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Industry Trend Analyses
Gale Group
Encyclopedia of American Industries - SIC 2411 Logging
From 1992 to 1997 I was a regular contributor
to various titles of Gale Group, one of America's
largest business publishers. I wrote more than
a dozen articles for the Encyclopedia of American
Industries, which has in-depth surveys of every
segment of the US economy. A typical article provided
an overview of the sector, its history, major
companies, current conditions, and the long-term
outlook. The sectors I covered included aluminum
sheet, auto parts, child daycare, motor homes,
recruiting, sawmills, sporting goods, tobacco,
turbines, and logging.
For complete text, please download 2411LOG.doc (69KB)
Industry Snapshot (1993)
Logging, among the oldest of American industries,
has become one of the most controversial. Environmentalists
have severely attacked harvesting practices, and
they have scored significant victories. Much of
the dispute thus far has centered on protecting
government forests in the Pacific Northwest to
ensure the survival of the northern spotted owl.
The strife between the industry and its opponents
extends far beyond the well-being of a single
species, however, and prolonged hostilities on
several fronts appear likely. While most observers
believe the industry itself is not endangered,
it will probably be transformed by the battles
it faces.
The fight has already had a major impact on the
geographic distribution of logging within the
United States. The South and, especially, the
Pacific Northwest have been the two traditional
logging centers. In the South, loggers have relied
on private holdings, which account for some 90%
of all timberland in the region. In the Pacific
Northwest, however, much of the supply has come
from Federal forests. With harvesting of government-owned
land down sharply, the Pacific Northwest has accounted
for a shrinking proportion of the nation's production.
Leadership in the industry thus continues to shift
to the South.
Interestingly, the curtailment of harvesting on
Federal lands has had a disparate impact on firms
in the wood products industry. In general, the
major forest products companies performed poorly
during 1991 and had mixed results in 1992, as
the recession took its toll. In the first half
of 1993, however, large firms that had extensive
land holdings of their own recorded sharply higher
earnings, as they benefited from the price increases
that accompany shrinking supply. Other companies,
however, including many small sawmills without
timber assets, face increasing margin pressure
as their raw material costs rise.
Organization and Structure
A diverse group of economic entities and individuals
are involved in logging. Among the participants
are the giant, integrated forest products firms,
like Weyerhaeuser or Georgia-Pacific, which may
own millions of acres of private timberlands;
small sawmills that may harvest relatively few
trees on Federal lands for their own use; and
independent cutters, who are compensated depending
on how much of the trees they fall make it to
the mill. Logging activities are thus distributed
among different types of firms and individuals,
but they can also be integrated with other operations
within a single, large company.
According to the government, the value of products
and services sold by the logging industry in 1992
was an estimated $12.7-billion. Broad estimates
of the total size of the forest products and related
industries, of which logging is but a small segment,
run to about 4% of gross national product, or
$200-billion dollars.
Background and Development
Wood was a commodity of great value in ancient
Rome, and in Athens its export was banned -- a
harbinger of the recent controversy over sending
U.S. logs abroad to Asia. In the U.S., of course,
logging is older than the country itself, and
wood products have played a central role in the
economy's development.
The clearing -- and revival -- of the U.S. forest
has been extraordinary. The land area of the coterminous
United States is 1,903 million acres. Between
822 and 850 million acres, or about 45%, was originally
covered by commercial forest. By 1920, owing to
agricultural clearing, lumbering, and other activities,
the original cover had fallen to about 470 million
acres, of which only 138 million acres were original
forest (some 250 million acres were significantly
disturbed through grazing, cutting, and burning
and could not sustain second growth, while 81
million acres were both nonrenewable and nonrestoring).
By 1977, however, because of better management,
suppression of fire, replanting, and other factors,
the trend had reversed itself: the commercial
forest had grown to 483 million acres. The Forest
Service estimates that there were 490 million
acres of timberland in 1992.
Logging in the great forests of the Pacific Northwest
was begun by the Hudson's Bay Company at its Fort
Vancouver trading post on the Columbia River in
1820. In 1825, the Royal Horticultural Society
of London sent out a Scottish botanist, David
Douglas, to the area; he returned to England with
a sprig of what is now the most important commercial
tree of these forests, the eponymous Douglas fir.
Logging as an industry began in the region at
the time of the Gold Rush, which produced a new
market for timber in California. It was the timber
barons from the East who saw the potential of
the Pacific Northwest forests. Most famous among
them was George Weyerhaeuser, who incorporated
his company in 1900 in Tacoma, Washington; today
the firm has over $9 billion a year in sales.
Often a pioneer in the industry, Weyerhaeuser
began the practice of hand-planting new trees
on clearcuts in 1938.
For complete text, please download 2411LOG.doc (69KB)
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