles F. and Delbert J. Duncan. Marketing principles and methods. Chicago: Richard D. Irwin, Inc., 1952. 728 pp. 191 Quigley, Kenneth L. ‘Marketing farm‘woodland products in the Missouri Ozarks. Missouri State Division Of Resources and Development, 1952. 17 pp. and James C. Yoho. Marketing timber from Iowa farm woodlands. Iowa State College Cooperative Extension Service, F 122. 8 pp. Schnell, Robert L. Harvesting pine pulpwood in the Tennessee Valley. Tennessee Valley Authority, Division of Forestry Relations, Report NO. 238-61, 1961. 20 pp. . A survey of pulpwood dealers in the Tennessee Valley. Tennessee Valley Authority, Division Of Forestry Relations. Report NO. 219- 58, 1958. 17 pp. Stone, Robert N. and Harry W. Thorne. Wisconsin's forest resources. Lake States Forest Experiment Station, Station Paper 90, 1961. 52 pp. Thomson, Ray B. The South Carolina pulp and paper industry. Report of the Committee Investigating the Pulp and Paper Industry of South Carolina. Columbia, General Assembly of the State of South Carolina, 1943. 40 pp. Thornton, Philip T. and James T. Margan. The forest resources of Iowa. Central States Forest Experiment Station, Forest Survey Release 22, 1959. 46 pp. 192 Turner, Michall S. and Glen H. Mitchell. Farm marketing of timber in eight southeastern Ohio counties. Ohio Agricultural Experiment Station, Agricultural Economics 316, 1950. 23 pp. United States Bureau of the Census. Pulp paper, and board: 1961. Current Industrial Reports Series'M26A(61)-13. 'Washington: r1 Government Printing Office, 1961. . U. 8. Census of manufactures: 1958. Pulp, paper and board, Industry Report MC58(2)-26A. Washington: Government Printing Office, 1961. U. S. Forest Service. Timber resources for America's Future. U. S. Department of Agriculture, Forest Service. Washington: Government Printing Office, 1958. 713 pp. . Woodpulp mills in the United States. U. S. Forest Service, Division Of Forest Economics Research. 'Washington: Government Printing Office, 1961. 20 pp. United States Pulp Producers Association. Wood pulp statistics. New York: United States Pulp Producers Association, Inc., 1961. 95 pp. United States v. Consolidated Paper, Inc., 1963 Trade Regulation Reports. [Par. 70, 627, Trade Cas.], Western District Wisconsin, February 7, 1963. University of Wisconsin Extension Forestry Office. Wisconsin forest products review. Madison: University Of Wisconsin, Semiannual reports. 193 Weintraub, Sidney. An examination of some economic aspects of Forest Service stumpage prices and appraisal policies. U. 8. Forest Service, Washington. Unnumbered Mimeograph. 1958. 201 pp. Zielgit, W. Mb Employment possibilities of—a northern Michigan forest. Lake States Forest Experiment Station, Technical Note 331. 1950. 2 pp. - n, .. _ ”v . . ‘._-_‘-___ APPENDIX A. PRIMARY MANUFACTURER SCHEDULE CONFIDENTIAL Date Recorder Fbrm No. 1 State NCMr27 Project PRIMARY MANUFACTURER . Name Of firm Address. A. General: 1. Do you process logs or bolts in your mill? Yes No 2. How many years has your firm been Operating at this location? years. 3. Does your firm operate other wood-using mills? Yes No If YES, how many? If YES, how many in the study area? 4. Is your firm engaged full time in the processing of timber products? Yes NO If NO, what other business or occupation is your firm engaged in? (specify) If NO, what percentage of your firm's gross revenues in 1959 was realized from the sale of forest products? percent. 5. What were the principal products of your firm at this location in 1959? _ a. d. b. e. c. f. 6. How many full-time employees did you have at this location in 1959? 7. How many seasonal employees did you have at this location in 1959? ‘ B. Quantities of wood receipts: (Volume by log rule.) 1. What was the total volume of wood receipts at your mill in 1959? (List by species, raw product, peeled or unpeeled, and units of measure.) '_“. m been“. 9 195 ‘What was the monthly pattern in volume of wood receipts at your mill in 1959? (If monthly data are not available, indicate peak-and low-use months and amounts.) Jan . July Feb. ' Aug. Mar. Sept. April Oct. May i Nov. June Dec. Do you consider the monthly pattern in volume of wood receipts at your mill in 1959 to be a typical pattern? Yes No If NO, why not? Do you prefer seasonal variations in the volume of wood receipts at your mill? Yes NO If YES, what is your preferred pattern of receipts? How do you explain the seasonal variations in the typical pattern of wood receipts at your mill? Were any of your wood receipts in 1959 resold in the same form in which they were received? Yes NO If YES, what species and amounts? If YES, why was this wood not processed at your mill? a. What changes in the annual volume of wood receipts at your mill took place in the years 1950-59? (List by species) All 3 ies 196 8. Did your mill do any custom processing of timber products in 1959? Yes NO If YES, what species, products, and amounts? If YES, did you receive as payment a portion of the wood processed? Yes No If YES, what percentage? percent. C. Inventories of raw wood: 1. ‘What was the monthly pattern in raw wood inventories on hand at your mill in 1959? (If monthly data are not available, indicate peak-and low-inventory months and amounts.) Jan. July Feb. ‘Aug. Mar. Sept. April Oct. May Nov. June Dec. 2. Do you consider the monthly pattern in raw wood inventories at your mill in 1959 to besa typical pattern? Yes No If NO, why not? 3. DO you prefer seasonal variations in the volume of raw wood inventories on hand at your mill? Yes No If YES, what is your preferred pattern of inventories? If N0, do you have an objective of maintaining a fixed ratio in the volume Of raw wood inventories to annual receipts? Yes No If YES, what is this ratio? If NO, do you have an objective Of maintaining a fixed ratio in the volume of raw wood inventories to annual manufactured product sales? Yes No If YES, what is this ratio? ‘ 4. Is there a physical limit to the volume of raw wood inventories that can be stored in yard economically? Yes NO If YES, what is the nature of the limitation? If YES, what is the maximum volume? 