Highlights

• Montana had over 19 million acres of nonreserved timberland in 2004, containing a net volume of timber of 35 billion cubic feet. Annual growth on Montana’s timberland is 824 million cubic feet, while annual mortality is 377 million cubic feet, yielding net growth of 447 million cubic feet.

• Montana’s estimated timber harvest in 2004 was approximately 160 million cubic feet or 700 million board feet Scribner, down from 1.2 billion board feet during the late 1980s. The decline in Montana’s timber harvest can be attributed primarily to a 70 percent decline in harvest from national forests.

• Montana’s forest products industry consisted of an estimated 205 manufacturers in 2004. Eighteen mills in Montana processed over 10 million board feet Scribner in 2004, down from 38 mills in 1976.

• The capacity of Montana’s forest products industry to process timber was 963 million board feet Scribner (225 million cubic feet) in 2004, down from over 1.5 billion board feet during the 1980s. To continue to operate efficiently and competitively, Montana’s timber processors will need about 800 MMBF Scribner (186 million cubic feet) annually.

• Capacity utilization during 2004 was 77 percent, meaning Montana’s timber processors used 737 million board feet Scribner in their operations.

• Mill residue from Montana’s timber processors is a major source of raw material and fuel for Montana’s residue-utilizing facilities. These firms consume approximately 2.2 million dry tons (175 million cubic feet) annually. Montana’s timber-processors generated over 1.5 million dry tons (120 million cubic feet) of residue during 2004. The remaining residue needs were filled by residue from outside the state or by processing timber directly into raw material or fuel.

• With no change in current harvest levels, Montana will likely see the closure of more than one of its largest timber processors, along with the shut-down of several smaller mills.

• A 15 percent decrease in Montana’s annual timber harvest from current levels would cause the closure of four to six of the largest timber processors in Montana, in turn leading to substantial operational reductions for facilities processing mill residues.

• A 15 percent increase in Montana’s annual timber harvest from current levels would sustain industry capacity at close to present levels.

Timberland, Growth and Mortality (from USDA Forest Service IW-FIA):Montana had over 19 million acres of non-reserved timberland in 2004, with slightly more than two-thirds in public ownership (Table 1). The net volume of growing stock on non-reserved timberlands was approximately 35 billion cubic feet in 2004, with approximately 80 percent of the volume on public lands. Annual growth on non-reserved timberland is 824 million cubic feet (MMCF), while mortality is 377 MMCF annually, resulting in a current net annual growth of 447 MMCF on non-reserved timberlands.

Table 1: Montana Non-reserved Timberland Area, Standing Timber Inventory, Net Growth, and Mortality, 2004.
Ownership Group
Public	Private		All
Area of timberland (acres)	12,796,599	6,248,962	19,045,561
Net volume of growing stock (thousand cubic feet)	28,486,076	6,478,751	34,964,828
Average annual net growth of growing stock (thousand cubic feet)	-	-	446,655
Average annual mortality of growing stock (thousand cubic feet)	-	-	376,733

 

Timber Harvest 1980-2004 (from USDA Forest Service Region One and Keegan et al. 2001): Following the poor markets of the early 1980s, when Montana’s timber harvest averaged 901 million board feet Scribner (MMBF), the state’s harvest increased to just over 1.2 billion board feet annually for the remainder of the 1980s (Figure 1). A substantial decline in the volume of timber harvested began in 1990 and has continued through 2004 to an estimated harvest of slightly more than 700 MMBF (163 MMCF). The reduction can be attributed primarily to a 70 percent decline in timber harvested from national forests in Montana. A number of factors caused the declines in national forest timber harvests, including: appeals and litigation of timber sales, threatened and endangered species protection, cumulative effects of past harvesting, and reductions in U.S. Forest Service budgets.

Harvests from other ownership categories were relatively stable during the period with much of the year-to-year fluctuation driven by changing market conditions. Based on data for 2003, approximately 70 percent of the timber harvest in Montana was from private lands, national forests supplied 20 percent, and all other ownerships accounted for 10 percent.

 

Characteristics of Harvested Trees (from McLain 1992, Keegan et al. 2004a, and Morgan et al. 2005): Improvements in milling technology and changes in timber inventory have increased the proportionate use of smaller diameter trees and decreased the use of larger trees as borne out by repeated logging utilization studies.

