I. THE SITUATION
Is the family forest feasible? This title is meant to be more provocative than explicit. Family-owned forests over time have been the largest ownership category of commercial forest land in the United States. Do we assume from this they are stable, productive, economic, feasible? Feasible for what? Over what period of time? Why the title question?
The question is asked in terms of the role of nonindustrial private forests (NIPFs) as a reliable source of industry wood. These are forests owned by private persons or corporations not having timber-processing facilities. According to the USDA/Forest Service's, Analysis of the Timber Situation in the United States, 1952-203058, NIPF owners held 58% of the nation's commercial timberland in 1976, accounted for 77% of the total hardwood timber removals, but only 29% of the softwood timber removals - or 40% of the total sawtimber consumed. Why not more?
Actually, according to the same source, these percentages of removals compare favorably with the percentage of sawtimber inventory these lands accounted for in 1977: 70% for hardwoods (412.9 billion board feet, International 1/4" scale); 22% for softwoods (426.7 billion feet). The NIPF lands are credited for 1976 with 71 % of the net annual growth of hardwood sawtimber, 45% of the softwood sawtimber growth, and 54% of the total sawtimber growth for all species. Significantly, NIPF sawtimber growth for 1976 is listed at 40.0 billion feet, while sawtimber removals from these lands in the same year were 25.8 billion feet - 55% greater growth than removals for all species. NIPF hardwood sawtimber growth was 61% more than removals; softwood growth, 50% more than removals.58
With the Forest Service's high projection of a doubling of the consumption of sawtimber from 1970 to 2020, concerned questions emerge. Can timber productivity and harvests be significantly increased on forests averaging under 100 acres in size and owned by some 3 million individuals having highly variable objectives, abilities and tenures? When more wood is really needed, will market forces stimulate NIPF owners to provide it? If not, is this a cost-effective source of timber through public intervention? Or is it illusionary to assign a significantly larger wood supply role to these owners than they are already assuming?
In Western European countries, where private ownerships frequently approach 50% or more of the total forestland and may average only 10 acres in size, many outstanding examples of long-term, highly productive management exist. Within the same family, a tradition of continuous management programs has often prevailed for several generations. What factors affect the likelihood of developing similarly continuous and intensive management programs on family forests in this country?
What are the economic and societal factors affecting timber outputs from individually-owned forest properties in the United States? Are present public policies conducive to high productivity and continuity of management? Is timber a good income-producing crop for most NIPF owners?
This discussion will explore answers to these and related questions from a variety of sources, including the author's experience and observations as an association forester and NIPF owner for more than a quarter century. Since we are treating the most complex and haziest issue in American forestry, it behooves us to consult a goodly number of credible sources.
The Shaky Data Base
For answers, one might expect to turn to our American forest research, the envy of the world. Nonindustrial private forests, after all, have been singled out by foresters as the key to future timber supplies. According to conventional forestry wisdom, owner behavior, if left alone, leads to unacceptable shortages of timber or increases in timber prices. NIPFs have therefore been targeted for public policy. What information has our research provided to guide such policy formulation?
Unfortunately, the aggregate of some 150 landowner surveys and studies conducted during the past 50 years does not present a clear picture. It forms an inadequate, even misleading, basis for policy and program formulation. The Society of American Foresters (SAF) Task Force on Improving Outputs from NIPFs, chaired by Clark Row, found in 1979 that, while the many small studies and surveys conducted could provide insights into the aims and plans of private owners, no systematic inventory of owners had ever been attempted on an area, regional or national basis. There is a lack of continuing nationwide assessment of the economic merits of management opportunities; a lack of systematic data on forest products markets on a local area basis; and a lack of information about rates of change of land ownership, land values, property tax rates, and total tax revenue from forests.51
We have poor knowledge of what landowners actually want, what they will accept, how they react, or even how many there are and who they are. We don't know how many are young, old, wealthy, poor, are farmers or work in other occupations. The task force concluded we do not know enough about the economic, social, and other factors to make good quantitative or even qualitative assessments of what types of programs are needed, how they should relate, or how effective they would be. SAF called for an evaluation of the utility of existing information and a workshop to suggest improvements in information about private forests.51
In 1980, Duke University co-sponsored with SAF and the USDA/Forest Service a conference on NIPF data and information needs. Jack P. Royer wound up the conference program by citing findings of Duke's Center for Resource and Environmental Research, which reviewed 105 surveys and summary studies of woodland owners. The Forest Survey (now "Resource Evaluation") has intensively monitored forest resources on nonindustrial private lands for nearly four decades. But no parallel effort to examine the landowners has ever been forthcoming. Resource data are now very good for assessing the effects of landowner behavior, but they are inappropriate for explaining the causes of that behavior. This means we must largely speculate when formulating alternative policies and programs to improve timber outputs from these lands.44
Duke's review of 50 years of small woodland owner studies found that researchers were preoccupied with identifying deviations from some ideal behavior, and that this more than any factor seriously distorted assessments of the small woodland owner problem. By their very design, past surveys have highlighted a gap in landowner performance, which has fueled belief in NIPF mismanagement and obscured more vital questions. No survey has attempted to differentiate landowners on the basis of what is rational economic behavior for the individuals themselves.43
Advising the Forest Productivity Committee of the Forest Industries Council (FIC) in 1980, Royer concluded that data from past NIPF owner surveys are at best marginal for evaluating proposals to improve forest productivity. New, systematic surveys need to be designed and implemented to provide comprehensive data on NIPF owners, their lands, and their behavior in different social and economic climates. Until then, the FIC was told, the data necessary to make informed decisions about alternative actions to improve forest productivity will be lacking.
The foregoing and other knowledgeable sources lead one to a dispiriting conclusion: past, present and prospective national polices and programs aimed at nonindustrial private forest owners have been developed in the absence of an adequate, solid data base. Perhaps this is a reason they have not been demonstrably effective in increasing timber outputs in the past 40 years.
