Division of Agricultural Sclent UNIVERSITY OF ■.■;■:■ . ;• ,■■■■ , ECONOMICS of the YOUNG GROWTH SUGAR PINE RESOURCE Sy-i--T/-' K ?S::y"rC : -'-<:-' r y:. yTy:.. -y y-yr'-yyyyyyy^myyyyy-' WfyM-$W : €ff':. \ HENRY J. VAUX >Wfm: m &t- ,:^P CALIFORNIA AGRICULTURAL EXPERIMENT STATION BULLETIN 738 HIS BULLETIN is intended for sugar pine land owners, for timber managers, and for those concerned with the formulation and execution of public forest policies, particularly on blister rust control and the encourage- ment of timber growing. The point of view emphasizes general economics of the sugar pine situation rather than individual timber growing. But in the mixed public and private economy which characterizes timber production in the sugar pine area, the interdependence of public and private economic activities is so marked that both public and private considerations must be recognized in any realistic appraisal of the situation. As a result, the findings are of interest and sig- nificance to all concerned with the sugar pine situation regardless of the specific orientation of that concern. The study shows that economic use of available resources will require effec- tive sugar pine management on those areas which are highly productive for this purpose. There, the prospects for economic return are great enough to justify the relatively high costs of management. Elsewhere, site conditions, existing stocking, or the difficulty of protecting sugar pine are likely to render maintenance of the species not worth while in the light of prospective returns. Criteria are provided for judging which lands should be managed for sugar pine and which should not be so managed. The bulletin concludes with comment on existing public policies aimed at promoting sugar pine growth. The need for careful integration of such policies and for emphasis on the central objective — growing sugar pine — is stressed. CONTENTS Page Sugar pine resource 6 General characteristics 6 Range and occurrence 8 Problems of growing sugar pine 9 Sugar pine areas, ownership, and volumes 12 Method of analysis 13 Potential markets and values 14 Consumption 15 Uses of sugar pine lumber 15 Substitutes 17 Future market conditions 19 Market outlook for sugar pine timber 21 Significance of sugar pine for western pine industry 23 Costs of growing sugar pine and prospective supplies 25 Basis of cost estimates 26 Potential yields per acre 29 Cost per M of sugar pine yield 31 Potential sugar pine supplies from young-growth areas 32 Total potential supply 36 An economic production goal for sugar pine 38 Selecting the most economical areas for sugar pine production 40 Economic criteria 40 Rating cutover land for sugar pine management 41 Rating old-growth stands 42 Policies for handling the sugar pine resource 44 Total expenditures 44 Purposes of expenditure 45 Is a program of public action needed? 46 Desirable lines of public action ... 47 Economic significance of the sugar pine resource 48 Acknowledgments 49 Appendix A, crop-tree rating tables 49 Appendix B, statistical analysis of sugar pine demand 53 THE AUTHOR: Henry J. Vaux is Professor, School of Forestry; Forester in the Agricultural Experiment Station; and Associate on the Giannini Foundation, Berkeley. JANUARY, 1954 [4] ECONOMICS of the YOUNG-GROWTH SUGAR PINE RESOURCE HENRY J. VAUX Sugar pine is one of the most valuable trees growing in California. Indeed, it has been described as the most remark- able of all pines from the standpoint of both economics and general interest. But it is a more difficult tree to grow than most commercial timber species found in the state. Its regeneration may be more difficult than that of other species. Without silvicultural help, young sugar pine often does not grow well in competition with other trees. It has spe- cial hazards — notably the white pine blister rust — which threaten its survival. In view of these obstacles to sugar pine growth, many foresters and land owners wonder whether growing sugar pine should be attempted in California. Are the obstacles so great that the effort is not worth while? Those concerned are faced with a num- ber of possible alternatives. If they do nothing about sugar pine, eventually the resource is likely to dwindle to insignifi- cant proportions as uncontrolled natural forces work themselves out. Or, if they undertake efforts to maintain the re- source by special management measures, the scope of these efforts could conceiv- ably vary from doing practically nothing all the way to the formidable job of try- ing to maintain sugar pine wherever it now grows. The practical problem is to determine, within this wide range, the objective of private and public sugar pine management policies. This question is of concern to both public and private owners of sugar pine land and to a variety of public agencies involved in programs of resource protec- tion. Moreover, the nature of the problem makes it essential that the several parties at interest coordinate their objectives. Neither the private owners nor the state or federal governments can solve the problem independently, or even establish satisfactory management objectives for their own lands without considering what role the other concerned groups are going to play. For this reason, an economic analysis