PRODUCTIVITY AND COSTS IN THE SOUTH: TRENDS AND CAUSES' 2 Frederick W, Gubbage, James E. Granskog and Bryce J. Stokes

ABSTKACT.--Trends in harvesting equipment costs, labor costs, and harvesting costs in the South since the 1960's are sumarized based on data collected from available price reporting services, Equipmettt costs and wage rates have generally increased at a rate greater than that of inflation in general hut less than that of industrial comodities, Logging costs have increased at a rate considerably less than inflation. This indicates that logging productivity has increased significantly in the last two decades,

INTRODUCTION HISTORICAL LOGGING METHODS AND MECWANIZATION

Harvesting productivity and costs are priority Before World War IE, logging in the South was concerns for the forest products industry. performed by labor-intensive methods. were Productivity gains are needed to offset rising costs usually felled and bucked in the using of personnel, materials, and equipment. How well crosscut and bow . Sawtimber and pulpwood were these f'lctors are combined by mandgearnt will hauled Irotn the woods using horses or muleri, either determine logging costs for individual operations as individual trees or using pallet skids that held and affect the competitiveness of the industry. stacked pulpwood. Once at the deck, sawlogs were loaded by using elevated ramps to pull it up across This paper examines recent trends in the bed of a truck or by A-frame with cables and productivity and costs for labor and machines winches. Pulpwood harvested at this time was often involved in harvesting timber in the South. First, cut with hand saws, delimbed and bucked in the the development of modern logging methods and woods, and piled in flat stacks or in "teepees." mectsanization will be reviewed. Second, the Small 2- or 3-axle straight (bobtail) trucke would available data on logging iabor and equipment then drive to the woods and 2 persons would hand productivity and costs are summarized. Third, the load the pulpwood bolts onto the truck. In the trends in average southern logging costs are 1950%, the use of pulpwood pallets was introduced. determined. Based on this data, the overall trends These allowed loggers to stack bolts on steel frames in and causes for changes in southern logging in the woods, which could later be winched onto a productivity and costs are discussed. straight truck or trailer, either directly in the woods or after being pulled to the roadside by a bulldozer.

'paper presented at the 1986 Society of American Simple loading by rollaway (hand) and elevated National Meeting, Forest Production and ramps has now given way to efficient, modern, Utilization Working Group, Bimingham, Alabama, hydraulic loaders. Earlier methods included October 7-9, 1986. crosshaul, and some type of cable hoists. Front-end loaders were introduced in 1950% and the L~rederickCubbage is Assistant Professor, cable (bigstick) loader was generally replaced by University of Georgia School of Forest Resources, the hydraulic knuckleboom, beginning in the 1960's. Athens. James E. Granskog is Principal Economist, From the 1950's to the present, roads and trucking Southern Forest Experiment Station, Forest Resources equipment have improved, leading trucks to gradually Law and Economics Work Unit. New Orleans. Bryce J. supplant railroads as the primary means for log Stokes is Research Engineer, Southern Forest transport in the South. Experiment Station, Engineering Work Unit, Auburn. Alabama. The gasoline-powered has become the most widely-used in logging. Most early saws were very cumbersome and could not cut trees well. Over time, many loggers, inventors, machinists, and engineers worked at developing and improving the clrain saw. Clrarlie Wolf developed and marketed a forerunner to the modern chain saw in 1920. In (;ermany, Andreas Stilt1 was working in ret.Iucing tl~e size and weight of the portable saw. Some of these saws were imported to the United States during World War I1 when tlrere was a great demand for powered saws for the woods. Efficiency increased greatly with the development of a unique saw chain by Joe Cox iu tlre 1940's (Lucia 1981). I)evelopme~~tof the first light-weight chain saws in the early 1960's Eicirislun by facilitated their use for cutting pulpwood and f.~. ,cscc<>rs delimbing. Exrrdccioo by Cur- vardcrr and rkiddrra The first wheel tractors were four-wheel-drive trucks with Ackermann steering. An articulated forest tractor was developed in 1955 in eastern Canada, while a concurrent development was being made in the f'acific Northwest (Silversides 1966). The tractors were used either as , wlricl~ carried shortwood on elevated bunks, or as ground , which dragged longwood with cables. Development of bundled forwarders had been tried unsuccessfully with rigid-frame wheel tractors. Tite articulated wheel tractor became an ideal carrier. Concurrent with the development of an articulated machine was the introductioii of the Figure 1. Trends in Logging Mechanization. Source: integral arclt, which permitted tlre lifting of logs Skogsarheten 1980, wittr steel c'lbles. "Chokerless" skidders were introduce11 ill the 1960's. Cltokers were replaced lowest average cost producers for pulpwood on very with grapples on a fixed boom or on a swing boom. small tracts. Even large operations in the Coastal They were ntoi-e efficient , especial ly for pulpwood, Plain usually have at least one cable . once feller-l)unchers were adopted, because they Rougt~ or swampy terrain reduce the productivity of allowed skidclers to carry more small stems at once rubber-tired feller bunchers and grapple skidders, than could be choked with cables. Most grapple so less mechanized systems may be more skidders solrl now also have factory-installed cables cost-efficient. Large trees, , and as well. high-value species are still harvested with , in order to prevent butt damage. Portable chippers were developed in the early 1950's but did not become popular until the 1970's. Several versions of portable chippers have been PRODUCTIVITY AND COSTS manufactured in response to a need or regional application. Their use is still limited by a small A uniform, well constructed data base for demand for tile dirty chips that are produced in the logging productivity and costs does not exist. woods. Thus, one must use various secondary measures to roughly estimate these factors. sttears were introduced in the 1960's also. The early slrears were directional devices. After mect~anicalfelling was accepted, holding arms Labor were added to accumulate, transport, and but~ch trees. Mechanized felling led to development of PRODUCTIVITY.--Productivity is an important multi-functional machines to mechanize shortwood measure of the success of mechanization. Althougtr harvesting. These machines felled, delimbed, often expressed in terms of labor productivity, such bucked, and bunched. Others were developed co fell as output per employee or person-hour, it actually and delimb whole trees. In general, however, these represents the output resulting from the entire set machines have not been widely adopted. of resources used in the production process.