Obviously, a great deal more needs to be known about NIPF owners and what motivates them before definitively answering our title question and the questions that flow from it. On a regional basis, only the Northeast appears to have supplemented more adequate forest resource data with comprehensive state-by-state landowner surveys. There, during the past 8 years, Neal Kingsley and his colleagues in the Resources Evaluation Unit at the Northeastern Forest Experiment Station have completed surveys of NIPF owners who hold 84 percent of the commercial forest land in 11 states. The surveys will soon encompass 14 states. A great deal of useful and surprising information on owner characteristics and motivation in that region is being obtained. As we shall discuss later, some insights were gained into why owners do what they do.24, 25, 26
Commercial timberlands held by "farmer and other private" owners without timber-processing facilities comprised 278 million acres in 1977, according to the USDA/Forest Service. Unfortunately, this much-used statistic includes Site Class V lands, which account for 27 percent of the area but only 16 percent of the productive capacity. The figure also includes a large number of units smaller than 10 acres in size and a large but unknown acreage "withdrawn from timber utilization" by the owners. The farm-owned acreage reported by the Forest Service is considerably higher than the farm woodland acreage reported by the Bureau of the Census in 1974. The Forest Service projects that the "farm and other private" acreage, which it reported at 296 million acres in 1952, will decline to 250 million acres by 2030.58
The ownerships vary greatly in size from 1 acre to 500,000 acres. To the detriment of designing sound public programs, little accurate information is available as to the numbers and size characteristics of NIPFs.
In the eastern third of the country, from north to south, most states are one-half or more forested and one half or more of the forested area is in NIPFs. The central part of the country is far less forested (many states less than 20 percent), but most of the forests are NIPFs. The West is highly variable in percentage of forest cover, but due to the heavy preponderance of federal ownership, the proportion of NIPFs is relatively small (under 40 percent in most states, under 20 percent in half or more).
NIPFs in the Southeast and Pacific Northwest (or major parts of states, such as western Oregon) have above-average biological productive capacity, mostly softwood timber, and reasonably good markets. Here are the nation's best economic prospects for timber supply from nonindustrial private forests.
In his analysis of the latest Forest Service data7 Marion Clawson found that on a national basis NIPFs appeared in 1977 to have 16 percent smaller productive capacity per acre than industrial forests. But on a state-by-state basis, there is near equality. This is true also of wood growth per acre and softwood growth in relation to standing timber volume. In fact, total growth of wood on NIPFs increased by 57 percent from 1952 to 1977, while average stocking on a state-by-state basis increased from half to more than 80 percent of that on industry forests. Timber outputs, however, have been remarkably stable, owners apparently being unable, for lack of markets, to harvest all the increased annual growth, especially of hardwoods.
In the South, where most of the forests are NIPFs and where oaks and other hardwoods tend to replace pines harvested from formerly abandoned cropland, available data do not show the extent of the shift in acreage from pine to hardwoods. The trend in the last 25 years in annual growth as well as stand inventory is more toward pine than hardwoods. However, there is concern that the trend may be reversed in the future unless special forest practices to renew the pine are undertaken on a large scale.
Other valuable resources occurring on nonindustrial private forests include water, wildlife, range and esthetics. Here the inventory and valuation are more sketchy. Clawson roughly estimates the annual value of outdoor recreation on all NIPFs at a third of the value of the annual wood growth. But the largest non-timber value of NIPFs may be the gain in land value, which has been larger and more regular than other gains from these lands.
The 278 million acres of "commercial" timberland that are attributed by the USDA/Forest Service to "farmer and other private" ownerships are held by an estimated one million farm forest owners and two million non-farm forest owners.58 These numbers are high if the 27 percent of the land capable of producing less than 50 cubic feet of timber per acre per year (Site Class V lands) and the unknown acreage withdrawn from timber production by the owners are eliminated. During the 25 years prior to 1977, farmer-owned forest acreage declined about one third, most of it thought to have shifted to the "other private" category of NIPF ownership.
The lack of firm, comprehensive data concerning NIPF acreage and number of owners extends to owner occupations, characteristics, attitudes, behavior, tenure, tendency to subdivide their properties, and other pertinent factors. For data of this kind applicable to a reasonable homogeneous region, one has to turn to the Northeast. There, Neal Kingsley has spearheaded surveys of nonindustrial owners in 11 states, where the 46 million acres held by an estimated 1.6 million owners represent 5/6 of the commercial timberland. The average size of holdings one acre and up is 29 acres. The average size of holdings 10 acres and larger is 63 acres. More than 7,200 13-page questionnaires were analyzed - a 70 percent return. When the first canvassing of NIPF owners in the 14 northeastern states is completed by 1983, the first re-canvassing is expected to begin, along with regular reinventories on a state-by-state basis. This will provide an opportunity to find out to what extent the expressed intentions of owners are carried out.24
About a third of the NIPF owners in the 11 states have had fewer than 8 years of formal education. Another third have had from 8 to 12 years. In certain states, the percentage of owners with more than 12 years of schooling is much higher than average for the regions: New Hampshire and Vermont - 60 percent; Maryland - 41 percent. One half of the NIPF land is owned by persons between 45-65 years of age. Nearly a third of the land is owned by persons over 65.24
Nearly 50 percent of the owners holding 16 million acres reported annual cash incomes of less than $10,000. Only 10 percent reported over $30,000 - possibly reflecting a high proportion of retirees and farmers. But it can also be assumed that most owners' incomes are derived only in part from their forests. A surprising 79 percent of owners with 74 percent of the NIPF land either live on their forest land or within 5 miles of it. Only 10 percent of the woodland acreage is held by true absentee owners. Forty-one percent of the owners holding 28 percent of the NIPF land have held their land for fewer than 10 years. More than 60 percent of the land in the 11 states has been in the same ownership less than 25 years.24
Less than two percent of the owners with a total of 11 million acres reported they hold forest land for timber production, but most said they are not opposed to harvesting. Objectives for holding land are more apt to include farm, domestic, esthetic, recreation and investment purposes.24
The size of the holding was found to be by far the most significant indicator of whether or not an owner will cut timber. Money is an important motivating influence. About 54 percent of the private forest land in the 11 states - 27 million acres - is held by owners who have harvested. A 1969 ownership study by R. N. Stone in Michigan found that many owners have non-timber-producing objectives most of the time, but during the short period their timber is merchantable, they are timber value-oriented.54 This was corroborated in the Delaware owner survey which concluded that most growing stock will eventually be harvested due to change in owners' intentions, and that profitability is a major determinant of attitude.15
In a five state area of the Northeast (Pennsylvania, New Jersey, Delaware, Maryland and West Virginia), farmers, retirees, professionals and executives hold 66 percent of the 25 million acres of NIPFs. It was found that only eight percent of the owners accounting for five million acres have some form of forestry assistance. Sixty percent of the owners with 48 percent of the land reported they do not know where to get forestry assistance. In state after state, more timber is available than is being consumed. Thus, there is small incentive to invest in timber culture. Kingsley asks foresters why they should be urging the small woodland owner to produce more timber in the face of sufficient supply.