In 1988, less than 50 percent of timber volume harvested for sawlogs in Montana came from trees smaller than 17 inches diameter at breast height (dbh). In 2002, 78 percent of sawtimber harvest volume came from trees smaller than 17 inches dbh, and about 50 percent came from trees less than 13 inches dbh (Figure 2). Trees with dbh greater than 23 inches accounted for over 18 percent of harvest volume in 1988, but less than 4 percent in 2002.

Tree use (excluding pulpwood) by size class in Montana’s timber-processing facilities is similar to harvest within the state. Of the 174 MMCF of timber used by Montana mills in 2003, less than 2 percent of volume was from trees smaller than 7 inches dbh, almost 12 percent was from trees 7 to 9.9 inches dbh, and slightly less than 87 percent (151 MMCF) was from trees 10 inches dbh or larger.

 

Montana’s Forest Products Industry

Of the active forest products facilities in Montana, the overwhelming majority (193 in 2004) used timber in round form and will be referred to as timber-processing facilities; 12 used primarily mill residue and are dealt with separately.

Integration among Major Sectors: Some obvious integration exists in the forests products industry, for example between loggers and the mills that process the logs. A much less obvious but very important linkage exists between the mills that process timber (logs) and those that use wood fiber by-products from timber processors. These by-products are generally referred to as mill residue or residuals.

Number and Size of Timber Processing Facilities (from Keegan et al. 2001, 2004a and 2004b): The number of active timber-processing facilities in Montana has remained relatively stable over the last thirty years (Figure 3). The numbers have ranged from a low of approximately 178 facilities in 1976 to a high of 228 mills in 1981. At the end of 2004, there were approximately 205 active timber-processing facilities in the state. These included 54 sawmills, 80 log home or house log manufacturers, three plywood plants, a pulp and paper mill, a particleboard plant, a medium density fiber board plant, and 65 additional facilities, such as log furniture makers and post and pole plants.

      The major change when considering the number of facilities has been an increase in the number of small facilities (mills processing less than 10 MMBF of timber or, in the case of residue users, less than 5 MMCF of wood fiber annually) from 140 in 1976 to 187 in 2004. Conversely, the number of larger mills processing more than 10 MMBF or 5 MMCF of residue declined from 38 in 1976 to 18 in 2004. Simply tracking the number of mills in the state over time, even by size class, does not provide a precise analytical measure of the forest products industry’s size or vitality. The increase or decrease in the number of operating facilities does not necessarily translate to a corresponding change in capacity to process timber or in production.

 

Montana’s Timber-processing Capacity and Timber Use

Capacity refers to the annual volume of timber or mill residue that the state’s industry could process assuming sufficient supplies of raw materials and firm market demand for products, considering normal maintenance and down time. Capacity to process timber in this report is expressed in units of raw material input – board feet Scribner and cubic feet. For the residue-utilizing sector, capacity is expressed in dry tons (2,000 pounds of oven-dry wood fiber) and cubic feet.

 

Trends in Capacity (from Keegan et al. 2004a and 2004b): Montana’s timber processing capacity, after increasing slightly during the 1980s to just under 1.6 billion board feet Scribner (375 MMCF), declined by nearly 40 percent over the subsequent 15 years (Figure 4). Montana mills had a combined timber-processing capacity of 970 MMBF (227 MMCF) in 2003. The estimated annual capacity to process timber as of December 2004 was 963 MMBF (225 MMCF).

 

Capacity Utilization (from Keegan et al. 2001, 2004a, and 2004b): Utilization of timber-processing capacity averaged 78 percent for the period 1980 through 2004, and has ranged from a low of 53 percent in the severe recession year of 1982 to 88 percent in 1999.

In 2003, Montana’s 193 timber-processing facilities used approximately 750 MMBF (174 MMCF) of timber, utilizing approximately 77 percent of state-wide capacity. The total timber harvest in Montana during 2003 was approximately 684 MMBF Scribner, indicating 66 MMBF more timber was processed in Montana than was harvested. The difference between volume processed and in-state harvest came primarily from the net flow of logs into Montana. In 2004, estimates indicate that Montana mills processed 737 MMBF, again utilizing 77 percent of stated capacity. The estimate of total timber harvest in Montana during 2004 was just over 700 MMBF, indicating that the net flow of logs into and out of Montana was nearly zero.