of the sugar pine problem must be framed in terms of the entire resource and of all the agencies concerned. The economy of sugar pine production on private land will depend heavily on whether or not public disease-control programs on such land are continued. The wisdom of continuing such programs will depend in part on whether or not individual private owners want to grow sugar pine. The extent to which national forests should be managed for sugar pine will depend in part on what action is taken on state and private lands. What is done in California must be decided in the light of Oregon's potential position in the sugar pine economy. In view of [5] this high degree of interdependence be- tween diverse public and private inter- ests, the first problem for economic analysis is that of determining a sound management objective for the sugar pine resource as a whole. The present study considers this prob- lem primarily as it relates to existing young-growth sugar pine areas — the areas where the economic effects of alter- native sugar pine management policies will first be felt. It attempts to provide guidance in what the objective of man- agement on such sugar pine lands ought to be, if the economy of the sugar pine region is to obtain the maximum eco- nomic advantages from the presence of this resource. The central question to be answered is : "Under what circumstances is it economic to undertake the special silvicultural measures needed to produce a sugar pine crop from young-growth stands now more or less stocked with the species?" Closely related to this are the questions of how big a sugar pine supply the Amer- ican economy is likely to need in the future, and of what particular forest tracts can produce such a supply most economically. SUGAR PINE RESOURCE General characteristics Sugar pine (Pinus lambertianaDougl.) is one of three commercially important five-needle pines native to the United States. From the day of its discovery by David Douglas in 1826 (Harvey, 1947), the tree has been of major interest to botanists, lumbermen, foresters, and rec- reationists. Along with the northern white pine of the eastern United States and the western white pine of the Inland Empire, it provides the soft, straight- grained, easily worked timber commonly known as "white pine." Appearance. In virgin stands, sugar pine is the monarch of all the pines, sometimes exceeding 200 feet in height and 10 feet in diameter. Mature trees are recognized easily by their huge cones, which often exceed 15 inches in length, and by their red-brown, scaly bark. Vet- erans in the stand have flat tops and a distinctive branching habit which results in one or two rather straight horizontal limbs which are considerably longer than the remaining limbs in the crown (Jep- son, 1910). Younger trees grow in straight, sym- metrical form with rather narrow crowns. The bark is pale gray and smooth in youth, gradually becoming darker col- ored and rough in appearance. The needles, which are 3 to 5 inches long, are borne five to the fascicle. This arrange- ment of the needles serves to distinguish sugar pine from all other commercial pines within its range with the exception of western white pine. Young sugar pines and western white pines are very similar in appearance. They can be distinguished most readily by reference to the lower altitudinal range of sugar pine, and by the fact that its needles are stiffer than those of western white pines and are often twisted (Harlow and Harrar, 1950). Growth habits. In youth sugar pine grows moderately rapidly and maintains this growth rate longer than do most species. Normally sugar pine occurs in mixture with other timber species char- acteristic of the forests of the Sierra Nevada, the southern Cascades, and the inner Coast Ranges. Among the most important of these associates are the true firs, ponderosa pine, Jeffrey pine, Doug- las fir, and incense cedar. Wood. As a raw material, the wood of sugar pine is soft, easy to work, and under changing atmospheric conditions shrinks or swells less than most other softwoods. For these reasons, sugar pine has always been highly prized in the lum- ber trade. Its market extends into every 16] Commercial sugar pine occurrence: Other sugar pine occurrence Fig. 1. The commercial range of sugar pine in California and Oregon. [7] major lumber-consuming region of the United States, and to many foreign coun- tries. Its technical properties, its markets, and the end uses to which it is put are all very similar to those of the two other American commercial soft pines, eastern white pine and western white pine. The tree is named from the sugary exudation which forms hard, white, crys- talline nodules on the upper side of wounds in the wood. This substance "is as sweet as cane sugar, but belonging to a different class of sugars, namely pinite or pine sugar." (Jepson, 1910.) Recent chemical investigations show that sugar pine heartwood contains about 4 per cent pinitol (the currently accepted name for pine tree sugar) . Crude pinitol can be extracted readily from the wood. The substance may prove useful in in- dustry as a raw material for synthesizing chemical compounds. But commercial ex- ploitation will require further study of processing methods and market potential- ities (Anderson, 1952). I 1 N o sugar pine crop trees 20-40 per cent crop |^N\ trees are sugar pine K>^>^ 10-20 per cent crop trees are sugar pine 40 per cent or more crop trees are sugar pine Fig. 2. Typical irregular distribution of sugar pine crop trees in 160-acre tract of young- growth, mixed conifer forest. Range and occurrence Range. Although sugar pine grows as far south as Lower California and north- ward almost to Mt. Hood, its commercial range (fig. 1) is more restricted. On dry, south- and west-facing slopes it occurs in mixture with ponderosa pine. More com- monly, it is found on benches and north slopes mixed with white fir and red fir. Near its northern commercial limit it may be found at elevations as low as 2000 feet. Merchantable stands extend up to 4000 feet elevation in the north and to 7000 feet in the south (Sudworth, 1908) j Occurrence. In the virgin forest, sugar pine occurred in significant amounts over an area of 5% million acres (U. S. Bur. Entomology and Plant Quarantine, 1951a) . However, true sugar pine types (that is, areas in which sugar pine is the key species and where it forms 15 per cent or more of the stand by vol- ume) were limited to about 3% million acres. Fire, logging, and reservations for park and similar purposes have consider- ably reduced the area of land available for sugar pine production. Today, something over 2 million acres of commercially available land support at least some sugar pine growing stock. (Commercially available land is forest land which is: 1) producing or capable of producing usable crops of wood; 2) economically accessible for timber grow- ing either now or prospectively; and 3) not reserved for uses other than timber production.) A large part of this area, including much of the best sugar pine land, lies on the western slope of the Sierra Nevada, between Mt. Whitney and Mt. Shasta. Over three fourths of the commercial sugar pine land is in Cali- fornia. The remainder is in southern Oregon. The sugar pine forest does not occur as a continuous unbroken stand. It is dis- tributed in tracts of varying size within the matrix of the pine, mixed conifer, and [8] true fir forest types (fig. 2). Depending on topography, past history of the forest, and other local conditions, these tracts may vary in extent from a few to several hundred acres. This "patchy" occurrence of the species creates special problems both in studying the sugar pine situation and in devising suitable measures for handling it. Problems of growing sugar pine Sugar pine presents problems peculiar to California forestry. Forty years of ex- perience have shown that such methods of cutting as tree selection, seed tree cut- ting, and clear cutting in large blocks, although successfully used elsewhere, are not well adapted to the forest types in which sugar pine occurs (Hallin, 1951). Thus, in part, the problem of growing sugar pine is identical to the problem of managing mixed conifer forests in the whole Sierra region. (Problems of grow- ing sugar pine in the Sierra Nevada differ in some important respects from the problems of growing sugar pine in south- ern Oregon. In parts of the latter state clear cutting in larger blocks and greater use of seed-tree techniques may be feasible.) In addition, sugar pine has character- istics which often make it more difficult to grow than other species which compete with it in the forest stands. It is highly susceptible to white pine blister rust (Cronartium ribicola Fisch.). Thus, the forest management measures applied to a stand must be designed with these characteristics in mind if a satisfactory crop of sugar pine is to be grown. The nature and importance of these measures can be made clear by a more detailed discussion of the tree itself. Reproduction. Sugar pine produces bumper crops of seed at six- to eight-year intervals. Although considerable quan- tities may fall in intervening years, the seed is highly palatable to rodents, which dispose of enormous quantities of it be- fore it has a chance to germinate (Fowells and Schubert, 1951) . The seeds are large and, hence, dissemination is likely to be satisfactory only within a radius of 150 feet from the parent tree (Dunning, 1949) . A mineral soil seedbed is essential for satisfactory establishment of the seed- lings. Once established, the young trees are persistent and quite tolerant for a number of years. Planting stock can be produced successfully in forest nurseries. However, survival has been poor in some sugar pine plantations, and improve- ments in nursery and planting techniques are being studied. Growth. Sugar pine grows rather rapidly. Moreover, it maintains rapid growth for a longer period of years than its associates (Baker, 1934). For this reason, second-growth mixed conifer stands with a substantial proportion of sugar pine in the growing stock yield somewhat higher timber volumes than do stands of equal age and density which do not contain sugar pine (Dunning and Reineke, 1933). As a result of this more persistent growth, sugar pines may reach a given merchantable diameter at a some- what earlier age than do other species. This advantage is offset (at least in part) by the fact that, in its early years, sugar pine height growth may be less rapid than that of its more aggressive