Apparent from these surveys is the following.
- Most Northeast forest owners show little or no negative attitude toward management and harvesting of timber;
- More wood is being grown than currently harvested;
- When good markets become available, the owners are not adverse to selling timber provided their primary ownership objectives are not jeopardized.
Localized surveys and information on timber markets are admittedly not available. However, favorable markets coupled with owner-sensitive advice would surely increase the contribution of northeastern NIPFs to the nation's wood supply.
But what of other regions? The Northeast, despite its variability, constitutes a unique forest and forest owner situation. Its nonindustrial forest owner profile is not applicable elsewhere and, to the extent of the variability within the region, is state-specific. In other relatively homogeneous, many-state regions, comparable owner data are not available and may also require the better part of 10 years to collect and publish. More meaningful replication of owner surveys over a timber rotation will take 40 years or more of continuity in research effort. Perhaps the long-term nature of this fact finding is a reason or excuse for delaying it.
However, comprehensive owner studies are basic to programming for society's needs. They are badly needed in other regions, especially the South with its lion's share of NIPF land. When it is not known who the owners are, their objectives, attitudes and capabilities, and what motivates them, how can foresters and policy-makers design cost-efficient programs that will actually result in the owners producing and harvesting more wood?
To answer just such need, Duke's School of Forestry and Environmental Studies is undertaking a comprehensive forest landowner survey of 200,000 NIPF owners in North Carolina. The carefully prepared, attractively formatted questionnaire contains 35 multiple-choice questions about land holdings and objectives; current management; evaluation of proposed programs; attitudes on investments in timber production, harvesting, obstacles, existing policies and programs, and the roles of government and industry; and a personal profile. If this effort is successful, perhaps the USDA/Forest Service will be encouraged to institute a regional owner survey in the South.
II. PERCEPTIONS OF REVIEWERS
Recent Reviews of the Situation
Working with a shaky data base, economists and forestry interests since 1975 have increasingly looked at the NIPF situation. Prominent among the reviews and summary studies were: the "Forestry Incentive Series", seven articles in the April 1975 Journal of Forestry; Policy Alternatives for Nonindustrial Private Forests by Roger A. Sedjo and David M. Ostermeier, a report on the 1977 national workshop sponsored by the Society of American Foresters (SAF) and Resources for the Future (RFF)45; The Federal Role in Conservation and Management of Private Nonindustrial Forest Lands, a 1978 interagency report of the U.S. Department of Agriculture to the President55; Improving Outputs from Nonindustrial Private Forests, the 1979 study report of a task force of the Society of American Foresters51; The Economics of U.S. Nonindustrial Private Forests by Marion Clawson, a 1979 research paper of Resources for the Future7; Nonindustrial Private Forests: Data and Information Needs, proceedings of a 1980 conference sponsored by Duke University, SAF and the USDA/Forest Service44; the Forest Industries Council's Forest Productivity Report of 198017; America Grows an Trees: The Promise of Private, Nonindustrial Woodlands, a 1980 report by the Private Woodlands Committee of the National Forest Products Association (NFPA)33; and the 1980 report of the private forestry conferences arranged by the National Association of State Foresters.
In the 5 years prior to 1975 there were only 2 such major reviews of the NIPF situation: The South's Third Forest, a 1969 report of the Southern Forest Resource Analysis Committee53; and The Challenge of Private Woodlands, a 1972 report of the Trees for People Task Force.
Most reviewers have identified what they saw as obstacles to increased NIPF timber activity and suggested programs to alleviate them. Generally, the diversity of owners and lack of reliable information about them has not inhibited such analysis. The most frequent conclusion is that the level of timber productivity desired by society can be attained only by greatly expanding, with some modification, certain traditional public approaches together with some tax relief. Evaluation of the relative cost efficiency of existing and alternative programs is lacking. NIPF owners themselves are rarely brought in as significant participants in the reviews. To an extent, there is a "here's what's wrong with you and here's what we propose to do about it" approach. Recommendations that comprehensive owner surveys should precede program formulation are scarce indeed.
Of the major reviewers, only economist Clawson dares to suggest there may not be a small owner problem in NIPFs being a significant source of industrial wood. He observes that the United States is not running out of timber, and that by 1977 wood growth per acre on NIPFs had increased to essential equality with forest industry lands on a region-by-region basis. Most of the fully salable timber growing on smaller holdings where good markets exist will be harvested and sold either by the present owner or a future owner. NIPFs could be made to produce more wood by the stimulus of higher prices. But Clawson concludes the resulting increases would not be large compared to the amount NIPFs would otherwise produce or the added amounts that management of the national forests on economic principles could produce. He reminds us that increasing net annual growth on NIPFs is not the only way to enlarge national wood supply.7
An Expensive Opportunity?
On the other hand, the FIC and the NFPA's Private Woodland Committee report that 57 percent of all identified treatment opportunities to increase forest productivity are on 79 million acres of NIPF lands. The forest industry's reviews have emboldened it to project that NIPFs can and must increase their share of the nation's timber supply from 42 percent in 1980 to over 52 percent by 2030. Without attempting to find a consensus among categories of owners as to the timber supply role of each, industry feels that supplies from NIPFs must increase from 4.4 billion cubic feet to 8.3 cubic feet.17, 33
To reach industry's national timber productivity goal, a projected $4.9 billion must be invested over the next 50 years to increase NIPF productivity. This figure is said to be 83 percent of the cost of funding all "economically feasible treatment opportunities" on NIPFs (those producing 10 percent or more return after taxes), and four times the current level of investment on these lands. About 5/8 of the proposed investment would be made in the South, and most of the balance would be about equally divided among the Northcentral, Pacific Southwest and Douglas fir regions. Of the $4.9 billion, about half would go to rehabilitation of softwood sites.33
It is not clear how the costs of this quadrupled level of investment are intended to be shared. Whether such a large expenditure will be made and, if so, what its results will be remain to be seen.
