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Overview of Wisconsin’s Forests - Economic Trends and Impacts

Published Jan 18, 2013 in Business & Management
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Presentation Slides & Transcript

Presentation Slides & Transcript

A Look at Wisconsin’s Forest Industry:
Structure, Impacts, and Trends

Critical Issues in Forest Management and Utilization Conference – Managing for Multiple Demands on Our Forests

April 12, 2011

Steve Hubbard
Forest Products Specialist
WI DNR Division of Forestry

State of the Industry; Resources

Current Market Conditions

Threats and Opportunities


State of the Industry; Resources
Of Wisconsin’s land base, 16 million acres (46%) are productive forest land

State of the Industry; Resources

While significant forest lands are being lost in other states, Wisconsin’s forest lands have increased by 640,000 acres since 1985.

Wisconsin grows more wood than it removes- about 490 million cubic feet is grown each year, while only 332 million cubic feet is removed.

State of the Industry; Resources

Wisconsin now manages over 7 million acres of third party certified (SFI, FSC, ATFS) forest land.

Wisconsin is the #1 paper making state in the nation and has been for 50 years- Maine is a close second.

State of the Industry; Resources
Wisconsin has over 1,324 forest products companies
149 Sawmills
53 Veneer, Plywood, Eng.
433 Other Wood Products
282 Pulp & Paper
407 Wood furniture

Wisconsin Forest Product Industries
Number Companies 2008: 1,536
Number Companies 2009: 1,324

Number of Employees 2008: 65,694
Number of Employees 2009: 60,899

Total Payroll 2008: $3,059,383,000
Total Payroll 2009: $2,742,114,000

Source: Nacker

Wisconsin Forest Product Industries
Value of Shipments 2008: $20,467,801,000
Value of Shipments 2009: $17,907,522,000

Capital Expenditures 2008: $711,208,000
Capital Expenditures 2009: $509,941,000

Forest Product Industry Locations

Traditional Products
(Source: Reading & Whipple 2003)

Traditional Products
(2011 estimates)

Traditional Products
Subtle shift in consumption trend is deceiving:

Bottom line is a 36% decline in wood consumption from 2003!

Wisconsin Lumber Markets
Hardwood Lumber Production:

12.8 billion board feet in 1999
9.3 billion board feet in 2008
6.5 billion board feet in 2009 estimated
7.0 billion board feet in 2010 estimated

448 million board feet in 1999
328 million board feet in 2008
164 million board feet in 2009 estimated
200 million board feet in 2010 estimated

Growth in 2010 driven by an increase in export markets

Why the reduction in Wisconsin wood consumption?

Globalized Marketplace
Environmental regulations
Careful here because some exports beneficial

Downturn in our domestic economy
Consumers extremely price conscious

Global Impact
The secondary forest products market has been hit hardest by globalization.

Trends in single family home prices and household income; home prices were increasing at an unsustainable rate:
Sources: Median income & median new home prices - U.S. Census Bureau; Median existing homes – Natl. Assoc. of Realtors

Single family housing starts
Data source: U.S. Census Bureau
Down 74% from 2005 (peak) to 2009
Feb 2010

Value of private U.S. construction: 2002-2009
Data source: U.S. Census Bureau, Annual Value of Private Construction Put in Place

Medium/high quality products- focus on quality resources we have and position them well

Restore lost manufacturing? (juvenile furniture)

New markets (wood fuel and bio-refining)

High degree of customization

Process improvement methods (Lean and JIT Manufacturing, etc.)

Solid workforce and customer Service

Pulp Mill to Bio-Refinery
If our pulp mills are going to survive the current (traditional) marketplace they will need to become bio-refineries.

Pulp Mill addition of Bio-Refinery
Flambeau paper and NewPage each received $30 million in federal grants to do bio-refining

Flambeau paper has started entering into contracts in preparation of construction

Flambeau still looking for investors

Woody Biomass
Potentially any portion of a woody plant in the forest can be called wood biomass:
Residuals: tops, branches, cull logs and pulpwood, dead trees, etc.
Dedicated crops

Woody Biomass
Biomass is and will be an increasing product from our forests

How long development takes is the big question

The general perception of what levels of biomass forests can provide are not the same as reality

As this market develops additional new markets and room for innovation (i.e. Using wood pellets as animal bedding, changes in supply chain logistics, value added refining)

Woody Biomass
Fiber may not stay cheap and prices need to increase so those supplying it can make a reasonable living.

Automation, supply logistics, and efficiency are critical to reducing costs.

As oil prices climb the biomass market will likely be more competitive with other methods of energy production.

