Abstract

Logger interviews

For the purposes of this study, a successful small-parcel logging firm was defined as a logging firm that regularly and successfully harvests parcels of timber smaller than 40 acres and is capable of successfully harvesting parcels smaller than 20 acres. The 40-acre threshold was identified as a breaking point between firms that specialize in harvesting small parcels on family forest land versus those firms that specialize in harvesting larger parcels on state, county, and industrial/corporate forestland (Rickenbach and Steele 2006).

Successful small-parcel loggers were identified by contacting 48 mills and forest industry experts by phone and e-mail. Mill contacts were targeted toward procurement foresters when these entities could be identified; however, when this was not possible, inquiries were directed to mill managers or other responsible officials. Wisconsin mills were identified using Wisconsin's Wood Using Industry Online Database (University of Wisconsin–Madison et al. 2006). Mills purchasing more than 3 million board feet of timber annually were contacted and asked to provide the name and contact information for loggers who successfully harvest small parcels of timber. The 3 million board feet cutoff was chosen to eliminate secondary mills, hobby mills, and small mills that deal with few or no loggers. These contacts yielded a total of 80 unique loggers from across Wisconsin, which represents approximately 10 to 15 percent of Wisconsin loggers based on past studies (Rickenbach and Steele 2005, Rickenbach et al. 2005, Traver et al. 2013). From the list of 80 loggers, 19 were selected for further study. Loggers were selected based on the frequency with which their firm was mentioned by mills and forest industry experts, the type of harvesting system used, and geographic distribution. Logging firms that were mentioned by multiple entities were automatically included in the study because this was considered strong evidence that the logger was actually successful on small parcels. Additionally, if a logger was said to have a unique or innovative logging system, that logger was included in the study. Finally, Wisconsin was divided into four quadrants using US Highway 51 as the east/west divider and Wisconsin State Highway 29 as the north/south divider, and at least one logger was selected from each quadrant. Forest type, population density, and topography vary considerably across Wisconsin, and therefore receiving input from loggers from each region was considered beneficial.

After the 19 loggers were selected, each logger was contacted by phone to request an on-site interview. Fifteen loggers agreed to participate in the study, while the remaining four either chose not to participate or did not return telephone calls. This participation rate is comparable to the one reported by Stone et al. (2011) in a similar study. Interviews were conducted during the summer and early fall of 2013 at active harvesting sites or another location chosen by the logger. In most cases, the interview was conducted with the owner of the logging firm, but in three cases the interview was conducted with another individual familiar with the logging firm's structure and operations, such as a staff forester or timber buyer. During the interviews, data were collected relating to the size of parcels harvested, moving costs, harvesting equipment, timber procurement, type of timber harvested, profitability, and experience.

Moving cost estimate

The direct cost of moving equipment from one site to another was provided by loggers during the interviews. For loggers that do not own a truck and low-boy, this was the cost of hiring an outside contractor with a truck and low-boy to move equipment from one site to another. For logging firms that own a truck and low-boy, this cost would include the wages paid to the truck driver, fuel costs, and wear-and-tear on the truck and low-boy. In addition to the direct cost of moving, the cost of wages for idle employees and the fixed cost of idle equipment should also be included to fully reflect the cost of moving (Cubbage 1982). The hourly cost of owning harvesting equipment was estimated using the machine rate method (Miyata 1980). The following assumptions were made for both harvesters and forwarders: an economic life of 6 years, a salvage value of 20 percent of the purchase price, an interest rate of 8 percent, a tax rate of 4 percent, and 2,000 scheduled machine hours per y (Brinker et al. 2002). Purchase prices of $300,000 and $169,000 were assumed for harvesters and forwarders, respectively (median reported investments by mechanized loggers). Equipment operator wages were estimated to be $15.31/h (US Department of Labor Bureau of Labor Statistics 2012), and labor overhead was assumed to be 40 percent of the base rate.