197 5. Is there a technological limit to the volume of raw wood inventories that can be stored in yard because of insects, fungi, etc.? Yes No If YES, what is the nature of the limitation? If .YES, what is the maximum volume? D. Sources of wood receipts: 1. Where is the 1959 wood supply area for your mill? (List counties or states if only a few are involved. Outline on attached county map, if possible. State radius of Operations in miles.) a. Counties or states. b. Radius of operations. 2. Have there been any significant changes in the wood supply area for your mill over the period 1950-1959? Yes NO If YES, what were the changes? 3. What is the ownership of the forest land from.which the 1959 wood supply was obtained? (Estimate volume of wood or per- centage of total volume Obtained from each source.) Vo lume 3 Vo lume Z._ a. Own 1and* d. Nat. forest b. Farmer e. State forest c. Other private f. Other public *Include subsidiary company ownership 4. Have there been any significant changes in the wood supply Obtained from different forest landownership sources over the period 1950-59? Yes . No. If YES, what were the changes? If YES, what explanations can you give for these changes? __ 5. From‘which agent sources was your 1959 wood supply Obtained? (Estimate volume of wood or percentage of total volume Obtained from each source.) Volume Z. a. Own employees: (1) From.own lands (2) From other lands b. Producer c. Dealer d. Other agent (specify) 198 6. Have there been any significant changes in the agent sources of your wood supply over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these.changes?.__ E. WOod procurement methods and policies: 1. 'What percentages of your firm's 1959 cut wood purchases were Obtained under the following types of agreements? 1 a. Written contract b. Oral contract c. NO prior agreement QUESTIONS 2 TO 6 APPLY ONLY TO WRITTEN CONTRACTS FOR CUT WOOD PURCHASES. IF THERE WERE NO SUCH CONTRACTS, SKIP TO QUESTION 7. 2. How far in advance Of the beginning of wood deliveries are contracts usually negotiated? 3. ‘What are the details of standard written contracts for cut wood purchase? (Obtain printed copies where possible. Check the following items which are included in contract specifications; then describe as much as possible.) a. Kind of wood b. Amount Of wood c. Size of wood d. ______Quality of wood e. Time or period Of delivery j f. Method of payment 3. Time of payment 4.. Are there any differences in the cut wood purchase contracts made with different groups of agents? Yes NO If YES, what are these differences? 5. Does the standard cut wood purchase contract specify any conditions under which timber is to be harvested? Yes No If YES, what are the conditions? 6. 199 How binding are the provisions of standard written contracts for out wood purchases (i.e., how much leeway is given suppliers in completing terms of contract and how much leeway does your firm allow itself in terminating contracts)? QUESTIONS 7 TO 11 APPLY ONLY TO ORAL CONTRACTS FOR CUT'WOOD PURCHASES. IF THERE WERE NO SUCH CONTRACTS—,- SKIP TO QUESTION 12. 7. 8. 10. 11. How far in advance of the beginning of wood deliveries are contracts usually negotiated? What are the details of oral contracts for cut wood purchases? (Check the following items which are included in agreements; then describe as much as possible.) a. _____.Kind of wood b. Amount of wood c. Size of wood d. Quality of wood e. Time or period of delivery f. Method of payment 3. Time of payment Are there any differences in the oral contracts for cut wood purchases made with different groups of agents? Yes No If YES, what are these differences? Does the oral contract for cut wood purchases specify any conditions under which timber is to be harvested? Yes __ NO If YES, what are the conditions? How binding are the provisions of oral contracts for cut wood purchases (i.e., how much leeway is given suppliers in completing terms of contract and how much leeway does your firm allow itself in terminating contracts?) _QUESTIONS 12 TO 16 APPLY ONLY TO STUMPAGE PURCHASES BY YOUR FIRM; IF NO STUMPAGE PURCHASES ARE MADE, SKIP TO QUESTION 17. 12. 13. 14. 15. 16. 200 What percentages Of your firm' 8 1959 stumpage purchases (in terms of volume) were obtained under the following types Of agreemen ts ? Z. a. ‘Written contract with public landowners b. 'Written contract with private landowners c. Oral contract What are the details of your firm's standard contracts for : stumpage purchases from.private landowners? (Check the following items which are'included in agreements; then describe as much as possible.) a. Species b. Amount Of timber _ c. Size of timber d. Quality of timber e. Time or period of harvest f. ‘Method of payment 3. Time and basis of measurement If the standard contract for stumpage purchases from private landowners is a written contract, and if oral contracts are also made, how does the oral contract differ in its provisions frmm the written contract? Are there any differences in the stumpage purchase contracts made with different groups of private landowners? Yes NO If YES, what are these differences? Does the standard contract for stumpage purchases from private landowners specify any conditions under which timber is to be harvested? Yes 'NO If‘YES, to what percentage of your 1959 private purchases do these specifications apply? percent. If YES, what are the specifications? If’NO, are there any harvest conditions your firm will accept in contracts for stumpage purchases upon a private landowner' s insistence? Yes No If YES, what are the conditions? 201 17. What percentages of your 1959 wood purchases were obtained through negotiations initiated by your firm or initiated by sellers? 2. a. Mill b. Sellers c. Indefinite 18. When your firm takes the initiative in negotiating wood purchases, what are the methods you use in contacting poten- tial suppliers? 