An Obstacle Course
If the results of comprehensive owner surveys were generally available, reliable information on the major obstacles to greater NIPF timber outputs would be at hand. Lacking this, one turns first to the reviewers. Lengthy lists of obstacles are easy to come by. They make one wonder why a small woodland owner would want to invest in timber production. A partial list from reviewers would include the following problems most often mentioned:
Large initial investments and long payback periods
Relatively high unit costs
Conflicts between timber production and other owner goals
Lack of technical knowledge
Lack of ability or interest
NIPF owners and their lands are so diverse that few would be expected to experience all of these timber output problems at one time. But more than one problem may be common to owners in a region.
For example, a very high proportion of owners in the Northeast have been shown by survey to hold forest land for purposes other than timber production, to lack adequate markets for timber, and to experience low profitability for investments in timber growing.
Unfortunately, foresters and forestry interests concerned with NIPF outputs have not generally shown enough interest in the diversity of owner characteristics and problems to obtain firm data through surveys - a practice they insist on for resource inventories. So, to a great extent, they have been prepared to engage in NIPF policy and program formulation using the existing fund of information. Later we shall attempt to discover what effect this may have had on program efficiency.
The Policies and Programs
Nonindustrial private forests have not lacked for programs aimed at increasing outputs perceived to be needed by the public. The longest term programs from the 1920s and 30s - Forest Extension, Cooperative Forest Management (CFM), and the Agriculture Conservation Program (ACP) - were instituted at least as much to increase the incomes of landowners (income redistribution) as to increase timber production or accomplish other forestry purposes.32
The large number of public incentive programs can be roughly categorized as outright subsidies, tax relief, and indirect assistance. The programs address either the perception that NIPF owners are not educated to the potentials of their lands or lack the ability to manage them, or that certain economic barriers are preventing profitable timber management. The programs have been listed and described many times and are well known to foresters and concerned organizations. What needs to be discussed about them is their effectiveness and efficiency. What are the prospects that they can bring about the timber productivity and harvests the nation is said to require from these lands?
During the 1970s, it was far easier to find comment by economists, or agency and industry spokesmen, on the inadequacies of program evaluation than it was to find hard analysis. Addressing the federal role in management of NIPFs, the USDA concluded that, while federal cost-sharing does stimulate owner action, in application the program is wanting in efficiency and effectiveness, and there has been little in-depth analysis of specific incentive approaches. Former Forest Service chief John R. McGuire told the state foresters that what was needed was good solid cost/benefit analysis, giving as much attention to program evaluation as to program development and execution; agencies need to be able to tell appropriation committees of Congress exactly what will be produced with funds appropriated.28 Texas state forester Paul R. Kramer reported to an SAF national convention that the demand for assistance to owners often exceeds the supply, that faulty program coordination and lack of communication can result in lack of assistance, and that public assistance programs, especially cost sharing, are victims of the "numbers game" where annual accomplishments are equated to program costs.27
The President's Advisory Panel on Timber and the Environment chaired by Ralph D. Hodges noted it was difficult to appraise the effectiveness of the eight federal programs providing either technical assistance or direct grants of money or materials to owners. In general, they have provided help to only a relatively small portion of small private forests. More seriously, it is extremely difficult to know to what extent federal, state or industry programs have provided a net addition.49
The programs have undeniably had some effect in increasing total wood production on NIPFs, but it is impossible to put a quantitative estimate on either the extent of the increase or on the results received per unit cost. The Panel cautioned, in view of the record, against over-optimism about increasing the output of wood from NIPFs. It pointed out that increasing the outputs above those that will occur naturally is very difficult, and efforts in this direction may produce but limited results not worth the public cost.49
The SAF task force on improving NIPF outputs concluded that continuous monitoring and periodic evaluation of all major woodland programs is an essential, but too often neglected, step toward improved productivity; this should include visits and contacts to see how assisted owners have progressed toward their goals and how the treated land is currently managed. The task force reported there is little information for a comprehensive evaluation of even major programs and their relationships. Only a few studies have been made in a few states, and only one or two useful evaluations at the federal level. Commenting on program weaknesses, the task force emphasized that not enough attention is given to whether specific actions are economic on a specific owner's tract, fit his objectives, or match the availability of his investment and operating capital. All too few assistance programs present or discuss management options.51
Economist Albert C. Worrell has observed that the confusion about effectiveness of these programs is due in part to uncertainty about their objectives, several being aimed at least as much at increasing owner incomes as producing more timber. While the small forest owner has come to the fore as the nation's "number one forestry problem", not much attention has been given to the tremendous variability among owners and the effect this is bound to have on their response to public programs. Much of the public program effort has been based on what people thought would implement desired policies, but experience has shown that many of these earlier ideas were incorrect. Just as important, conditions have changed since existing programs were started. Worrell is further concerned that little real attention has been paid to the relationship between the size of the small holding and the cost of assisting its owner.59
Clark Row told the 1976 SAF national convention that, while owners and program managers have realized intuitively that timber production costs for small tracts are higher than for large tracts, virtually no studies have been made of costs by tract size, or of the impacts of those higher costs on financial and other returns. Extension economist George D. Kessler stated that over 70 percent of NIPF land falls in the diseconomics-of-scale category.23
Richard A. Skok and Hans M. Gregersen declare there is especially little scholarly evidence to back up the assumption that direct public subsidy programs can effectively and efficiently induce increased or additional wood production. Nor is there much evidence to suggest whether an added dollar spent on motivating private forestry would have as great or greater influence on future timber supply as the same dollar spent on intensifying forestry on public lands or on supporting industrial programs. Considerable effort needs to be devoted to an analysis of alternative programs, their past effectiveness and the means for improving and expanding the promising ones.50
Worrell and Lloyd C. Irland observe that success to date in motivating private forestry in the United States has been far less than spectacular. It is a complex undertaking with many potential alternative actions and actors where the opportunities for making mistakes may be greater than those for success. Programs may be aimed at overcoming obstacles which are really not limiting ones and, as a result, apparently successful programs may not motivate greater investment.60
While proclaiming industry's timber productivity goal for NIPFs and its proposed quadrupling of investments, the NFPA found major concerns associated with expanding public programs and subsidies for these lands:
- The near impossibility of judging their effec-tiveness with inadequate or obsolete data;
- The difficulty of assuring that program bene-fits go where the need is greatest;
- The inherent risk of destroying the initiative of owners to manage their lands;
- The erratic nature of funding for public pro-grams;
- The unlikelihood of appropriation of sufficient public funds to assure achievement of the productivity goal.