competi- tors, particularly white fir. Until the trees reach an age of fifty to sixty years, the height growth of the firs may exceed that of the sugar pines. This results in sup- pression of the pines unless they are favored by release cuttings. This adverse competition from the firs seems to be of greatest significance in the southern por- tion of the sugar pine range. In northern California and Oregon, sugar pine seems able to compete more effectively in height growth throughout its life. Indeed, in the Umpqua Basin in Oregon, sugar pine seems to outgrow its nearest competitor, Douglas fir, by a substantial amount. Fire. Young-growth sugar pine is somewhat more resistant both to direct heat killing and to crown injury by fire [9] than are the firs (Show and Kotok, 1924) . But even moderately hot ground fires may kill a significant part of the sugar pine growing stock or reduce growth by damage to crowns. Careful protection of established young-growth stands is therefore essential. Nevertheless, even casual inspection of old-growth mixed conifer forests sug- gests that fire has probably played a key role in the past in maintaining sugar pine as a major component of the virgin stand. Fires have apparently favored establish- ment of sugar pine seedlings at the ex- pense of potential fir competition. It also seems probable that fire exclusion has served to increase very materially the amount of fir in the understory of old- growth mixed conifer types. As a result, when such stands are logged, the pre- established fir may effectively block the development of new pine regeneration (Baker, 1934). Insects. The mountain pine beetle (Dendroctonus monticolae Hopk.) is the most destructive insect enemy of sugar pine. It prefers living timber, and en- demic losses are more or less continual (Keen, 1928). During recent years this pest assumed a new and serious role when, for the first time, it was observed killing vigorous young-growth sugar pines at several points in the western Sierra (U. S. Bur. Entomology and Plant Quarantine, 1952). Danger from the beetle seems to be greatest in those young- growth stands having the biggest pro- portion of sugar pine in the species mix- ture. Due to the very recent development of losses in young-growth stands, full evaluation of the seriousness of this in- sect hazard and of measures to combat it must await further study. The sugar pine cone beetle (Conoph- thorus lambertianae Hopk.) is also of apparent significance wherever problems of sugar pine regeneration arise (Miller, 1915) . This insect invades the cone stalk at the beginning of the second season of its growth and effectively prevents seed development. In view of the critical role of the seed supply, already described, the cone beetle may prove to be a very sig- nificant factor in the problem of sugar pine regeneration. Disease. The principal disease affect- ing sugar pine is the white pine blister rust (Cronartium ribicola Fisch.). The rust entered California in 1936 and has since been observed as far south as Amador and San Mateo counties. It is evidently only a matter of time before the disease is established throughout the sugar pine range. The disease kills sap- lings and small poles quickly and, under favorable conditions, eventually destroys the entire sugar pine component of the stand. However, large trees (those 20 to 30 inches d.b.h. or larger), and those on sites unfavorable for rust development may escape serious damage (see fig. 3). The threat of blister rust is thus aimed primarily at young-growth sugar pine and at the advance reproduction which has become established in overmature stands. The degree of hazard is related to moisture conditions — very dry sites are unfavorable to rust development, wet sites favorable to it. In view of the brief experience with the disease in California, measurement of the hazard must be gen- eral rather than specific. From data now available, the relationship between haz- ard conditions, tree size, and expectation of sugar pine survival is shown in fig- ure 3. Although part of its life is spent on five-needle pines, blister rust cannot spread from pine to pine. It must com- plete its life-cycle on one of the alternate hosts, currants or gooseberries (Ribes spp.). The principal ribes associates of sugar pine are Sierra gooseberry (R. roezli) and Sierra currant (R. nevadense Kell.), both highly susceptible to blister rust (Quick, 1951). Under present practice, sugar pine is protected by eradicating ribes plants in the vicinity of sugar pine trees. As the spread of the disease from ribes to pine [10 100 75 50 25 1 1 1 ' ■ > 7 - - ^/ - f 10 16 Present tree d.b.h. (in inches) 22 28 Fig. 3. Sugar pine survival, related to degree of rust hazard and to size of tree. "Per cent survival" shows proportion of sugar pines which will not be killed by blister rust under the indi- cated conditions of hazard and tree size. Source: Based on data furnished by U. S. Bur. Ent. and Plant Quarantine. is limited to relatively short distances under most conditions, protection can be obtained by eradicating ribes from the sugar pine area and from a compara- tively narrow sanitation strip around it. Experience to date indicates that where adequate protective measures are taken sugar pine losses due