19. From how many different persons or agencies was your 1959 wood supply purchased? No. No. a. Nonproducer c. Dealer landowner d. Other agent b. Producer (specify) Was 1959 a typical year? Yes No If NO, why not? 20. What quantities of your 1959 raw wood receipts were purchased on the stump, roadside, and delivered? Quantity 3. On the stump Roadside F.o.b. railroad Delivered to mill 21. Did the points of purchase of 1959 raw wood receipts vary by agent sources of wood? Yes NO If yrs, how did they differ? 22. To what degree does your firm perform the following functions in regard to wood procurement? a. Logging? b. Hauling? QUESTIONS 23 AND 24 APPLY ONLY TO CUT WOOD PURCHASES FROM.PRODUCERS. 202 23. Are any producers Offered payments (loans) in advance of time of payment specified in a standard contract? Yes NO If YES, is this the usual procedure adopted by your firm? Yes NO If YES, does the producer pay interest on such prepayments or loans? Yes NO If YES, what is the size limitation on the prepayments or loans offered? 24. Are any producers Offered other business aids by your firm? Yes NO If YES, is this the usual procedure adopted by your firm? Yes No If YES, what are these business aids? QUESTIONS 25 AND 26 APPLY ONLY TO CUT WOOD PURCHASES FROM DEALERS OR EQUIVALENT AGENTS. 25. Are any dealers offered payments (loans) in advance of time or payment specified in standard contract? Yes NO If YES, is this the usual procedure adopted by your firm? Yes ____ No If YES, does the dealer pay interest on such prepayments or loans? Yes No If YES, what is the size limitation on the prepayments or loans Offered? 26. Are any dealers offered other business aids by your firm? Yes No If YES, is this the usual procedure adopted by your firm? Yes NO If YES, what are these business aids? 27. DO you assign exclusive procurement territories to your wood suppliers? Yes No If NO, what policy do you follow to minimize the overlapping of procurement territories by your wood suppliers? 28. DO you Object to having your wood suppliers take contracts to supply-wood to other firms using the same kind of timber? Yes No If YES, what action do you take? 203 29. Do you have any wood procurement policy designed to minimize wide fluctuations in the volume of wood called for in successive contracts made with suppliers? Yes NO If YES, explain what this policy is. F. Prices: 1. What prices were paid per unit of volume (price scale at end of 1959) for wood purchases by your firm? (Fill in as many items as possible, by species, product, and quality classes.) S 11 ies classes roduct and S e Roadsi ' Deli ered to rr F o b rr 'Tru at ard Rr at ard. iT—“. n- r' 7?". 1:7; in.» :35": 7: -—~.—— 7““1‘; 2. Are there any differences in the prices paid to different groups of landowners or agents? Yes NO If YES, what are these differences (and which prices are quoted in item 1 above)? 3. Are there any differences in prices paid for delivered wood on basis of distance of haul? Yes No If YES, what are these differences by mode of transportation (and which distances do the prices quoted in Item 1 above refer to )? 4. Are the prices you pay for wood raw material the result of: (Check the correct explanation below) a. your Offered price? c. negotiation? b. the seller's price? d. rother (specify) 5. Are the prices received for your principal products sold the result of: (Check the correct explanation below) a. your price? c. negotiation? b. the buyer's price? d. other (specify) 204 6. 'What prices per unit of volume were Obtained by your firm at the end of 1959 for the processed products you sold? (List by principal products.) 7. How frequently have the prices you pay for wood raw material changed during the 3-year period 1957-59? . times. an 8. How frequently have the prices received for the principal products sold by your firm changed during the 3-year period 1957-59? “ times. “C ‘l“.1 G. Costs: 1. 'What logging costs (felling and bucking and skidding) per unit of volume applied to wood products delivered to your mill at the end of 1959? (Estimate prevailing contract rates, if logging costs were not paid for directly by your firm.) ___ ‘I'l-h-x._.a a M. 2. What truck hauling costs per unit of volume applied to wood products delivered to your mill at the end of 1959? (Esti- mate prevailing contract rates, if hauling costs were not paid for directly by your firm.) a. Hauling by truck direct to mill. (1) Average cost? (2) Min. cost? (3) Max. cost? (4) Cost by distance zones? b. Hauling by truck to railroad. (1) Average cost? (2) Min. cost? (3) MAX. cost? (4) Cost by distance zones? 3. Do truck hauling costs above include the cost of loading? Yes NO If NO, what is the estimated loading cost per unit of volume? If N0, who pays the cost of loading? 4. Do truck hauling costs direct to mill include the cost of unloading? Yes NO If NO, what is the estimated unloading cost per unit of volume? If NO, who pays the cost of unloading? 5. 7. 205 DO truck hauling costs to railroad include the cost Of unloading and loading onto railroad cars? Yes No If NO, what is the estimated cost per unit of volume? If NO, who pays this cost? What railroad hauling costs per unit of volume applied to wood products delivered to your mill at the end of 1959? a. Average cost? b. Min. cost? c. Max. cost? d. Cost by distance zones? What was your cost per unit of volume for wood purchasing activities in 1959? H. Transportation: 1. What percentages of the volume of your raw wood receipts in 1959 were delivered to your mill by different methods of transportation? ’ Z a. Truck b. Railroad c. Other (specify) What were the truck-hauling distances to your mill in 1959 in direct-to-mill wood hauls? Miles a. Average distance b. Min. distance c. Max. distance What were the truck-hauling distances to railroad in 1959 in wood hauls where deliveries to your mill was by railroad? Miles a. Average distance b. Min. distance c. Max. distance What were the railroad-hauling distances to your mill in 1959 in wood hauls where deliveries to your mill was by railroad? Miles a. Average distance - b. Min. distance c. Max. distance I. 206 What changes in the use of different methods of transportation for deliveries of raw wood to your mill have occurred over the period 1950-59? 