Public programs have been criticized because they have not been proven to be cost-effective. While it felt that some level of public funding of protection and cost-share programs was appropriate, the NFPA forecasted that both federal and state programs were in danger of losing even current levels of funding unless resulting public benefits could be demonstrated.33
NFPA economist Merle E. Conkin reported to the 1975 SAF convention that little consideration has been given to the magnitude of the small landowner's alternative rate of return. Consequently, the level at which to subsidize the landowner is not known, nor can the economic efficiency of such subsidies be measured.
The traditional policy approach of attempting to raise forestry investment levels on NIPFs by supplementing owner's investments with a variety of direct and indirect public subsidies appears to have very low cost efficiency, John A. Zivnuska told RFF's future forest policy forum in 1974. Due to the size and nature of the properties, and the dispersion of efforts among widely discrete agencies, administrative costs per acre are high. Lacking are an economic basis for selecting the specific areas in which investments are made, means of coordinating the different program elements, and a basis for insuring that the specific practices funded will be continued long enough to yield the planned results. There is a continued implicit assumption that the cause of low investment levels is owner ignorance rather than the economic characteristics of his property. Zivnuska held that this approach is not sufficiently responsive to the basic constraints on investments in such small tracts to hold much promise of leading to any major increase in investments.62
Consulting forester James M. Vardaman, whose clients are primarily NIPF owners in the South, declared in a 1970 issue of American Forests that private landowners will grow whatever timber this country needs as long as they can make money doing so. They are sophisticated investors. If tree farming pays, they cannot be kept out of it. But if it doesn't pay, they cannot be kept in it, if they can't make money at it, Vardaman concludes, the nation doesn't need the timber as badly as some say it does.56, 57
Addressing the matter of remedying small tract size and the consequent diseconomies of scale, Zivnuska urged pursuing public policies that encourage formation of efficient management units, but abolishing policies that establish artificial economic incentives.63 The Southern Forest Resource Analysis Committee called for consolidation of small holdings by either industry or government.53 William R. Sizemore's treatise on improving productivity of NIPFs in the report of the President's Advisory Panel on Timber and the Environment concluded that formation of management units of economic size and the provision of financial assistance would encourage increased investment in timber production.48 After evaluating the cost effectiveness of the 1974 Forestry Incentives Program (FIP), Forest Service economist Thomas J. Mills recommended imposition of a minimum 10-acre tract size limit and maximum cost-per-acre limits.30
The SAF/RFF workshop on policy alternatives for NIPFs summarized the major problems of public programs. It viewed insufficient coordination and cooperation between and among service-delivering agencies involved with incentive programs as the most serious. It also pointed out overlapping roles and overprotection of agency jurisdictional interests as examples of interagency conflict. The workshop also noted the following other major problems: lack of cost-effectiveness measurements at all levels; lack of specific goals at various levels; a general philosophy that specific investments need not consider economic criteria as long as they conform to program guidelines; inadequate collection of data on the characteristics of NIPF owners; lack of a systematic inventory of NIPF owners on a regional and national basis; lack of consideration of owner motives and goals which may not give priority to fiber production; failure to consider sufficiently the variations in conditions among the states; and neglect of on-the-ground follow-through.45
Amid this outpouring of knowledgeable misgivings about the data base, the assumptions used in program formulation, and the adequacy of program evaluation, forthright statements about the effect of existing programs are difficult to come by. But Sizemore is unequivocal: the present level of assistance has no significant effect on the intensity of forest practice.48 More recently, SAF's task force on implementation of the Resources Planning Act (RPA) reported that the 1980 Assessment does not provide a consistent and comprehensive (or indeed any) comparison of costs and benefits of incentive/assistance programs that would lead to its conclusion that there is strong justification for publicly supported cost sharing and technical assistance programs aimed at NIPF owners.
Early on (1962), economist James G. Yoho concluded that private landowners have been allocated a share of the supply deficit on purely physical criteria without regard to the profitability or relative attractiveness of investment in forestry on small private forests. The allocation of public funds based on this problem definition could be efficient only by accident.61
The feeling today of many forest economists seems to have been articulated by Robert O. McMahon in 1964: the assumptions that timber from NIPFs can fill the gap between expected future demand and supply of softwood, and that these landowners are willing and economically able to intensify timber management, have not been adequately tested. Due to high alternative rates of return and short planning horizons, landowners may not be able to afford investment in forestry. To describe small owners as holding the key to the nation's timber supply is to charge them unrealistically with a responsibility they cannot afford to accept, however idealistic and conservation-minded they might wish to be. From a national policy viewpoint, if increased timber production is a goal, it might be more efficiently achieved through investment in the national forests or in forest industry lands.29
There is, however, a disposition to try new public assistance programs at lower levels of government. Apparently concluding that federal programs will not bring about increased timber outputs needed in the future, several states have had governor's task forces study NIPFs and alternative means of motivating their owners. In South Carolina, survey interviews revealed that farmers, who own 44 percent of the state's commercial forest land, usually don't apply for cost sharing because their capital is invested in land and equipment and is not available for matching funds. A gradual trend is evident toward state programs that give tax relief and otherwise recognize the smaller owner's need for profitability.14
Oregon's largest timbered county, Douglas, in 1980 enacted "The Nonindustrial Private Woodland Management Ordinance" containing a remarkable package of county programs, including technical assistance, equipment rental, a tree seed bank, and loan programs. This action was triggered by pessimistic timber supply-demand projections, and by a 1977 private woodland owner survey conducted by the county. The survey found taxation was a major concern of most owners, that support existed for woodland owner associations or cooperatives as sponsors of assistance programs, that there was weak support for state and federal assistance programs, and that a large majority favored the county as the administrator or sponsor of such programs.10, 11, 12
In recent years, large forest companies have increasingly offered landowners assistance programs. In return for first refusal on the timber an owner harvests, the company provides forestry advice, site preparation, tree seedlings and planting services at near cost. Union Camp Corporation's PLUS program in Georgia, Alabama and Virginia, for example, was initiated several years ago by distributing over 120 million pine seedlings free to timberland owners. Since then, many thousands of acres have received various regeneration treatments.31 Aside from the obvious effectiveness of such programs in timber procurement, the payoff in terms of increased timber outputs from the subject lands is yet to be determined.