Wisconsin’s Energy Needs
If you could collect all logging residues it would amount to 2% of existing energy needs.

If all forest growth was used toward energy it could only supply 8.7% of existing energy needs.

This level does not allow for management, current demand or following BMP’s for biomass harvesting.

University Wisconsin System
UW Madison plans to convert its Charter Street plant to biomass using about 200,000 dry tons per year to produce steam. SCRAPPED
UW Stevens Point is planning a small biomass boiler 16,000 dry tons.
UW Oshkosh is planning a small gasification system 16,000 dry tons.
UW Superior is talking about a small biomass boiler- early in the process

Proposed Electrical Generation
Domtar – WE Energies have proposed a 50 megawatt power plant for Rothschild.
This would be a combined heat and power plant.
Domtar buying about ½ the steam produced (exhaust from turbine). Procurement of the bio-mass would be done by Domtar.
They are initially talking 500,000 green tons of fuel.
Application has been submitted to Public Service Commission.

Xcel energy was approved by the Wisconsin Public Service Commission to convert their Bay Front power plant in Ashland Wisconsin to use 250,000 dry tons of biomass.
Currently operate 2 boilers

UPDATE: third boiler stopped due to unanticipated costs.
Proposed Electrical Generation

Proposed Electrical Generation
DTE Energy Services Inc. purchased E.J. Stoneman power plant in Cassville.
Wisconsin coal fired power plant is converting to a 40 megawatts biomass power plant.
Using about 340,000 dry tons of biomass. Dairyland Power Cooperative has agreed to purchase all of the power. STATUS: operating

Wood Pellet Plants
Between 10-15 pellet plants in operation in Wisconsin- most are operating part time due to markets.

Another 10 are still looking into markets and manufacture.

With the prices of oil rising, we expect to see pellet markets improve.

Maximize Benefits
The impact to Wisconsin’s economy is significant
Pulp and Paper
Log Cabins, building material, millwork
Value Added (Furniture)
Biomass (fuel)

Overall WI is doing better than many other states in retaining forest industries.

Challenges facing the forest industry.
Global competition
Slump in the economy

One company closing can devastate a town

Look for new niche markets

Sources and Literature Cited
Hardwood Market Report.

Median income & median new home prices - U.S. Census Bureau; Median existing homes – Natl. Assoc. of Realtors

Nacker, Roger. Wisconsin Economic Development Institute, Madison, WI.

Reading, William H. and James W. Whipple. 2003. Wisconsin Timber Industry: An Assessment of Timber Product Output and Use in 2003. USDA Forest Service Resource Bulletin NRS-19.

U.S. Census Bureau, Annual Value of Private Construction Put in Place.

US Dept. of Commerce and International Trade Commission.

Steve Hubbard
Forest Products Specialist
WI DNR Division of Forestry
One Gifford Pinchot Drive
Madison, WI 53726
Phone (608) 231-9329

Wood Pellets
Pellets need to have a feed stock MC of 10%
Residential pellets can only contain 1% wood ash, which limits bark content in the feed stock
Markets could become saturated as more plants go online
Pellets sell domestically for $140 to $150 premium bagged a ton
Pellets premium bulk $120 to $130
Pellet industrial grade $110 to $130 (if you can sell it)
Export markets can have prices over $220 delivered The cost to deliver is about $100 per ton
Most successful industrial plants make pellets from mill residues which keeps raw material costs low

Wood pellets
High energy prices have increased demand for wood pellet stoves.
One new pellet plant was built in Peshtigo.
Wood Pellets are in short supply globally.
Several firms are considering putting in pellet manufacturing equipment in Wisconsin. The decrease in pulpwood demand and price has made these projects more viable.

Estimate of contribution by owner for 2008

Timber Trade Patterns
92% of the wood harvested in Wisconsin is used by Wisconsin manufacturers

6% of the wood harvested goes to Michigan

Remainder goes to Minnesota and other states

Niche Markets
The nature of existing forest products markets, particularly markets for specialty products, are changing.
Competition and consumer demand have changed the manner in which firms must invest and market their products to compete within specific market segments.
Forest product niche markets are increasing to meet that demand.

Technical Assistance
Wisconsin has a strong technical assistance program for the forest industry.
DNR Division of forestry, forest product specialists provide direct assistance along with two UW Extension forest products specialists.
Help is also available from the USDA-FPL Technology Marketing Unit.

Technical Assistance (con’t.)
Financial analysis spreadsheets have been developed for primary wood processors to help them make better decisions.
Industry directories are maintained.
Custom technical assistance is offered to companies.
Resource assessment.
Work shops, etc.