6. What changes in the distances of haul for deliveries of raw wood to your mill have occurred over the period 1950-59? a. Truck deliveries? b. Railroad deliveries? Sales of processedpproducts: 1. What was the total volume of production at your mill in 1959? (List by products.) 2. What percentage of mill capacity did your 1959 production represent? percent. 3. What was the gross sales value of processed products at the mill in 1959? 4. 'What was the monthly pattern of production at your mill in 1959 (in terms of volume)? (If monthly data are not available, indicate peak-and low-production months and amounts.) Jan. July Feb. Aug. Mar. Sept. April Oct. May Nov . June Dec. 5. DO you consider the monthly pattern of production at your mill in 1959 to be a typical pattern? Yes No If NO, why not? 6. What was the monthly pattern in processed wood inventories on hand at your mill in 1959? (If monthly data are not available, indicate peak-and low-inventory months and amounts.) Jan. July Feb. Aug. Mar. Sept. April Oct. iMay NOv. June Dec. 207 7. Do you consider the monthly pattern in processed wood inven- tories at your mill in 1959 to be a typical pattern? Yes NO If NO, why not? 8., Do you prefer seasonal variations in the volume of processed product inventories on hand at your mill? Yes No ' If YES, what is your preferred pattern of inventories? If NO, do you have an Objective of maintaining a fixed ratio in the volume of processed product inventories to product sales? Yes No If YES, what is this ratio? 9. Is there a physical limit to the volume of processed product inventories that can be stored in yard economically? Yes NO If YES, what is the nature of the limitation? If YES, what is the maximum volume? 10. Is there a technological limit to the volume of processed product inventories that can be stored in yard because of insects, fungi, etc.? Yes NO If YES, what is the nature of the limitation? If YES, what is the maximum volume? 11. What percentages Of the volume of your principal prOducts in 1959 were produced to fill previously Obtained orders? Product 7; a. b. c. d. 12. What area did your sales territory cover in 1959? (List by principal products. List counties or cities, or outermost states or cities. State maximum distances.) 13. 14. 15. 16. 17. 208 Have there been any significant changes in the product market areas for your firm over the period 1950-59? Yes No If YES, what were the changes? TO which types of buyers did sales of your principal products in 1959 go? (Estimate, by products, the volume or percent of total volume.) ‘ olume Volume Volume Manufacturer Wholesaler Retailer Industrial user Other specify Have there been any significant changes in the volumes of products going to different types of buyers of your principal products over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? How many different buyers of your products did you sell to in .1959? E2; Re. a. Manufacturer d. Industrial user b. Wholesaler e. Other (specify) c. Retailer Have there been any significant changes in the numbers of buyers of your principal products over the period 1950-59? ' Yes No If YES, what were the changes? If YES, what explanations-can you give for these changes?‘ 209 18. What is the typical time interval between receipt of an order from a buyer and the filling of that order? (List separately by principal products, if time interval varies.) a. How much variation from the typical time interval occurs? b. What are the causes of variations from the typical time interval? ' J. Aggnt sources of raw wood products, 1959: Name Address ._ #4.... #1; MAJQ APPENDIX B. INTERMEDIATE MARKET AGENT INTERVIEW SCHEDULE CONFIDENTIAL Date Recorder Form NO. 2 State NCM-27 Project INTERMEDIATE MARKET AGENT Name of agent or firm :3.» Address .51 A. General: 9 ___—__. t 1. DO you buy and sell or receive a commission for handling ; rough wood products? Yes No f 2. How many years has your firm been operating at your present ; location? years. 3. What form of business organization does your firm have? a. Single owner c. Corporation b. Partnership d. Cooperative 4. Is your firm engaged full time in the marketing of raw timber products? Yes NO If NO, what other business or occupation is your firm en- gaged in? a. Sawmill operator ____d. Farmer b. Operator of other wood- e. Wage earner using mill (specify) ___ f. Other(specify) c. Store Operator If NO, what percentage of your gross revenues in 1959 was realized by sales of raw timber products? percent. 5. ‘What were the principal raw timber products handled by your firm in 1959? a. d. b. ' e. c. f. 6. Is your marketing of raw timber products typically a year-round business? Yes No If NO, what are the typical months of operation? 7. How many full-time employees in your timber-marketing business did you have in 1959? employees. 8. How many seasonal employees in your timberdmarketing business did you have in 1959? employees. 211 B. Quantities of wood purchases: (volume by log rule) 1. What was the total volume by product and unit of measure, of your raw timber purchases in 1959? (List only timber handled as part of your business as an intermediate market agent.) ct Volume a. b. c. d. e. f. 2. What was the monthly pattern in your raw timber purchases in 1959? (List separately by products) ' Jan Feb Mar ril Ma June Jul Au Se t Oct.‘ Nov Dec If monthly data are not available, what were the: '(List separately by products) a. Peak inventory . months and amounts (aver.) b. Lowest inven- tory months and amounts (aver.) c. Other months and amounts (aver.) 212 DO you consider the monthly pattern in volume of your wood purchases in 1959 to be a typical pattern? Yes No If NO, why not? How do you explain the seasonal variations in your typical pattern of wood purchases? What changes in the annual volume of your wood purchases took place in the years 1950-59? (List by products.) Year All roducts 1 958 57 1 56 l 5 1 . 