Harvesting cost estimate

In order to demonstrate the impact of parcel size on harvesting costs, a simulated thinning of a 50-year-old red pine (Pinus resinosa Ait.) stand with a site index of 60 (base age 50) was conducted. The hypothetical stand was planted with 436 trees per acre and was thinned at ages 30 and 50 as suggested by Ek et al. (2006). The harvest volume was estimated using the RPYLD version 2.0.0 growth and yield model (Hansen 2008). The harvest removed 112 trees per acre with an average diameter at breast height (dbh) of 10.5 inches, which resulted in a harvest of 47 tons/acre. Harvesting costs were estimated using LogCost version 13.1, a harvesting cost estimation model developed by the US Forest Service (Rheinberger 2013). The model includes a 2 percent profit allowance in its cost estimate; however, this was removed for the purposes of this study. Harvesting costs were estimated for a system using a John Deere 1070E harvester and a John Deere 1010E forwarder. Off-road diesel was assumed to cost $3.00/gal. Hauling costs were estimated using the values provided by Abbas et al. (2013) for a 50-mile hauling distance. Moving costs were estimated using the average direct moving cost reported by participants in the study plus the cost of idle employees and equipment as estimated using the machine rate method.

Three harvesting systems

Loggers in this study used three systems to harvest small parcels: cut-to-length (13), chainsaw and skidder (1), and specialized small-scale equipment (1). Of the 13 loggers that used cut-to-length equipment, 7 used rubber-tired harvesters and 6 used tracked harvesters (Table 1). The ability of mechanized loggers to harvest small parcels of timber is encouraging because the majority of Wisconsin loggers use mechanized systems (Traver et al. 2013). Small parcels of timber are often located near the landowner's residence, which makes timber utilization and aesthetics more important than on secluded harvests. Loggers C, F, and J suggested that cut-to-length equipment improves utilization and leaves a more aesthetically pleasing site after harvest than other systems.

Table 1. Profile of 13 cut-to-length loggers that were identified as successful at harvesting small parcels in Wisconsin.^a

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One logger in southwestern Wisconsin harvested timber with a chainsaw and cable skidder. In the steep terrain of southwestern Wisconsin, it is common for loggers to construct bladed skid trails and use cable skidders to winch logs to the skid trails. Chainsaw systems typically require lower capital investments than cut-to-length systems, which reduces overhead costs and may allow chainsaw-based loggers to be competitive with mechanized loggers on small sales. This logger invested only $51,000 in equipment, whereas the smallest capital investment by fully mechanized loggers was $115,000 by Logger E (Table 1). While $51,000 appears low, the median investment by chainsaw loggers was just $60,000 in 2010 (Traver et al. 2013).

There are several disadvantages to harvesting small parcels of timber with chainsaws. First, in Wisconsin, the average chainsaw crew produced only one-third of the annual volume produced by the average cut-to-length crew in 2010 (Traver et al. 2013). In this study, the chainsaw and cable skidder system produced approximately 8,250 tons/y, while cut-to-length loggers' annual production ranged from 6,045 tons (Logger M) to 30,875 tons (Logger H). Second, worker's compensation insurance rates in Wisconsin at the time of this study were $39.78 per $100 worth of payroll for chainsaw loggers versus only $10.95 per $100 of payroll for fully mechanized loggers (Wisconsin Compensation Ratings Bureau 2013). Finally, probably because of the danger and strenuous nature of the work, it can be difficult to find employees willing to work on chainsaw crews. Several loggers in this study that had once operated chainsaw crews had shifted to cut-to-length logging in part because they had difficulty staffing chainsaw crews.

