Economic Impact of Tennessee Timber Sales
Recently we were asked to provide a simple statistic: the amount of added economic activity that results from $1 worth of timber sale. We didn't have the answer at hand, so we thought about it…
When trees are cut, the landowner is paid for the logs produced. This is called ‘stumpage' and stumpage revenues in the state of Tennessee amount to millions of dollars per year. However, the loggers who cut the trees make money for their work, sawmills use the logs for their lumber businesses, the lumber from sawmills feeds into further manufacturing or into retail sales, and so on. All of these steps in the wood product value change represent value added economic activity and this activity in Tennessee totals in the billions of dollars per year. Obviously ‘a lot' of economic activity results from $1 worth of timber same – but can we put a number to it?
When timber is sold, the seller is often paid by the ton for different products such as pulpwood, sawlogs and veneer logs. These different product types are of varying quality and value, and publications such as Timber Mart-South report the average stumpage prices paid for these commodities. The US Forest Service regularly reports on the volumes, in cubic feet, of commodities harvested in individual states such as Tennessee . By using published conversion factors to go from cubic feet to tons, we can then calculate the total annual value of stumpage in Tennessee. For 2009, this value works out to be about $72½ million.
The forest industry in Tennessee is large and diverse, ranging from loggers to lumber mill and paper to pencil factories. The total amount of economic activity related to forestry activities was estimated in a recent report from economists at the University of Tennessee titled Summary of the Economic Impacts of Agriculture & Forestry in Tennessee, 2009 . In that report, the Total Value Added by the forest industry is over $8 ½ billion! Total Value Added includes things such as wages paid, profits earned and taxes paid.
Dividing ‘Total Value Added' by ‘stumpage' shows that every $1 in timber sales results in almost $120 of value added economic activity in Tennessee. There is uncertainty in this number, because stumpage prices vary, conversion factors are imprecise and wood moves across state lines. However, it is certain that landowners who sell timber play an important role in the economy in Tennessee.
For more information, contact Adam Taylor at 865-946-1125 or AdamTaylor@utk.edu .