Assessing Forest Resources and Demands

David Darr, group leader, Demand, Price, and Trade Analysis, Forest Resources Economics Research Staff, Forest Service.

Reasons for Assessing Forest Resources and Demands

Simply put, the Forest Service assesses supplies and demands for United States' forest resources because we have to. The Secretary of Agriculture is directed by law to prepare "an analysis of present and anticipated uses, demand for, and supply of the renewable resources, with consideration of the international resource situation, and an emphasis of pertinent supply and demand and price relationship trends." And the Forest Service acts as his agent in this assessment.

But more importantly, we see our Agency as custodians of the Nation's renewable resources: outdoor recreation, wildlife and fish, range, timber, and water. Since the mining of mineral resources often has significant effects on renewable natural resources, our analyses also include minerals. Results of periodic assessments are used in developing programs to deal with projected resource situations.

Lead times can be long for programs to have much influence in a resource area such as timber, so projections are made 50 years into the future. The Forest and Rangeland Renewable Resources Planning Act calls for an assessment of the supply-demand situation every 10 years.

Plans are now under way for the thin assessment due in 1989. The last assessment was done in 1979, with an update in 1984, and contained projections to 2030.

Assessments Analysis

Assessments are done by specialists who concentrate on an assigned renewable resource. The analysis of each specialist is organized around the following points: 1) Analysis of long-term trends, demands, and supplies; 2) social, economic, and environmental implications of trends in demands and supplies; 3) description of the resource base; 4) opportunities to manage and use the resource base to meet the goals of society; and 5) quantification of the major implications of the analysis for the Forest Service's Renewable Resources Planning Act (RPA) Program.

The future is uncertain; projections into the future must rest on assumptions about the effects of selected variables and their interactions on forest resource supplies and demands. Projection methodologies vary among the renewable-resource areas and depend on adequacy of the data available. Especially in the areas of economics and sociology, relationships among variables can change rapidly over time. By contrast, measures of physical relationships such as tree growth change relatively slowly over time.

Various types of research are needed to develop the information required for an assessment of each of the resource areas. There are several ways to classify this research, but it all deals in one way or another with demand and supply.

Demand for Resources

Resource demand can be measured in general ways and in ways specific to a resource area. General measures of demand are population, gross national product, and personal income. Current expectations are that the U.S. economy will continue to grow, with more people with more money to spend, leading to increased demands for all resources.

Historical data can be used to develop long-term trends in the relationship between consumption and the measures of resource demand. For example, trends in variables such as prices and consumption measure the outcomes of market interactions. They implicitly include the influences of government policies and many other variables and policies. Analysts not only define and describe these trends but also decide whether or not historical relationships will continue into the future.

They can make long-term projections in some renewable-resource areas better than in others, and technical issues also vary from one resource to another. But the overall approach to making these projections is similar for all resource areas. The timber area has the most advanced projection models and data bases.

The RPA assessment calls for an analysis of long-run demands and supplies. Our approach is to use statistics to estimate supply and demand schedules for timber products such as softwood lumber and plywood. For some timber products, analysts evaluate trends in historical consumption and make projections on a judgmental basis. For timber demands, they tie all projections to a few key variables: housing starts, gross national product, population, and personal income. These variables are primary measures of activity in the U.S. economy.

Demands for housing and other end uses of timber products all influence the demand for standing trees. Supplies of standing timber interact With demand to determine prices and Output levels. The latter are key indicators of the resource situation. Our analysts must tie together demands and supplies to gain a consistent view of the resource situation. They do this with a mathematical model called the timber assessment market model.

Supply of Timber

The standing timber resource has many characteristics that make it difficult to simulate for long-run projections. Standing timber is a resource in inventory: it can be harvested or left standing from one day to the next.

While the timber is in inventory, it grows, but it may be damaged or killed by fire, insects, and disease. Analysts try to account for the changes to the resource inventory in various ways, the latest being what we call the timber resource inventory model. Data for projecting growth and other measures of the timber inventory are generally based on historical data from periodic surveys done by Forest Service forest inventory and analysis units around the country.

In addition to data on physical attributes, such as growth and mortality, analysts try to account for changes in the area of timber land over time. Timber-growing areas on public lands may be taken out of production for other uses such as wilderness. Private owners of timber land may convert it into cropland or some other use.

Timber sales on public lands are generally set in a prespecified way and are generally predictable. Timber sales from private lands are less predictable, and generally analysts project sales from these lands using relationships derived from historical data.

Characteristics of the timber inventory vary around the country, as do the technical issues of trying to model this inventory. For example, public lands are relatively more important than private lands in determining timber supplies on the West Coast, but the reverse is true in the South. In the timber assessment market model, there is an attempt to account for interactions among the various supplying and consuming regions in the U.S. timber sector. Our timber situation is heavily influenced by imports from Canada and to a lesser extent by U.S. exports to offshore markets. Analysts also attempt to assess the influence of international markets on the U.S. resource situation.

The first attempt at a comprehensive mathematical simulation model of the U.S. timber sector was completed in the late 1970's. Although a continuing program of trying to improve the various parts of the model has gone on, our experience of the last few years has shown that there is probably no way to develop a definitive model of the U.S. timber sector. Data and insights change over time and influence how we view the workings of the timber economy.

Significant Future Issues

There is no way to tell either whether the model of the future of the forest sector is realistic. The following examples highlight issues that appear to be especially significant in the future for the timber sector.

Housing. The number and size of housing units is especially important in trying to assess future use of softwood lumber, plywood, and other timber products. Reasons for optimism include expectations of a growing population with rising incomes. Reasons cited for pessimism include the potential for high interest rates and high housing costs. Both arguments rest on assumptions about an uncertain future and are therefore not testable.

Technology. People tend to be either optimists or pessimists about technology. If they believe in technology, a future with economic scarcity of timber products is unlikely. Economic scarcity is defined as a situation with rising prices for timber products compared with other products. If they doubt the virtues of technology, the future becomes more uncertain, with economic scarcity a plausible outcome of the current resource situation. An example in the timber sector is the amount of lumber that can be recovered from round-wood logs. As technology has improved over time, more wood in the form of lumber per unit of roundwood processed has been recovered.

State-of-the-art sawmills are efficient in terms of lumber recovery, but most of the industry's capacity consists of mills built over the past 30 years, with wide variation in efficiency. In making projections, analysts must account for the potential effects of technology on the future resource situation.

Forest Management. Especially in the South, the age of harvest for trees is generally less than 50 years the length of our projection period. Assumptions must be made about what will happen to the land after the trees are harvested. For example, should it be assumed that the timber land will be converted to cropland, should it be assumed that the land will be replanted, or what? In addition, the land may be managed intensively or not at all. What should be assumed? Some historical data on how land is managed exist, but there are both optimists and pessimists about the future who claim that it will be different from the past.

Futures Analysis. Many other examples could be cited as issues in trying to make long-term projections in the forestry sector. Most of these issues cannot be resolved because they deal with uncertainty. The Forest Service has tried to address this uncertainty through what we call futures analysis, which means we ask a lot of "what if' questions. For example, what if timber management is more intensive in the future than assumed in our projections? What if housing demand is lower in the future than assumed? What if land area available for timber production is less than assumed for the future?

This futures analysis has proven useful in trying to assess the implications of the uncertainties in long-term projections. For example, it has shown that over a wide range of possible futures, the United States faces the prospects of growing economic scarcity of softwood lumber, with continuing increases in prices.

The uncertainties discussed for projections of demands and supplies also are involved in trying to assess the social, economic, and environmental implications of trends in demands and supplies. For example, what will society consider important 50 years from now?