A key question in this analysis is: “What proportion of capacity would Montana’s timber-processing industry need to utilize in order to make necessary capital investments and operate on a long term basis?” Based on discussion with timber-processing experts and industry representatives, as well as historic capacity and operating levels in Montana and other western states, this optimal operating level is between 80 and 85 percent of capacity. To maintain this level of capacity utilization, Montana’s existing industry would need approximately 800 MMBF Scribner (186 MMCF) of timber annually.

 

Mill Residue Production and Consumption: In both 2003 and 2004, Montana timber-processing facilities generated just over 1.5 million dry tons (120 MMCF) of mill residue. Sawmills and plywood plants generate more than 95 percent of the mill residue produced in the state. The annual use of mill residue by Montana facilities for products and fuel in each of those years was approximately 2.2 million dry tons (175 MMCF). The remaining residue needs were filled by residue from outside the state or by processing timber directly into raw material or fuel.

 

Conclusions

No change in harvest from 2003-2004 levels: Current timber harvest levels in Montana, averaging approximately 690 MMBF (160 MMCF) annually, would be insufficient to sustain the current industry for the next decade. Even if Montana mills continued to receive timber from outside the state at levels comparable to 2003, it is highly likely that more than one of the larger and several of the smaller timber-processing mills in the state would close. Given changes in land and mill ownership in Western and Northwestern Montana, the net flow of timber from Idaho into Montana should decline from historic levels. In fact, the net flow of timber into Montana was nearly zero during 2004. Closures of more than one major timber-processing facility would negatively impact the residue-utilizing sector, perhaps leading to reduced capacity to utilize mill residue.

 

 

Decrease in Harvest: A 15 percent decrease in Montana’s annual timber harvest to 587 MMBF would cause a shortfall of approximately 210 MMBF from the 800 MMBF needed to sustain the current timber-processing industry. With no net flow of timber into the state, this shortfall would be sufficient to cause the closure of four to six of the largest timber-processing mills in Montana, as well as several smaller mills. Losses of this magnitude would lead to substantial reductions in operating levels or closures among facilities that use mill residue.

 

 

Increase in Harvest: A 15 percent increase in Montana’s annual timber harvest to 794 MMBF would meet virtually all of the current milling capacity needs in Montana and should sustain industry capacity at current levels, even with no net flow of timber into the state.

 

 

References

Keegan, C.E., K. Gebert, A.L. Chase, T.A. Morgan, S.E. Bodmer, D.D. Van Hooser. 2001. Montana’s forest products industry: a descriptive analysis 1969-2000. The University of Montana-Missoula, Bureau of Business and Economic Research, Missoula, MT. 67 p.

Keegan, C.E., T.A. Morgan, F.G. Wagner, T.P. Spoelma, P.J. Cohn, K.A. Blatner and S.R. Shook. 2004a. “Timber Use, Processing Capacity, and Capability to Utilize Small-diameter Timber within USDA Forest Service, Region One Timber-processing Area” Report submitted to USDA Forest Service, Inventory and Monitoring Institute and Region One, Missoula MT. January 2004.

Keegan, C.E., T.A. Morgan, K.M. Gebert, J.P. Brandt, K.A. Blatner and T.P. Spoelma. 2004b. “Timber-processing Capacity and Capabilities in the Western U.S.” Report submitted to USDA Forest Service, Resource Valuation and Use Research, Washington, DC. November 16, 2004.

McLain, W.H. 1992. Logging Utilization--Montana, 1988. Resource Bulletin INT-78. Ogden, UT: U.S.D.A., Forest Service, Intermountain Research Station. 9 p.

Morgan, T.A., T.P. Spoelma, C.E. Keegan, A.L. Chase and M.T. Thompson. 2005. Montana logging utilization, 2002. Research Paper RMRS-RP-52. Ogden, UT: U.S.D.A., Forest Service, Rocky Mountain Research Station. 12 p.