3 1 2 951 50 _u . 213 C. Inventories of raw wood: 1. Did you assemble raw timber products at your own wood yard in 1959? Yes No IF YES, mswsa QUESTIONS 2 TO 6. IF no, sup TOSECTION D. SOURCES or woos PURCHASES. 2. What raw timber products did you assemble at your own wood yard in 1959? ' —-—.—. —---.-~ 4‘ .._‘-l -.. I ’1 _ . V a. C. e. b. d. I f. ‘v'l rs 3. Why do you assemble raw timber products? im‘: .I‘maf‘u. m '3- infil— 4. What was the seasonal variation in the volume of raw timber inventories on hand at your yard in 1959? (List separately by products.) a. Peak inventory months and amounts (aver.) b. Lowest inven- tory (months and amounts (aver.) c. Other months and amounts (aver.) 5. Do you consider the seasonal pattern in raw timber inventories "at your yard in 1959 to be a typical pattern? Yes No If NO, why not? 6. Do you have an objective of maintaining a fixed ratio in the volume of raw timber inventories to sales? Yes NO If YES, what is this ratio? 214 D. Sources of wood supply: 1. 3. Where is your 1959 wood supply area located? (List.counties or states if only a few are involved. Outline on attached county map, if possible. State radius of Operations in miles.) a. Counties or states. b. Radius of Operations. Have there been any significant changes in your wood supply area over the period 1950-59? Yes NO ' If YES, what were the changes? ‘What is the ownership of the forest land from which your 1959 wood supply was obtained? (Estimate 1 Of total volume from each source.) ' a. Own land d. Nat. forest b. Farmer e. State forest c. Other private f. Other public 3. Don't know 1 Have there been any significant changes in your wood supply from different forest landownership sources over the period 1950-59? Yes No _If YES, what were the changes? If YES, what explanations can you give for these changes? From which agent sources was your 1959 wood supply obtained? (Estimate 1 of total volume obtained from each source.) 2 Z a. Own employees: A b. Producer ' (1) From own lands c. Other agent (specify) (2) From other lands Have there been any significant changes in the agent sources of your wood supply over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? 215 WOod procurement methods and policies: 1. What percentages of your 1959 cut wood purchases were Obtained under the following types of agreements? a. Written contract ‘— b. Oral contract QUESTIONS 2 TO 5 APPLY ONLY TO WRITTEN CONTRACTS. IF THERE WERE NO WRITTEN CONTRACTS, SKIP TO QUESTION 6. 2. How far in advance of the beginning of wood deliveries are contracts usually negotiated? 3. What are the details of standard written contracts for cut wood purchase? (Obtain printed cOpies where possible. Check the following iteme which are included in contract specifi- cations; then describe as much as possible. a. Kind of wood b. Amount of wood c. Size of wood d. Quality of wood e. Time or period of delivery f. Method of payment 3. Time of payment 4. How binding are the provisions of standard written contracts for out wood purchases (i.e., how much leeway is given suppliers in completing terms of contract and how much leeway does your firm allow itself in terminating contracts)? 5. Did you buy out wood in 1959 only when you had a contract for its resale? Yes No If NO, explain your policy of purchases in advance of sales contracts. 216 QUESTIONS 6 TO 9 APPLY ONLY TO ORAL CONTRACTS FOR CUT WOOD PURCHASES. IF THERE WERE NO SUCH CONTRACTS, SKIP TO QUESTION 10. 6. 8. 9. How far in advance of the beginning of wood deliveries are contracts usually negotiated? What are the details of oral contracts for out wood purchases? (Check the following items which are included in agreements; then describe as much as possible.) a. Kind of wood b. Amount of wood c. Size of wood d. Quality of wood e. Time or period of delivery f. Method Of payment g. Time of payment How binding are the provisions of oral contracts for cut wood purchases (i.e., how much leeway is given suppliers in completing terms of contract and how much leeway does your firm allow itself in terminating contracts?) Did you buy cut wood in 1959 only when you had a contract for its resale? Yes NO If NO, explain your policy of purchases in advance of sales contracts. 217 QUESTIONS 10 TO 13 APPLY ONLY TO STUMPAGE PURCHASES BY YOUR FIRM. IF NO STUMPAGE PURCHASES ARE MADE, SKIP TO QUESTION 14. 10. What percentages of your firm's 1959 stumpage purchases (in terms of volume) were Obtained under the following types of agreements? Z a. Written contract with public landowners b. Written contract with private landowners c. Oral contract 11. What are the details of your firm's standard contracts for stumpage purchases from private landowners? (Check the following items which are included in agreements; then describe as much as possible.) a. Species b. Amount of timber c. Size of timber d. Quality of timber e. Time or period of harvest f. Method of payment 3. Time and basis of measurement 12. If the standard contract for stumpage purchases from private landowners is a written contract, and if oral contracts are also made, how does the oral contract differ in its provisions from the written contract? 13. Does the standard contract for stumpage purchases from private landowners specify any conditions under which timber is to be harvested? Yes No If YES, to what percentage of the 1959 private purchases do these specifications apply? percent. If YES, what are the specifications? If NO, are there any harvest conditions your firm will accept in contracts for stumpage purchases upon a private landowner's insistence? Yes NO If YES, what are the conditions? 14. 15. 16. 17. 18. 19. 218 What percentages of your 1959 wood purchases were obtained through negotiations initiated by your own firm or initiated by sellers? 