Canada lrad systems in which all functions were Changes in output per employee in the United completely mechanized in the mid-60's. These States, the South, and 1.ouisiana were calculated for systems either had multi-functional machines or the periods reported by the Census of Manufactures several single-functional machines. The past (U.S. Bureau of Census 1967-1982), as shown in Table trends, as well as Future prospects for 1. Output was measured by value of shipments data, ~t~ecl~aniz~ttion in Sweden are summarized in figure 1. adjusted fur price changes by the PPI-A11 l'hese trends generally parallel the mechanization of Commodfties index. Productivity in all areas timher ttarvesting in North America and the southern increased from 1967 to 1977, but showed a decline llnited States, except the Sottth has relied more on for the most recent period because 1982 figures rail and less on river transport. reflect recevstonnry conditions. The Louisiana logging industry had the best record. Greater 1)espi te irdoption of new equipment, ntitny capital investment resulted in higher productivity labor-itttcnsive operations remain in use. (:~thl)age relative to tile South and the U.S. (1982) found that bobtail systems are still tire TABLE 1.--Average annual growth rates in output Equipment per employee in timber harvesting, 1967-1982. PKOUUCTIV1TY.--Based on a 1976 pulpwood producers survey reported in Watson et al. (19781, Area 1967- 1972- 1977- 1967- we calculated the average weekly production rates 1972 1977 1982 1982 and firm assets for the different systems shown in Table 3. The systems ranged from labor-intensive to - highly mechanized. U.S. 5.5 7.1 -2.4 3.1 The number of personnel in each firm increased South 6.3 8.1 -2,7 3.8 as the mechanization level increased. As mechanization increased, the output per week La. 3.9 10.7 -1.1 4.4 increased, as did the weekly production per person. Output per amount of capital invested decreased with increasing mechanization. The 1976 survey did not COSTS.--Periodic data on employment and earnings include feller-buncher systems, which would have in the logging industry are also contained in the increased production for systems with grapple Census of Manufactures. Table 2 shows various skidders. However, a 1480 survey made specifically measures of labor cost and capital expenditures for of 121 high volume southern wood producers found the logging industry. Total payroll costs per that systems using rubber-tired feller bunchers and employee and wage rates for production workers have grapple skidders harvested an average of 400 cords increased steadily since 1967; however, payroll as a per week (Weaver et al. 1982). This data provides percent of value added has generally declined. additional evidence that mechanized systems are more productive, 'Today, mechanized high-volume producers Value added is the amount remaining after the probably constitute an even greater share of cost of stumpage is subtracted from the revenue southern pulpwood production capacity. received from product sales. This must cover ail the expenses of operation and a margin for profit. A declining ratio of payroll to value added is COSTS.--Data on southern equipment indicative of an increasing importance of capital to prices have been published over a period of years by labor. New capital investment per employee Plumrner (1967-1982), Cubbage (1982) and Werblow and increased rapidly from 1967 to 1977, but 198.2 levels Cubhage (1986)- To determine historical price were down due to the severe recession that year. trends for this equipment, price data were The logging industry in Louisiana has performed best summarized by year and equipment type (Cubbage and in reducing payroll as a percent of value added and Werblow 1985). The equipment comonly used in the iircreasing the level of capi tdl investment. South w~isselected to form a weighted avernge index to deterrnlne average price increases over time, 'l'ABI,E 2.--Historical Timber tlarvesting Labor Weights were assigned according to the Costs and Investment from Census of Manufactures purchase prices for each piece of equipment. Data. S.I.C. Code 2411.