One logger used specialized small-scale equipment to harvest timber. He used a Kioti Forester DK35SE tractor, a Metavic forwarder trailer pulled and powered by the tractor, a Metavic Wheeler for transporting logs to the mill and moving equipment, and chainsaws for felling. This logger typically harvests between 500 and 800 tons per y. This system required an initial investment of approximately $128,000 for new equipment, including the cost of a pickup. While this is higher than the median investment of $60,000 by non-mechanized firms in Wisconsin (Traver et al. 2013), this system does allow the logger to perform all harvesting functions from felling trees to delivering wood to the mill and moving equipment between harvest sites, whereas many loggers contract with outside entities for hauling timber and moving equipment. This logger has used this system for approximately 12 years, but has yet to make a profit. He is retired from another occupation and logging is considered an “expensive hobby.” He takes satisfaction in his work and considers it his contribution to good land stewardship.

While past research indicates that chainsaw loggers can be competitive on small sales (Rickenbach and Steele 2005, Allred et al. 2011), the trend toward greater mechanization in the logging industry is continuing (Traver et al. 2013). For this reason and because this study included only two chainsaw loggers, the remainder of the results will focus on participants using mechanized systems.

Capital investment

Capital investment among mechanized loggers in this study ranged from $115,000 to $900,000 (Table 1). Somewhat surprisingly, 7 of the 13 mechanized loggers had more capital invested in equipment than the median investment of $480,000 by mechanized loggers in Wisconsin (Traver et al. 2013). However, the cost of a new set of cut-to-length equipment can easily exceed $1 million, and approximately 15 percent of mechanized loggers in Wisconsin had more than $1 million invested in equipment in 2010 (Traver et al. 2013). None of the loggers in this study invested $1 million in equipment. Logger M suggested that loggers with $600,000 harvesters cannot be profitable on small parcels of timber. Only three of the mechanized loggers in this study suggested that they would be better equipped to harvest small parcels if they had additional capital invested in equipment, and two of these three simply wanted to replace one or more of their aging machines.

Several of the loggers in this study were able to reduce the purchase price of their equipment by purchasing excavators that had been retrofitted with a harvester head. Logger C purchased a John Deere 490E excavator with a Fabtek harvester head for $120,000, and Logger E purchased a Link-Belt excavator with an Upton harvester head for $80,000. These machines may be less productive than new purpose-built machines; however, for loggers harvesting small parcels of timber, accepting reduced productivity in exchange for lower fixed costs may be worthwhile.

Eight of the 13 mechanized loggers in this study had debt levels equal to at least half of the value of their equipment (Table 1). It is not uncommon for loggers to carry high debt loads because of the capital requirements of the business; however, high debt levels may reduce flexibility and force loggers to focus on tracts with large harvest volumes to ensure the firm generates enough revenue to make its monthly payments. Logger B suggested that his debt load required a break-even production level of 640 tons/wk, which made him hesitant to commit to harvest small parcels.

Timber harvest size

Participating loggers estimated that their average harvest size during the previous year was just 27 acres, which is approximately the same size as the average family forest in Wisconsin (26 acres; Perry et al. 2012). Despite the impacts of parcelization and the recent economic downturn, 7 of the 13 mechanized loggers reported that they were profitable in each of the past 10 years, and 11 of 13 had been profitable in at least 7 of the past 10 years. Six of the 13 mechanized loggers reported an average harvest size smaller than the average family forest (Table 2). Twelve of the 13 mechanized loggers harvested tracts that were 10 acres or smaller during the previous year. Eleven of the 13 stated that they would be willing to harvest parcels as small as 5 acres as long as the tract required only a short move (<5 mi). In terms of volume, 8 of the 13 loggers in this study stated that they would be willing to harvest parcels with as little as 150 tons of timber (about five truckloads). These results are similar to those of Kittredge et al. (1996), who found that more than 80 percent of Massachusetts loggers would harvest a 5-acre parcel if it contained five truckloads of timber and/or was no more than 5 miles from home.

Table 2. Average harvest tract size during the previous year, the smallest harvest performed during the previous year, and the smallest parcel that the logger would be willing to harvest as estimated by participating mechanized loggers.