Excessive taxes as an obstacle have been widely observed and commented upon. It is generally agreed that tax policies have exacerbated the low profitability of timber growing on small ownerships. The total load of all forest and timber-related taxes and their increases may drastically overshadow financial incentives and even market forces as a profit factor, causing owner behavior adverse to sustained timber outputs. Reviewers have differed only in degree as to the extent of the tax problem and relief needed.
On the heels of the prediction of a 22 percent decline in western Oregon's Douglas fir timber harvest by the year 2000,3 the Governor's Task Force on Small Woodlands found in 1978 that property and death taxes were the problems most frequently proclaimed by small woodland owners. Property taxes limit capital investments in forest management, while death taxes may cause premature liquidation of timber crops or transfer of ownership. The governor and legislature were urged to provide assurances that property taxes would be moderate and stable to avoid their becoming a disincentive for forest management. The Oregon Board of Forestry declared that taxes were a significant cost in the business of growing trees. They found that many decisions to sell, to convert to non-forest uses, harvest, or invest in intensive forest management practices had been made, or not made, because of taxes. They recommended that state and federal tax laws be changed to allow NIPF owners to expense rather than capitalize reforestation costs, to stop taxing incentive payments, and to increase exemptions on taxable estates to prevent forced transfer of ownership or premature harvesting of standing timber. In 1979 the Oregon legislature enacted a 10 percent income tax credit for reforestation of understocked land by owners of 10-500 acres.36, 37, 38, 39
The Governor's Advisory Task Force on Small Woodlot Management in North Carolina reported in 1978 that potential investors readily admitted that inability to deduct out-of-pocket reforestation costs from taxable income in that year discouraged investment. Taxing reforestation cost-sharing payments as ordinary income in the year received just made matters worse.34
The SAF/RFF workshop on NIPF policy alternatives found that federal income and estate taxes can significantly influence the owner's decisions on investment since they can significantly alter the returns.45
William C. Siegel advised the SAF Forest Tax Study Group that most nonindustrial owners of small tracts do not avail themselves of the capital gains provisions for tax treatment of timber income because the dollar recovery is too far down the road. The concept has been of little value as an incentive to encourage forestry on small and medium size tracts. Most of the income foregone by the U.S. Treasury because of Sections 631 and 1231 of the Internal Revenue Code is directly attributable to less than a dozen forest products companies, Siegel concluded.46
The Study Group reported that in the private, noncorporate sector, capital gains treatment appeared to have little influence in developing the resource. This may be due to lack of knowledge of the option, the relatively smaller tax advantage to middle and lower income owners, and other factors.52 Skok and Gregersen observed that capital gains treatment involved procedures too complex to be of interest to many NIPF owners.50
Perhaps in response to the recent widespread notoriety of the effect of taxation on NIPFs and to the fact that taxation can be used as an incentive as well as disincentive, Congress has started to modify federal taxes in ways that will ease the burden of NIPF owners. In 1978, FIP payments were no longer required to be included as ordinary income. Congress in 1980 enacted into law a 10 percent reforestation tax credit applicable to expenditures of up to $ 10,000 per year.16 In 1981, the Wallop bill, which provides relief to small farm and woodland owners from confiscatory death taxes, is finally getting serious consideration and, buoyed by a general taxcutting mood, has a good chance of passage. It will be important to tract the effect of such policy changes on NIPF productivity.
Total death taxes on medium and large forested estates in the South can have a significant impact on the transfer of assets, according to S. Olson and L. Haney. Though these taxes may not constitute a large proportion of the estate, the absolute amount of tax is extremely important since it must be raised in cash. The state tax share makes up a surprisingly large amount of the combined levy.