Logging Costs Payroll Wage/Hour Payroll as New Capital per Production X of Value Investment Data on logging costs or logging contract races -Year Employee Workers Added Per Employee per se are not published in any references, but they (dollars) (dollars) (percent) (dollars) can be derived from secondary sources. Timber Mart South (1985) has reported average southern prices -SOUTH for stumpage and delivered-to-the-mil1 wood products since 1976. The difference between the two is a measure of logging costs. Also, Louisiana has published strimpage and delivered prices for sawtimber and pulpwood state since 1955 (Louisiana Department of Agriculture 1967-1984, Ulrieh 1985). For comparison, logging cost measures were 1.011 15 IANA c~lcul~tetllrom 1967 to 1984 for 1,ouisiana pine pulpwood 'ind sawtimber, and from 1976 to 1984 for Ti~tberMart South pine pulpwood and sawtimber.

COST TRENDS

UNITED STATES Using the above information, the average trend in labor, equipment, and logging costs and for inflation was calculated for the years for which data were available (Table 4)- Regression analysis was used to estimate average annual rates of increase for all but the labor costs, which were calculated by determining the simple internal rate of return. TAUI.1: 3.--Average t4eekly Soutl,crn Pulpwood l'roduction Rates for Selected fbrvesting Systems, 1976. Source: Adapted from Watson et at. 1'178.

Approximate Average Average Assets Average Weekly Production No. t:t~oratteristic Number of 1979 Per Per dollars cords person $10,000 -tiar#est ing System -Firms Equipmezit E~itployees Shortwoo I:

A Etanaal Uobtsil 398 Straight Truck/lland Loading 1.6 3,800 16 10.0 42.1

c Farm Tractor/Bobtail 1105 Straight ?'ruck/Rigstick/Farm 7.0 29,500 25 12.5 8.5 Tractor

D 329 Forwarder 3.4 49,000 55 16.2 11.2

14? C.rble 6/iir Grapple $kidder/ 4.3 108,000 99 23.0 9. L Knuckleb*ictn~/'lrat ler

F Cable Skidder 369 Cable ~kidder/bt~cklrboo~n/ Front End Loaders

C Gr'tpple Shidder 20 Cdble/Cr.lpple Skidder/ Knuckleboom

The weighted average rates of inflation TABLE 4.--Average Wage Rate, Equipment Price, calculated for purchase prices of in-woods equipment Logging Cost, and Inflation Rates of Increase increased at an average rate of 8.8 percent per year from 1971 to 1984--the years for which data were available. Highway vehicles increased at a rate of Trend from Initial 8.3 percent per year from 1967 to 1984, and all Year to 1984 logging and highway equipment at 8.7 percent from Initial Year - 1970 to 1984. During the time period from 1967 to --Cost Item/Index -1967 - 1970 1971 I976 1984, trend analysis indicated that the rate of inflatir~nincreased at 7.2 percent per year as Payroll per Employee measured by the CNP deflator and 8.3 percent for the South 7.8 - - - PPI-Industrial index.