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These results indicate that properly equipped loggers are capable of harvesting MFL mandated harvests. The majority of participants in this study were willing to harvest parcels that are 10 acres or smaller, which is the minimum acreage required to enroll in the MFL program (WDNR 2013). Logger K suggested that during the early days of the MFL program, plan writers had a tendency to lay out harvests that were as small as 2 or 3 acres, meaning that the planner had taken a 10-acre parcel and applied several different harvest prescriptions that required separate stand entries. Logger K suggested that progress had been made and that most MFL plans had feasible harvest prescriptions today. Logger L echoed these sentiments, stating that the MFL program is “wonderful” for both landowners and loggers and that foresters are doing a better job of planning manageable harvests than in the past.

It is important to recognize that the number of acres available in a timber sale is not the only factor that influences feasibility. When asked to rank the importance of harvest area, harvest volume, timber value, and the proximity of a site to current or planned harvests, loggers ranked volume as most important, followed by value, proximity to current or planned harvests, and then harvest area. Furthermore, site-specific characteristics such as access, operability, and proximity to the mill were listed as factors that influenced loggers' decisions to harvest small parcels. Easy access for trucks and good landing locations reduce logging costs. In Wisconsin, many parcels are inaccessible during the summer months because of soil moisture, oak wilt concerns, or other restrictions, and so small parcels that are operable during the summer are attractive to loggers. Sites that are close to a mill have low transportation costs, which may offset high harvesting costs on small parcels. Nevertheless, parcel size is important in determining operational feasibility, because volume and value available on a site at rotation age is determined in part by early-rotation and midrotation thinnings, whose feasibility is dependent on acreage because these treatments generally produce low per-acre volumes.

Timber purchasing strategies

Ten of the 13 mechanized loggers interviewed during this study purchased at least 50 percent of the timber that they harvest, and 9 of these loggers purchased at least 80 percent of the timber that they harvest (Table 3). Loggers have historically been the primary purchasers of stumpage in Wisconsin (Rickenbach et al. 2005). This strategy gives loggers flexibility in terms of the tracts that they harvest and allows them to group small tracts together to reduce moving costs.

Table 3. Timber purchasing strategies employed by 13 mechanized small-parcel loggers in Wisconsin.

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Every mechanized logger in this study has attempted to group small sales together. Most of the loggers had been somewhat successful with this approach; however, grouping sales does not overcome all of the challenges associated with harvesting small parcels. For example, for loggers owning tracked equipment, any move beyond crossing a road will require a truck and low-boy, which will cost the logger several hundred dollars. Second, each harvest requires paperwork to be filed with the county in which timber is to be harvested. Third, each harvest, regardless of the volume available, requires time to be spent with the landowner prior to the harvest to ensure the landowner's objectives are achieved. Harvest preparation costs are especially important for logging business owners that also operate equipment. Four of the loggers in this study had a business owner that was responsible for purchasing timber and operating equipment. These loggers must target parcels that yield enough volume to compensate for the production lost while meeting with landowners. Logger L refuses to harvest parcels with less than 360 tons available for harvest because on parcels with less volume, he will lose money because of time spent with the landowner. Three of the logging firms in this study employed foresters to purchase timber and interact with landowners; however, the remainder only hired foresters to perform specific tasks such as timber marking and plan writing, meaning that the logger was the primary contact with the landowner for the majority of the firms in this study.

Loggers often perform services in addition to timber harvesting to appeal to landowners. All but two of the mechanized loggers in this study offered at least one service other than timber harvesting, with food plot establishment the most common service provided (Table 3). For most loggers these additional services were not a large part of their business, and they did not perform these services on every sale, but these services did help them purchase timber from some landowners. Loggers should ensure that they are compensated for the time spent performing these services either as a direct payment or in the form of reduced stumpage rates. The cost of owning and operating cut-to-length equipment can easily exceed $100 per scheduled machine hour per machine (Adebayo et al. 2007), and so loggers cannot afford to conduct these services for free. Logger K stated that he often engages in a “bartering process” with landowners over special services to ensure that he makes money and the landowner's objectives are achieved. Logger L stated that he tries to limit the time spent on additional services because landowners expect this work to be conducted free of charge.