The most serious issue in forest taxation at the state and local level is Siegel's view is neither the rate structure nor the form of a tax, but rather tax stability. Elimination of uncertainty has been the focal point in the drive by southern forestry interests for woodland assessment systems. Experience proves, however, that even the best and most equitable procedures sometimes fail to bring about the desired results, due to improper implementation or political influence. Forestry investments remain extremely vulnerable to tax changes. Even the threat of a tax shift can discourage prudent owners from investing in an otherwise sound and apparently profitable forestry program.47
Markets and Prices
Due primarily to extremely limited data, the effectiveness with which the timber market operates and the responsiveness of NIPF owners to market forces remain a particularly clouded issue. Of course, owner response to market conditions is an important policy issue, but this has not brought forth the necessary research. Clawson concludes that a fully revealing and significant consideration of the market possibilities for timber grown on NIPFs requires a vastly more localized set of data than now exists. He goes on to suggest the kinds of questions such data should answer.7
Timber market conditions vary greatly in different regions of the country and even within states. The SAF task force on improving NIPF outputs emphasizes that market systems, to function well, require unbiased, current information on sources of supply, active buyers, and species and quantities demanded. But timber market information is infrequently published, and most data are of poor quality and not in forms useful to forest owners. Timber markets have characteristics that make reporting difficult, but probably no more so than agricultural produce or used cars. The wood products industry has for years opposed timber price reporting on the ground that averages could be misleading to individual owners due to differences in timber value.51
The SAF/RFF workshop reports that the limited markets which exist in some regions have very dramatic consequences on timber investment. There are risks related to timber production due to the long period to maturity and uncertainty about future prices and markets.45 University of Minnesota economist Philip M. Raup concludes that where income investment is the primary goal of NIPF owners, uncertainty over markets is a critical variable. In the absence of reasonably assured markets, technical aid in production has either failed outright or had a brief, or even harmful, influence. Markets are the key. Where they exist or can be stimulated, technology transfer has been surprisingly rapid.40
This concept has been corroborated in 1981 by Fred. W. Haeussler, Land Manager for Union Camp's Woodland Division in Savannah:
"...We need to work with the larger, more able landowners...FIP and some of the other incentive programs have been of some help, but minimal. Taxes, of course, can play an important role in getting the private sector to invest in timber management.... In the final analysis, the free market system is the key. If markets for various wood products are adequate, if competition is keen and stumpage prices are high enough, then hopefully the returns on timber will be high enough to encourage re-investments to grow more timber. In short, returns from the private timberland must be competitive with alter-native investment possibilities. Real world situations bear this out..."21
But what about prices paid to NIPF owners for timber? Clawson observes that there is almost a total lack of information on prices actually paid for stumpage and for wood, on a national scale, refined enough to fit local conditions, and for different qualities and grades of timber. For timber there is nothing like the localized information on prices of agricultural commodities. Are the stumpage and wood prices received by NIPF owners fair, measuring the full economic value of the wood, or are they unfair, being to some degree below such a full economic value because buyers are not faced with enough competition in the bidding? This is a very difficult question, with many ramifications, unanswerable with readily available information. It is an important issue, not only because of the equity aspect, but because prices paid to forest owners more accurately reflecting the true value of their stumpage or wood would make for sounder decisions on investment, production and harvest.7
Having posed the question, Clawson discusses the disadvantages of small forest owners in marketing their timber, including inferior bargaining strength, frequent shortage of competition among buyers, and occasional stress sales. He suspects that many buyers of NIPF timber could have paid a good deal more than they did had competition forced them to do so.7
Of course, without better data it would be difficult to prove that suspicion as plausible as it seems. Before leaving markets and prices, we should acknowledge Clawson's willingness to devote detailed attention to so sensitive a subject as fairness of prices paid to NIPF owners. He seems to understand that the true interest of the owner is paramount to increased outputs from NIPFs.
III. PERCEPTIONS OF A FORESTER/LANDOWNER
It can be seen at this point there is no dearth of observations and comment from knowledgeable sources about increasing timber production on nonindustrial private forests. They paint a gloomy picture of the adequacy of the data base, the effectiveness of existing programs, and even the likelihood of being able to increase NIPF wood outputs significantly. Is the family forest feasible as a reliable, substantial source of the nation's wood supply? Having reported the situation and a cross section of reviewers' comments, perhaps it is the author's turn to express an opinion.
There are many problems of small forest owners, but there is no "owner problem". Generally, owners are neither ignorant nor unaware of the relative profitability of timber production as compared to alternative investments. This is evidenced by the large number of owners who do not have timber harvesting as a high priority objective, but who sell timber when prices rise sufficiently. If NIPF owners - a heterogeneous lot - share a failing, it is a rugged individualism that keeps them from organizing strongly to protect and promote their common interests, such as marketing and tax relief.
The Forester Problem
There is, however, a "forester problem": the traditional attitude of foresters toward the nonindustrial private forest owner. An attitude of unwitting arrogance and old-line authoritarianism. Foresters generally have:
- Accepted the notion that NIPFs are mismanaged and far below the productivity of other timberlands;
- Assumed the contribution of NIPFs to national timber supply is inadequate;
- Characterized the NIPF situation as a "national timber supply problem" or the "small forest owner problem;"
- Developed a wholly inadequate data base on NIPFs, especially with respect to owners (their objectives, diversity, problems, behavior, and markets for timber);
- Formulated "top-down" programs to motivate NIPF owners without adequate understanding or regard for their objectives, problems or needs;
- Assumed, without critical evaluation, that owners can be induced through such programs to increase timber outputs significantly;
- Reacted strongly to criticism of NIPF programs with which they are involved; and
- Allocated a share of the projected timber supply deficit to NIPF owners without regard to their objectives or alternative rates of return.
In all fairness, the question of increasing outputs from nonindustrial private forests is the most complex and intractable issue in American forestry. It involves a greater number and diversity of forest acres, owners' interested agencies and organizations, professional experts, and subsidiary issues than any other. Is it any wonder that it is the major issue on which we foresters have made the least headway, and on which we landowners have been faced with the most amazing array of incentives and disencentives?
If foresters can be excused for not having resolved the issue, how can our profession be satisfied with the hardly professional, intuitive approach we have adopted toward its resolution? Are we really content with an approach that eschews scientific sampling techniques and analysis, accepts conventional wisdom born largely of agency and industry self-interest? It is enough to cause the public and its elected representatives to lose interest and wonder if we are really serious about the issue after all. Perhaps when foresters generally become convinced there will be a serious timber supply shortage, we will apply the kind of effort and professionalism to this issue that has stood us in good stead with other knotty questions.
An Owner/Forester Perspective
In my view, the family forest in America is feasible as a reliable source of industrial wood. The intensity of management and level of outputs, however, will depend chiefly on demand for timber as expressed in markets and prices, and on the costs of production and harvest, including taxes. For higher output levels, the markets, timber prices, haul distances, logging and reforestation costs, and total tax loads must be favorable and predictable.
Owners respond to higher prices even when timber production is a low-priority objective. This is especially true during periods of inflation when the need for money is stronger. On the other hand, higher total taxes on land and timber are a definite discouragement to timber growing. When both markets and tax loads are unstable and unpredictable, owners are least inclined to intensify production.
This concept is best tested in a locality where timber markets have been weak, are becoming strong, and are projected to be even stronger. Such is the case in Western Oregon where the demand for Douglas fir sawtimber - except during extended housing recessions as at present - is fast overtaking supply and relative prices have been rising sharply. Since forest land values in this locality have been increasing at a rapid rate in the last 15 years and will probably continue to do so, and since the long-term outlook for selling wood is very favorable, an owner is encouraged to hold on to his forest land and to obtain as full stocking as possible.