1 a. Own firm b. Sellers c. Indefinite When your firm takes the initiative in negotiating wood purchases, what are the methods you use in contacting potential suppliers? From how many different persons or agencies was your 1959 wood supply purchased? NO. No. a. Nonproducer c. Other agent landowner (specify) b. Producer Was 1959 a typical year? Yes No If NO, why not? What quantities of your 1959 raw wood receipts were purchased on the stump, roadside, and delivered? Quantity 1 On the stump Roadside ' F.o.b. railroad Delivered to mill Did the points of purchase of 1959 raw wood receipts vary by agent sources of wood? Yes No If YES, how did they differ? To what degree does your firm perform the following functions in regard to wood procurement? a. Logging? b. Hauling? j tar—W .‘Anidifn'fi.ieiifii"—'—‘ut .. - “q 219 20. Are any wood suppliers Offered payments (loans) in advance of time of payment specified in a standard contract? ' Yes No If YES, is this the usual procedure adopted by your firm? .Yes No If YES, does the producer pay interest on such prepayments or loans? Yes No If YES, what is the size limitation on the prepayments or loans offered? 3 . .| 'a-r-b" v: va... 21. Are any wood suppliers Offered other business aids by your firm? Yes No If YES, is this the usual procedure adopted by your firm? Yes No Hanger-am M. ass-ems)! If YES, what are these business aids? 22. Do you assign exclusive procurement territories to your wood suppliers? Yes No If NO, what policy do you follow to minimize the overlapping of procurement territories by your wood suppliers? 23. DO you object to having your wood suppliers take contracts to supply wood to other firms using the same kind of timber? Yes NO If YES, what action do you take? 24. Do you have any wood procurement policy designed to minimize wide fluctuations in the volume of wood called for in successive contracts made with suppliers? Yes No If YES, explain what this policy is. 220 F. Prices: 1. What standard delivered prices did your firm pay per unit of volume to your wood suppliers at the end of 1959? (Fill in as many items as possible, by products and/or species.) Products and/ Road- Delivered F.o.b. Trucked Rr. to ‘ or species side to rr. rr. to mill. 'mill 3 ’WM ..'.1 .\ - I fire—r .1." ‘- . . -Jt.o"_ . 2. Are there any differences in the prices paid by your firm for delivered wood on the basis of distance of haul? Yes _ NO If YES, what are these differences by mode of transportation (and which distances do the prices quoted in Item 1 above refer to?) 3. ‘What changes in prices paid for wood by your firm have occurred over the period 1950-59? 4. Do you have any difficulty in Obtaining sufficient market price information as a basis for your business decisions? a. On products you have to buy? Yes No b. On products you have to sell? Yes No If YES to a. or b., explain. 221 G. Costs: 1. What stumpage costs per unit of volume applied to your wood purchases at the end of 1959? (Estimate prevailing contract rates, if stumpage was not paid for directly by your own firm.) Products and/or Average Minimum Maximum species cost cost COSC 2. What logging costs (felling and bucking and skidding) per unit of volume applied to your wood purchases at the end of 1959? (Estimate prevailing contract rates, if logging costs were not paid for directly by your firm.) A Products andfor Average . Minimum Maximum species cost cost cost 3. 222 What truck-hauling costs per unit of volume applied to your wood purchases at the end of 1959? (Estimate prevailing contract rates, if hauling costs were not paid for directly by your firm.) Product Truck to mill: (1) Aver. cost (2) Min. cost (3) Max. cost (4) Cost by distance zones A— . 'Ar‘1l} . . -— Truck to rr.: (1) Aver. cost . (2) Min. cost ’" (3) Max. cost (4) Cost by distance zones Do truck-hauling costs to mill include the cost of loading? Yes No Do truck-hauling costs to mill include the cost of unloading? Yes No Do truck-hauling costs to railroad include the cost of un- loading and loading onto railroad cars? Yes No What railroad-hauling costs per unit of volume applied to wood products delivered to your markets at the end of 1959? P qfiuct Rr. to market: (1) Aver. cost (2) Min. cost (3) Max. cost (4) Cost by distance zones 223 H. Sales of raw timber products: 1. What was the gross sales value of timber products sold by your firm in 1959? 2. What was the total volume, by product and unit of measure, of your timber products sales in 1959? (List only timber handled as part of your business as an intermediate agent.) Product olume ntfl 3. What changes in the annual volume of your timber products sales took place in the years 1950-59? (List separately by products.) All Year roducts 2 l 1 l l 1 l l l 1 l l 4. What area did your sales territory cover in 1959? (List by principal products. List counties or cities, or outermost states or cities. State maximum distances.) 7. 224 Have there been any significant changes in the product market areas for your firm over the period 1950-59? Yes No If YES, what were the changes? To which types of buyers did sales of your principal products in 1959 go? (Estimate, by products, the volume or percent of total volume.) Vblume 1 Volume 2 Volume I a. Manufacturer b. Wholesaler c. Retailer d. Industrial user e. Other (specify) Have there been any significant changes in the volumes of products going to different types of buyers of your principal products over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? How many different buyers of your timber products did you sell to in 1959? No. . No. a. ‘Manufacturer d. Industrial user b. Wholesaler e. Other (specify) c. Retailer Have there been any significant changes in the numbers of buyers of your principal products over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? 