to the rust can be held to negligible levels. Basis for management. In the past, those not directly concerned with it have often assumed that blister rust control was the heart of the sugar pine problem. To assume this is to oversimplify the situation. A typical sugar pine area, pro- tected from the rust, may still yield very little sugar pine because other manage- ment measures have been inappropriate. Having noted this, we should also recog- nize that the problems of growing sugar pine, although important and perhaps not yet fully understood, differ only in detail and degree from the general prob- lems of forest management in the mixed conifer types. These problems .need not cause us to conclude that sugar pine silvi- culture is a hopelessly difficult enterprise. On the contrary, with the exception of blister rust, all of the factors discussed above operated in the virgin forests, where Nature's management system pro- duced highly successful sugar pine crops. The basic conclusion which does seem to follow from the foregoing outline of sugar pine characteristics is this: Suc- cessful management for sugar pine will require recognition of the peculiar habits of the species and careful adaptation of forest practices to its requirements. Blanket rules of forest treatment are likely to prove an unsatisfactory substi- tute for the informed judgment of the trained forest manager, intimately famil- iar with his stand, and applying his knowledge directly to local forest condi- tions as he observes them in the field. In many young-growth sugar pine areas this will mean thinning the stand [ii] to curtail competition with sugar pine crop trees, pruning to improve quality (see page 28), controlling blister rust, or using other special measures to favor sugar pine. The cost of raising the sugar pine crop under these conditions of man- agement is considered later (see page 25). Sugar pine areas, ownership, and volumes Areas. The mixed conifer, pine, and fir forest types, of which sugar pine is often a prominent feature, occupy 10.1 million acres of commercial forest land in California (Wieslander and Jensen, 1946) . Much of this area never supported significant amounts of sugar pine, and from some of the area that did, the pine has been more or less permanently re- moved by fire, logging, or other agencies. As a result, the estimated area of forest land available for commercial sugar pine production is 2,138,000 acres. This in- cludes lands in both California and Oregon, but excludes those sugar pine areas permanently withdrawn for na- tional parks, recreation areas, or other noncommercial uses. Estimates of the distribution of this area, by states, by ownership, and by cutting status are shown in table 1. Ownership. Of the available sugar pine land, 77 per cent is in California. Forty seven per cent of the total has already been cut at least once. Thus the young-growth stands to which this study is ultimately directed account for roughly half of the total sugar pine land resource. Private owners hold title to 44 per cent of the total acreage and to 54 per cent of the cutover land. These private hold- ings are of even greater economic im- portance than the percentages suggest Table 1. Estimated Area of Forest Land Available for Commercial Sugar Pine Production, by Stand Condition and by Ownership, 1950* (Area in thousands of acres) Ownership Cutting status Federal State and private Total California Cutover 382 474 856 419 376 801 Uncut 850 Total 795 1,651 Oregon Cutover 93 235 328 124 35 159 217 Uncut 270 Total 487 Tot al — Sugar pine reg ion Cutover 475 709 1,184 543 411 954 1,018 1,120 2,138 Uncut Total Source: U. S. Bur. Entomology and Plant Quarantine, Off. Blister Rust Control. 12 because they include lands of better- than-average productive capacity. Volumes. The merchantable volume of sugar pine timber approaches 21 billion board feet. About 2 billion feet are in recreation areas or are otherwise unavailable. The economic standing tim- ber resource thus amounts to 18.8 billion board feet (table 2). About 47 per cent of this is on private land with the balance largely in national forests. More than 92 per cent of the standing timber volume is in California. For young-growth stands, merchant- able timber volumes as just described are not an accurate indicator of economic potential. A large percentage of the grow- ing stock on such areas is too small to be reflected in merchantable volume. Table 3 shows the character of growth on the cutover areas in terms of the existing quantity of sugar pine stocking. The stocking index used is number of crop trees per acre. A crop tree is defined as a dominant sugar pine, of good health, quality, and growth rate, that will remain dominant until the end of the rotation in the face of whatever competition is now evident (U. S. Forest Service, et al. 9 1952). A notable feature of table 3 is that over half the acreage of sugar pine cut- over land is very sparsely stocked with sugar pine. Even with better than average site conditions and careful management, stands with this degree of stocking will yield less than 2 M board feet of sugar pine per acre when the existing growing stock matures. On the other hand, the bulk of the well-stocked land is Site class II (see table 3, footnote 