At the same time, the owner is discouraged by high taxes and runaway costs of site preparation, tree planting, protection against animal damage, vegetative release, road construction, harvest and haul. He is squeezed badly during extended low market periods, such as 1980 and 1981. He is further hard pressed by the no-burn, no-spray, no-trap regulations or pressures that hamper regeneration. An owner looks at alternative rates of return on investments and wonders if he is in the wrong business.
What keeps the NIPF owner in the timber-growing business are the undisputed projections that: 1.) there will be a 22 percent decline in Douglas fir timber for harvest in western Oregon between now and 2020; 2.) the pent-up need for housing, coupled with the growing population, will greatly accelerate the demand for wood products during the next 40 years.
Balancing all factors, the owner may conclude that the predictability of brisk markets for timber outweighs the unpredictability of timber-growing costs, including taxes. The balance is tipped in this direction, not by cost sharing, but by the prospect of relief in the form of tax credits on reforestation investments and higher exemptions from death taxes. However, the picture could change dramatically in the future due to governments' insatiable appetite for revenue and inflation in the value of estates that renders the death tax exemptions once again inadequate.
Keys to Owner Motivation
In judging the effect of public programs on wood outputs from NIPFs, we must consider the gamut of policies and programs at all levels of government that impact the owner. Some of these policies and programs act as an incentive in some degree to produce more wood, but many are a disincentive in one way or another. Public policies that tax, regulate and constrain must be considered along with those that assist, directly or indirectly. It is the net effect of all of these influences that determines whether an owner is stimulated or discouraged by government.
In formulating policies affecting small forest owners, the left hand of government appears not to know or care what the right hand is doing. Policies are developed independently of each other, often without regard for the overall effect. Taxes overshadow subsidies as an influence. The same government that retains expensing of a three-martini lunch denies expensing of reforestation costs. The same government that sometimes shares the cost of tree planting, always imposes income taxes on revenue from timber harvested to pay death taxes. Environmental constraints are increasingly instituted for public benefit at the private owner's expense.
On balance today, public policies and programs seem to this owner to add up to a net disincentive for NIPF owners to invest in greater timber productivity. If the balance were changed to a net incentive, owners would get the message and respond by producing more timber. The best incentive is profitability. Government can help most by holding down owner costs in growing wood.
Perhaps most surprising is that the wood products industry, with its increasing reliance on NIPFs as a source of timber, has been so slow to research and understand the small owner. Torn between its desire to help the owner grow more wood and its desire to buy owner wood as cheaply as possible, industry has been ambivalent and an enigma to many owners. On the one hand, it buys or seeks to control through leases as much NIPF land as it can. On the other, it is content with options to purchase whatever timber is grown. It alternates between opposing government subsidies to owners to grow more wood as leading to regulation of cutting practices on private land, and, more recently, supporting higher levels of cost sharing to reduce owner's timber-growing costs - and perhaps selling prices.
Can it be that the wood industry does not perceive its own best interests with regard to NIPFs? Surely, taking advantage of the owners' weakness in marketing ability, opposing timber price reporting, providing unstable markets for his timber, and pretending that retention of capital gains treatment income is also his number one tax issue are not calculated to buy industry more timber outputs from this source. Industry has within its power to be the single most influential force in increasing the productivity of NIPFs by assuring greater profitability to owners.
Consulting foresters are potentially the best hope for advice that will make tree farming pay on small tracts. The diseconomies of scale, technical forestry and marketing disadvantages that NIPF owners face can be overcome with the resourcefulness an experienced consultant has to offer. By calling for sealed bids alone the consultant can frequently not only bring owners enough more for their timber to pay his fee, but also enough to encourage reinvestment in the next crop. But consulting foresters can be a detriment to small owners if they try to serve also the wood-buying interests of processors.
Nonindustrial private forests continue to produce more wood than is being harvested from them. If it is felt that more timber production is needed, the following actions by the public and private sectors seem most likely to bring it about:
- Discontinue cost sharing programs as not cost effective.
- Remove death taxes from forest estates.
- Institute major investment tax credits for NIPF investments in reforestation and required environmental safeguards.
- Conduct comprehensive, state-by-state surveys of NIPF owner objectives, characteristics and motivation in all regions with significant ownership. Replicate the surveys periodically to show trends.
- Design and implement at the local level energetic, imaginative educational programs for owners, emphasizing investment returns and marketing, including localized price reporting.
- Shift policies and programs to lowest level practicable for cost effectiveness.
Wood Products Industry
- Offer stable, year-round markets for NIPF timber.
- Pay competitive prices for NIPF timber.
- Offer services that meet owners' short- and long-term needs for revenue, including revenue for forestry investments.
- Act independently of wood-processing interests.
The family forest in America is a feasible, reliable source of industrial wood. The level of timber outputs from this source can be increased, but only by understanding the owners. Curiously, government agencies, private forestry organizations and foresters have to a great extent been flying blind on nonindustrial private forests - and probably wasting money, too. The data bank on owners is pathetically thin. We don't even know how many owners there are and how many of their acres are managed for timber. What is more serious, no concerted effort to remedy the situation is in sight.
With little or no profile on the owners, their objectives and forest properties, we have been proceeding glibly to judge their needs and prescribe what is good for them - from the top down. As Lee Hunt, President of the Oregon Small Woodlands Association, expressed it in the December 1978 Journal of Forestry, "Officials, professional foresters, politicians, and even environmentalists are talking for the small woodland owner and determining what he should do without even knowing who he is or what he does, wants, or will accept."
Until we foresters, who pride ourselves on sophisticated sampling of tree populations, become equally interested and sophisticated in sampling the objectives and motivations of NIPF owners, it will not be known what policies and programs will best motivate the largest number to increase timber outputs. The intuitive approach will continue to fail us. And it will continue to be easy to sell patent medicine guaranteed to bring forth more small owner wood.
Meanwhile, we family forest owners in the United States are late in organizing effectively to gain a policy voice, economies of scale, and bargaining strength in managing and marketing our timber crops. If and when we do, market forces will prevail and all other programs will be of lesser importance in upping outputs.
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