225 10. What is the typical time interval between date of a purchase contract with a buyer and product delivery? (List separately by principal products, if time interval varies.) a. How much variation from the typical time interval occurs? b. What are the causes of variations from the typical time interval? I. Agent sources of raw wood products, 1959: Name Address APPENDIX C. PRODUCER INTERVIEW SCHEDULE CONFIDENTIAL Date Recorder Form No. 3 »State Name of timber producer Address A. General: 1. 2. NCMr27 Project TIMBER PRODUCER 1 How many years have you been operating as a timber producer at your present location? Years. Lib-2a.“. mrmtm; A.» ¢~1I Are you a full-time timber producer? Yes No If NO, what other business or occupation are you engaged in? a. Sawmill operator d. Farmer b. Operator of other e. ‘Wage Earner wood-using mill f. Other (specify) (specify) c. Store operator If NO, what percentage of your gross revenues in 1959 was realized from your business as a timber producer? Percent. What were the principal raw timber products you handled in 1959? a. d. b. e. c. f. Is your timber-producing business typically a year-round business? Yes No If NO, what are the typical months of operation? How many full-time employees in your timber-producing business did you have in 1959? employees. How many are members of your family? employees. How many seasonal employees in your timber-producing business did you have in 1959? employees. How many are members of your family? employees. 227 B. Quantities of timber purchases: (volume by log rule) 1. Did you purchase any timber as a basis for your timber- producing business in 1959? Yes No If YES, what volume, by product and unit of measure, was purchased as stumpage in 1959? Product Volume Product , Volume 3. do I be e. I ET! Co f. I E 1 Was 1959 a typical year? Yes No If NO, why not? If YES, what volume, by product and unit of measure, was purchased as cut wood in 1959? Product Volume Product Volume a. d. b. e. c. f. Was 1959 a typical year? Yes No If NO, why not? IF NO, SKIP TO C. SOURCES OF WOOD SUPPLY. 2. What changes in the annual volume of your timber purchases took place in the years 1950-59? (List by products) Year All rodu 195 l 6 1955 1954 53 19 2 1951 1950 C. 1. 228 Sources of wood supply: Where is your 1959 wood supply area located? (List counties if only a few are involved. State radius of operations in miles.) a. Counties b. Radius of operations Have area If there been any significant changes in your wood supply over the period 1950-59? Yes No YES, what were the changes? What wood each a. b. c. Have from 1950- If is the ownership of the forest land from which your 1959 supply was obtained? (Estimate 1 of total volume from source.) Z 7_. Own land d. .Nat. Forest Farmer e. State forest Other private f. Other public there been any significant changes in your wood supply different forest landownership sources over the period 59? Yes No YES, what were the changes? If YES, what explanations can you give for these changes? From what agent sources was your 1959 wood supply obtained? (Estimate 1 of total volume obtained from each source.) 8. Have 2. 2 b. Other producer c. Other agent (specify) Own employees: (1) From own lands (2) From.other lands there been any significant changes in the agent sources of your wood supply over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? 229 D. Wood procurement methods and policies: 1. What percentages of your 1959 wood supply were obtained by the following stumpage acquisition methods? I a. Stumpage from own lands b. Stumpage purchased by producer c. Stumpage purchased in producer's name by product buyer d. Stumpage provided by product buyer QUESTIONS 2 TO 15 APPLY ONLY TO STUMPAGE PURCHASES BY PRODUCER. IF NO STUMPAGE PURCHASES WERE MADE, SKIP TO QUESTION 16. 2. What percentages of your 1959 stumpage purchases (in terms of volume) were obtained under the following types of agreements? 1 a. Written contract with public landowners b. Written contract with private landowners c. Oral contract 3. What are the details of your standard contracts for stumpage purchases from private landowners? (Check the following items which are included in agreements; then describe as much as possible.) 8. Species b. Amount of timber c. Size of timber Quality of timber 2. Time or period of harvest f . Method of payment 3. Time and basis of measurement 4. If the standard contract for stumpage purchases from private landowners is a written contract, and if oral contracts are also made, how does the oral contract differ in its provisions from the written contract? 230 5. Does your standard contract for stumpage purchases from private landowners specify any conditions under which timber is to be harvested? Yes No If YES, to what percentage of your 1959 purchases do these specifications apply Percent. If YES, what are the specifications? If NO, are there any harvest conditions your firm will accept in contracts for stumpage purchase upon a private landowner's insistence? Yes No 'If YES, what are the conditions? 6. How binding are your contracts for stumpage purchase (i.e., how much leeway do you allow yourself in terminating contracts)? 7. How far in advance of the beginning of harvest operations are stumpage purchase contracts usually negotiated? 8. Do you buy stumpage only when you hold a contract for the sale of products? Yes No If N0, explain your policy of stumpage purchases in advance of contracts for the sale of products. 10. 11. 12. l3. 14. 15. 16. 231 What percentages of your 1959 stumpage purchases were obtained through negotiations initiated by you or initiated by land- owners? 1 a. Producer b. Landowner c. Indefinite When you take the initiative in negotiating stumpage purchases, what are the methods you use in contacting potential suppliers? rs How many stumpage purchase contracts did you make in 1959? contracts. Was 1959 a typical year? Yes No If NO, why not? From how many different persons or agencies did you obtain your stumpage purchases in 1959? persons or agencies. Was 1959 a typical year? Yes No If NO, why not? Is there a minimum volume per acre below which you will not consider stumpage purchase? Yes No If YES, what is this minimum? Is there a.minimum volume per tract below which you will not consider stumpage purchase? Yes No If YES, what is this minimum? Is there a minimum value of timber per tract below which you will not consider stumpage purchase? Yes No If YES, what is this minimum? Did you receive funds from any of your product buyers for stumpage purchases in 1959? Yes No If YES, which buyers? If YES, what portion of your total stumpage purchases in 1959 did these funds cover? 