2, for basis of site classification) or better. The productive potential of such areas is excellent and will permit the growing of substantial sugar pine volumes. Method of analysis If the young-growth sugar pine re- source is to be so used as to make maxi- mum contribution to the economy of the region, the objective of management must be to extend efforts to grow this species just to the point where the addi- tional returns from sugar pine produc- tion are offset by the additional costs which are incurred. Accordingly, we will begin our analysis with a look at potential sugar pine markets, turn to the costs of providing sugar pine supplies, and then, Table 2. Estimated Volume of Available Sugar Pine Sawtimber, by Subregion and Ownership, 1946* (Volumes in million board feet, log scale) Subregion Ownership Private Public t All ownerships California West Sierra Pine 5,387 927 1,337 7,330 418 1,978 9,727 12,717 1,345 3,315 East Sierra Pine Other areas Total 7,651 17,378 Oregon TOTAL 1,120 8,771 253 9,980 1,373 18,751 * Sources: California Forest and Range Experiment Station and IT. S. Bur. Entomolog antine, Off. Blister Rust Control. t Ninety-five per cent of the publicly owned sugar pine is in national forests. y and Plant Quar- [13] Table 3. Estimated Area of Cutover Sugar Pine Land in California* and Oregon, by Site and by Density of Present Sugar Pine Stocking f (Area in thousands of acres) Sugar pine crop trees per acre Site Quality^ 14 or more 10-13.9 6-9.9 2-5.9 Less than 2 Total A-200 1-175 3.8 70.2 39.3 15.0 2.4 32.9 29.1 12.4 3.6 53.3 43.1 23.0 6.1 59.6 74.4 34.5 19.3 204.3 199.3 92.1 35.2 420.5 11-150 385.2 HI-125 177.0 All Sites Percentage 128.3 12.6 76.8 7.5 123.0 12.1 174.6 17.2 515.0 50.6 1,017.9 100.0 * Approximately 80 per cent of the total area is in California. t Source: U. S. Bur. Entomology and Plant Quarantine, Off. Blister Rust Control. t Site quality used is Dunning' s Site Classification based on age of dominants at 300 years, determined in young-growth stands by reference height-age curves appearing in Dunnnig, D., "A site classification for the mixed conifer selection forests of the Sierra Nevada." Calif. Forest and Range Exp. Sta. Research Note No. 28. Berkeley, 1942. Note: Totals may not add because of rounding. in the light of these considerations, for- mulate a sugar pine production goal. The study concludes with a discussion of how this goal might best be met, in terms of the area which should be devoted to sugar pine production and of the public and private policies which might be needed. POTENTIAL MARKETS AND VALUES We noted earlier that under conditions now generally prevailing in sugar pine forests, most old-growth trees would sur- vive until harvested. In the absence of special measures favoring sugar pine, losses will occur in the younger trees, and it is the value of these which pri- marily concerns us. Because sugar pine typically occurs in mixture with other species, values for watershed protection and recreation do not appear to be at stake except in local areas. The protec- tive functions of most forests would not be substantially impaired even if all of the sugar pine in them were to succumb to blister rust. (Some ecologists are con- vinced that maintenance of a mixed spe- cies stand has significant advantages from the standpoint of the biological health of the forest. As it is currently impossible to quantify effects of this kind, they have been disregarded in the sub- sequent analysis.) Some recreational values will be lost when the majestic, overmature sugar pine — "Queen of the Sierras" — disappears from the stand. But, except in recreation areas which are reserved from cutting, these old-growth trees seem destined to disappear during the next half century, regardless of whether or not special sugar pine man- agement measures are undertaken. Accordingly, the question of the values at stake in sugar pine on commercial forest land centers on the market for wood products made from sugar pine. Of particular significance will be the market fifty to one hundred years hence, [14] when currently jeopardized young- growth trees have become mature. Consumption Sugar pine markets are of great eco- nomic importance. For the period 1949 to 1951, sugar pine lumber production averaged more than 400 million board feet per year (U. S. Bureau Census, 1952). More than four fifths of the total production was in California. Although sugar pine is also used for the manufac- ture of plywood, veneer, and shakes, lumber is of overwhelming relative im- portance, accounting for more than 98 per cent of the total volume of use (Burks, Vaux, et al, 1948). The total requirement for all other purposes is usually less than 5 million board feet per year. Thus, in discussing sugar pine values, we are concerned almost entirely with those derived from the production of sugar pine lumber. As statistics of timber consumption are not ordinarily compiled in the United States, the best available measure of the volume of sugar pine use is provided by lumber production data. These are shown in figure 4 for the period 1899 to 1951. It is apparent that sugar pine use has followed a rising trend over the last half century, but that consumption has fluc- tuated very widely around that trend, particularly