During all time periods, the costs for both Equipment Purchase Prices logging equipment and labor generally increased at rates greater than the general inflation rate, as In-Woods Equipment - - 8.8 - measured by the GNP implicit price deflator, but Highway Vehicles 8.3 - - - less than tile Producer Price Index for Industrial All I.ogging Eqpt. - 8.7 - - Commodities. Equipment and labor costs have increased at rates considerably greater than the 1.ol;glng Costs prices received by loggers. The cost trends for all but Louisiana sawtimber harvesting were Timber Mart South significantly less than inflation, labor, and Pu 1pwood - - - 4.9 equipment cost- increases--almost half as much. This Sawtimber - - - 3.3 implies that real (inflation-adjusted) logging costs 1.ouisiana have decreased substantially since 1967. Pulpwood 2.2 6.2 5.4 2'6 Sawt imber 8.7 8.0 7.8 8.6 CONCI.US IONS Inflation Indices Costs for hourly wages and for purchasing CNP lfef lator 7.2 7-1 7.1 7.3 logging equipment have increased significantly in PI'I-Industrial 8.3 9.1 9.1 8.3 the last 15 years. While neither the available wage rate or equipment cost data bases are without faults, they should provide a reasonable basis for The Cross National Product (CNP) implicit price estimating trends. The smaller annual price deflator and the Producer Price Index for Industrial increases for logging costs than for its component Commodities (PPI-Industrial) , as published in the factors indicate that loggers have increased their Economic Report of the President (19851, were used productivity greatly or are accepting lower profit to reflect inflation rates during the time period. margins. 1t cot~ldbe both. I.oggers can have a 'I'lterie are representetive ot inf latio~tin the overill1 lower profit mnrgin hut still make more money from economy ((;Nil) and the indust rial sector increased vol me. (PPI-Industrial). Overall, the results suggest that despite Plummer, Glenn M. 1967-1982. Machine costs and greater costs for labor and equipment, new rates, various years. mimeos. Georgia Kraft harvesting equipment has increased logging Corpora tion. Rome; Georgia. productivity. Adoption of new logging equipment and improvements to existing equipment have decredsed Silversides, C. R. 1966. Use of articulated real logging costs, making the forestry sector more wheeled tractors in logging. Unasylva - An contpeti tive. However, no new major equipmet~t International Review of Forestry and Forestry innovatior~sseem imminent. For the near future, at Products - Vol. 20(4), No. 83. p. 41-51. least, it appears that refinements to existing equipment will prevail. In this situation, some Skogsarl)eten. 1980. Logging in Sweden. gains in productivity will continue for tile sl~ort Forskningsstiftelsen Skogsarbeten. Stockholm. term as more loggers move from the older, less Sweden. 32 p. productive systems to modern feller-bunclter grapple-skidder systems. But better labor training Timber Mart-South 1984 Yearbook. 1985. Data and logging management are likely to be the Kesources. Inc. Lexington, Mass. 291 p. long-term keys to continued productivity improventents in the logging sector. I.et's hope we Ulrich, Alice H. 1985. U.S. timber production, can capture this opportunity as we have with ,trade, consumption, and price statistics equipment development and adoption. 1950-1984. Miscellaneous Publication No. 1450. U.S. Department of Agriculture, Forest Service, Wasl~ington, 11.C. 84 p. 1,ITEKATLIRE CITED U.S. Bureau of the Census. 1967, 1972, 1977, 1982. Cubbage, Fred. 1982. Economies of tract size in Census of Manufactures, S.I.C. 2411. soutttern pine harvesting. Research Paper Washington, D.C. SO-184. USDA Forest Service, Southern Forest Experiment Station. New Orleans, I.A. 27 p. Watson, W. F., R. A. Kluender, J. M. Kucera, and R. K. Mntthes. 1978. Productivity of pulpwood Cubbage, Frederick W. and Dennis A. Werblow. 1985. harvesting systems in the Southwest Technical Trends in forest harvesting equipment costs. Division of the American Pulpwood Association. Paper No. 85-1 591. Presented at : Ancerican Mississippi Agrictlltural and Forestry Experiment Society 01 Agricultural Engineers. Wirrter 1985 Station. Mississippi State University. 8 p. Meeting. December 18. 16 p. Weaver, G. H., Bob Izlar, Richard Kluender, W. F. Economic Report of the President. 1985. Watson, and R. K. Matthes. 1982. 1980 Survey Transmitted to the Congress. February 1985. of i~igllvolume independent wood producers in tibe U.S. Government Printing Office. Washington, Sot~th. Information Bulletin 23. Mississippi D.C. Agricultural and Forestry Experiment Station. Mississippi State, Mississippi. 7 p. I.ouisiarta Departmelit of Agriculture. 1967-1984. 1,ouisiann forest products-quarterly market Werblow, lfennis A. and Frederick W. Cubbage. 1986. report. Office of Marketing. Baton Rouge. Forest I~arvestingequipment ownership and operating costs in 1984. Southern Journal of I.ucia, k:llis. 1981. A lesson from : Joe Cox Applied Forestry 10(1):10-15. and his revolut.ionory saw chain. Journal of Forest tlistory 25(3) : 158-165.