232 17. Did you subcontract some or all of the logging operations in your timber-producing business in 1959? Yes No If YES, what percentage of the volume handled was subcon- tracted? percent. If YES, did subcontracting apply to a. Felling and bucking? Yes No b. Skidding? Yes No If YES, why didn't you handle all the logging operations yourself? (Check. If more than 1 reason, number in order an. of importance.) 5 1 (a) Lacked necessary equipment (b) Lacked logging experience a (c) Inadequate family or hired labor available r (d) Believed subcontracting to be the cheaper method 3 (e) Producer's time more valuable for other purposes 3 (f) Other demands on producer's time (3) Other (specify) 18. Did you subcontract some or all of the hauling operations in your timber-producing business in 1959? Yes No If YES, what percentage of the volume handled was subcontracted? percent. If YES, why didn't you handle all of the hauling operations yourself? (Check. If more than 1 reason, number in order of importance.) (a) Lacked necessary equipment (b) Lacked hauling experience (c) Inadequate family or hired labor available (d) Believed subcontracting to be the cheaper method (e) Producer's time more valuable for other purposes (f) Other (specify) 19. Did you receive in 1959 funds from any product buyers in advance of time of payment specified in a standard contract to facilitate your logging or hauling responsibilities? Yes No If YES, which buyers? If YES, for what purposes? 233 20. Did you receive in 1959 any other business aids from any product buyers to facilitate your logging or hauling respon- sifllities? Yes No If YES, which buyers? If YES, what aids? E. Prices Received: ”J, p . ‘4' 1. What prices did you receive per unit of volume for wood products you sold in 1959? (Fill in as many items as possible, by products and/or species.) ies W fimmmy wmom- mm‘ It a. Ro si e b. De ive to rr c. F.o.b rr d. Trucked to 11 to mi Rr. 2. To which agents did you sell the products and/or species listed above? (Check appropriate cells.) Products andlor species a. Dealer b. Concentration _Ayard c. Other interme- diate agggt d. Wood-usinggmill e. Other producer 4L f. Other (specify) 3. Did you have any difficulty in obtaining sufficient market price information as a basis for your business decisions? a. On the products you have to buy? Yes No b. On the products you have to sell? Yes No If YES, to a. or b., explain. 234 P. Costs: 1. What stumpage costs per unit of volume applied to the wood products you handled in 1959? (Estimate cost imputed by you if you used your own stumpage.) Products and or Purchased s ies s e 2. What logging costs (felling and bucking and skidding) per unit of volume applied to the wood products you handled in 1959? (Estimate cost imputed by you if you performed your own logging.) Products and or Subcontracted s ecies lo 3. What truck-hauling costs per unit of volume applied to the wood products you handled in 1959? (Estimate cost imputed by you if you performed your own hauling.) Products and/or Schontracted Own hauling 10881n8 species Cost Distance Cost , Distance 235 G. Sales of timber products: 1. 2. 5. ‘What was the gross sales value of timber products sold by you in 1959? W What was the total volume, by product and unit of measure, of your timber products sales in 1959? (List only timber handled as part of your business as a timber producer.) t olume What were the seasonal variations by product, in your timber products deliveries in 1959? Product a. Peak months and amounts (aver.) b. Lowest months and amounts (aver.) c. Other months and amounts (aver.) Do you consider the timing in your timber products deliveries in 1959 to be a typical pattern? Yes No If NO, why not? ‘Was the timing in your timber products deliveries in 1959 required by your product buyers? Yes No If YES, would you have preferred a different timing of deliveries? Yes No If YES, what is your preferred timing of deliveries? If NO, how do you explain the timing of your deliveries? 236 6. ‘What changes in the annual volume of your timber products sales took place in the years 1950-59? (List separately by products.) ' Year All roduct S 1956 l 5 954 1953 l 2 1951 l 7. What explanations can you give for annual fluctuations in your timber product sales? 8. To which types of buyers did sales of your principal products in 1959 go? (Estimate by 1 of total volume.) I 2 a. Manufacturer -. d. Other interme- b. Concentration diate agent (specify) yard c. Dealer e. Other (specify) 9. Have there been any significant changes in the volumes of your products going to different types of buyers over the period 1950-59? Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? 10. ll. 12. 13. 237 How many different buyers of your timber products did you sell to in 1959? E2; 32; a. Manufacturer d. Other intermediate b. Concentration agent (specify) yard c. Dealer e. Other (specify) Have there been any significant changes in the numbers of buyers of your principal products over the period 1950-59? . Yes No If YES, what were the changes? If YES, what explanations can you give for these changes? Did you have a contract(s) to sell prior to your harvesting of wood in 1959? Yes No What is the typical time interval between date of a purchase contract with a buyer and product delivery? a a. How much variation from the typical time interval occurs? b. What are the causes of variations from the typical time intervals? H. Other producers of raw wood products,¥l959: Name ,Address