during the last three dec- ades. Is there reason to suppose that either the rising trend or the apparent instability in the level of use will continue to characterize the sugar pine industry? To answer this question we need to look more in detail at the uses of sugar pine and at the factors shaping the historical consumption pattern. Uses of sugar pine lumber Sugar pine lumber goes into three broad types of end use: light construc- 1900 1910 1920 1930 1940 1950 Fig. 4. Sugar pine lumber production in the United States and California, 1899 to 1951 Source: U. S. Forest Service. [15] I 200 I 1 D Construction and other uses Fig. 5. Changes in sugar pine use, 1909 to 1948. Source: U. S. Forest Service. tion, containers and shipping lumber, and manufactures. The latter classification includes manufacture of a wide variety of products, such as patterns, millwork, in- struments, and fixtures (Merrick, 1951) . The relative importance of these dif- ferent classes of use changes with market conditions. In years of moderate or high rates of construction, about 60 per cent of sugar pine consumption is for building (fig. 5). But the relative importance of this use may be far less in years of low construction activity. The pattern has also changed with the passage of time. Between 1910 and 1948, manufactures became relatively more important as an end use and containers less so. Much of the stability in the pattern of use displayed in figure 5 probably occurs because of the nature of lumber production. Sugar pine lumber is not a simple, homogeneous product. It con- sists of a mixture of a variety of different sizes and grades of lumber which may differ markedly in their usefulness for different purposes. About a third of the lumber produced from a representative old-growth sugar pine stand is Shop and Select grade material (Brundage, Krue- ger, and Dunning, 1933) . The remainder is Common grade lumber. Because much of the latter is not technically suitable for specialty manufacture, it is used in the construction and container markets, where quality is of less importance than in manufactures. In a sense, it is a by- product of the production of high-quality sugar pine lumber. Table 4. Average 1950 Prices* of Select and Shop Lumber, f.o.b. Mill, for Sugar Pine, Ponderosa Pine, and White Fir in the Western Pine Regionf Grade Price per M bd. ft. Sugar pine Ponderosa pine White fir Price as per cent of sugar pine price Ponderosa pine White fir B and Better Select C Select D Select 1 Shop 2 Shop 3 Shop $ 244.24 235.36 209.69 131.13 94.75 68.38 $ 219.97 204.14 177.52 114.92 87.52 65.41 146.69 1 122.33 94.41 71.02 59.31 90.1 86.7 84.7 87.6 92.4 95.7 62.3 58.3 72.0 75.0 86.7 * Prices are averages of all sizes within each grade, weighted by the volume of each size sold. t Source: Western Pine Association. 1950 yearly summary of past sales. Portland, Oregon. 1951. j C select and better. [16] The economic importance of these upper grades is emphasized by the data of table 4. These show the relationships between prices per M board feet, at the mill, of the various grades of sugar pine lumber. The premium commanded by Clear grades is apparent. Shop grades share in this advantage pretty much in proportion to the extent of the clear ma- terial which can be cut from such grades. The data also show clearly the differences in value at the mill between sugar pine lumber and that of the other principal species which occur with it in the mixed conifer forest. The effect of eliminating sugar pine from the manufacturing market would be quite different from the effect of elim- inating it from the construction and con- tainer markets. In the two latter areas, sugar pine competes with a wide variety of other species of softwood lumber. It is a very minor element in these markets. It accounted for less than 1 per cent of all softwood lumber used for containers and for construction in 1948. Even in the Pacific Coast market, sugar pine remains both a minor component of supply for these markets and one which could read- ily be replaced by other species. On a quantity basis, sugar pine occu- pies only a slightly more impressive po- sition in manufacturing markets. There, it accounted for a little over 2 per cent of all softwoods used in 1948. But this total figure obscures the fact that the manufacturing market represents an ag- gregate of a number of rather diverse in- dustries. In some of these, sugar pine plays a very important role. The ultimate measure of the value of the species thus depends on its significance for those par- ticular industries for which it has espe- cially desirable properties. Before analyz- ing them in detail, however, we must consider more carefully the extent of market competition between sugar pine and other species of softwood lumber, particularly as it relates to this specialty market. Substitutes Sugar pine lumber has technical prop- erties which are very similar to those of western white pine and eastern white pine. Lumber of these three species is characterized by easy workability, di- mensional stability, and softness. Be- cause of the long period over which it has been marketed, eastern white pine is per- haps the best known to consumers, but both western white pine and sugar pine are now recognized as having