Moving distance and cost

The average moving distance for mechanized loggers in this study was just 30 miles. The average reported moving cost was also fairly modest at $406 per move for cut-to-length systems. However, once the costs of idle equipment and the wages paid to idle employees are included, the average moving cost increases to $778 per move. By comparison, Greene et al. (1997) assumed moving costs of approximately $1,500 (adjusted to 2014 dollars) for cut-to-length and whole-tree systems, and Abbas et al. (2013) calculated moving costs well in excess of $1,000 per move for cut-to-length systems. It is important to note that if loggers moved outside of normal operating hours they could reduce their moving costs to approximately $406 because the costs of idle equipment and idle employees would not apply. However, the vast majority of loggers in this study moved during normal operating hours. Several loggers reduced their moving costs by driving rubber-tired equipment on public highways between sales. This strategy allows the logger to move at his convenience and allows the harvester and forwarder to move between sites at different times. For these reasons, Logger H stated that he was willing to drive his equipment on public roads for up to 10 miles between harvest sites.

On average, cut-to-length loggers required a minimum volume of 242 tons to justify moving a typical distance to a new harvest site (Table 2). Assuming a move costs a total of $778 and the harvest generates 242 tons of timber, the logger would incur moving costs of $3.21/ton. Assuming that mills are not willing to pay extra for timber harvested from small parcels, this cost must be recovered from reduced stumpage prices.

Simulated harvest

In order to demonstrate the impact of reduced parcel size on harvesting costs, a simulated thinning of a 50-year-old red pine stand was conducted. The harvest generated approximately 47 tons/acre (Table 4). Seven of the 13 mechanized loggers in this study harvested at least one-quarter of their annual volume from red pine stands, and 10 of the loggers stated that they harvested at least as much volume from thinnings as regeneration harvests (Table 3). Therefore, this simulated harvest can be considered representative of what the loggers in this study harvest.

Table 4. Logging costs for a hypothetical thinning of a 50-year-old red pine stand (Pinus resinosa Ait.) with a cut-to-length harvesting system illustrating the impact of harvest size on delivered cost.

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On a 40-acre parcel, the delivered cost of timber was $33.10/ton (Table 4). This is lower than the costs reported for cut-to-length systems in Michigan (Abbas et al. 2013), but is similar costs reported for cut-to-length systems in Georgia after adjusting for inflation (Greene et al. 1997). With a parcel size of 40 acres, the logger could break even if he paid stumpage prices of approximately $8, $19, and $23 for pulpwood, saw bolts, and sawtimber, respectively, at recent delivered prices (Prentiss and Carlisle 2012). As parcel size is reduced, moving costs per ton increase, which necessitates lower stumpage prices if the logger is to remain profitable. In this scenario, the delivered cost of timber does not exceed the delivered price of pulpwood until parcel size reaches 1 acre (Fig. 1). It is important to note that sale preparation and administration costs are not included in this simulation because these costs will vary considerably between sites, between organizations, and may be paid for by the landowner directly.

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Clearly, small landowners should not expect to receive the same stumpage prices per unit on a 5-acre parcel as they would receive on a 40-acre parcel. On the other hand, loggers should be cognizant of paying competitive stumpage rates. When purchasing timber from small landowners, the power of reputation and word-of-mouth is significant. If a logger earned a reputation for paying below market rates for stumpage, the logger might find it difficult to purchase timber from landowners in the future. Logger A noted that 30 years of experience and a good reputation allowed him to purchase timber from small landowners and also remain profitable in each of the past 10 years. Logger C noted that he had several years' worth of timber lined up to harvest because landowners request him to harvest their timber because of his stellar reputation.