comparable properties. In other words, the three species are close substitutes. As a group, these three soft pines are clearly distin- guishable from the hard pines (such as the southern pines) whose properties are quite different. In most manufacturing uses there is little competition between these types of lumber. However, old- growth ponderosa pine, which belongs botanically to the hard-pine group, has many of the characteristics of softness and workability found in the soft pines. For some purposes, it provides a good substitute for the white pines, but for other purposes it does not. White pine. The extent to which the white pines dominate certain softwood manufacturing markets is shown in table 5. The three white pines currently pro- vide only about 6 per cent of the total softwood lumber supply. But in each of the industries indicated in the table, white pines account for more than 6 per cent of the softwood used. In other words, these industries prefer white pine to other softwood species. In some instances, no- tably match and boot and shoe manufac- ture, the preference for white pines is overwhelming. Even in the case of sash, doors, and millwork, where nonwhite pine lumber is widely used, the prefer- ence is striking if we remember that the wood needs of this industry substantially exceed the total supply of all white pine, regardless of grade. That is, if white pine supplies were larger, more of it would un- doubtedly be used in the sash, door, and millwork field. [17] Table 5. Principal Manufacturing Uses of White Pines and the Dominance of White Pine in Such Uses, 1948* End use Sugar pine Other white pines Total Per cent of all softwood use Sash, doors, and millwork. . . Pattern making Boot and shoe findings Furniture Fixtures Shade and map rollers Toys Ship and boat building Signs, scenery, et cetera Matches Other specialty manufactures Total 66.9 19.5 0.4 0.5 0.6 0.3 0.3 0.2 0.5 4.5 93.7 Million board feet 97.9 45.7 30.6 28.9 16.8 11.7 10.3 8.1 6.6 34.2 61.5 352.3 164.8 65.2 31.0 29.4 17.4 12.0 10.6 8.3 7.1 34.2 66.0 446.0 8.3 72.0 95.0 9.1 25.1 58.2 40.2 13.2 18.0 98.0 3.6 13.2 * Source: U. S. Forest Service. Wood used in manufacture, 1948. Forest Resource Report No. 2. Wash. D.C., 1951. (Adapted from its table 16.) There is evidence to suggest that, as time goes on, the preference for white pine over other softwoods in the spe- cialty market is increasing. Such market preferences are difficult to observe be- cause the available data show only con- sumption, and this is influenced not only by market preferences but also by con- ditions of supply. Thus the consumption of white pine, as compared with other softwoods in the manufacturing market, has fluctuated considerably over the past forty years and no definitive trend is noticeable. But during this period the supply of white pine has become gener- ally smaller relative to that of competing softwoods. In order to make allowance for this, figure 6 shows the use (in all manufactures except containers and mill- work) of white pine and of all softwoods expressed as a percentage of the total supply of each of these kinds of lumber. The percentage of all softwood produc- tion going into specialty uses has varied somewhat over the period of observation, but the data suggest a level trend. In con- trast, the proportion of white pine pro- duction going into specialty uses shows a marked rise over the last forty years. This suggests that, whatever the absolute size of the specialty market and whatever the supplies available to it, specialty manufacturers tend to absorb an increas- ing proportion of the available white pine as time goes on. This is consistent with the hypothesis that, as supplies of high-grade softwood timber of all kinds dwindle, white pine becomes increasingly desirable to specialty users. In 1948 the total use of white pine lum- ber in the specialty field amounted to 446 million board feet. But only 21 per cent of this was sugar pine. Thus, even if we grant the existence of a sizable specialty market exhibiting a strong preference for white pine, could not the demand be met effectively by western and eastern white pine alone? For a number of rea- sons the answer seems to be "no." In fact, the future may see the white pine market turn more to sugar pine as a source of supply than it has in the past. [18] Studies of the economics of the west- ern white pine industry suggest that pro- duction of that species cannot be con- tinued at present levels indefinitely. The volume of remaining old-growth and the age of second-growth stands are such that sharp curtailment of western white pine lumber output seems probable within the next thirty-five years (Mat- thews and Hutchison, 1948). Sugar pine will then be in a strong position to take over part of the western white pine mar- ket. Moreover, both population growth and industrial development are shifting the geographic center of the white pine market westward, away from primary areas of eastern white pine supply. The market area in which sugar pine has a comparative advantage over eastern white pine is thus likely to expand ma- terially. The effect of these changes would be to increase significantly the market need for sugar pine. Finally, it may be noted that both eastern and western white pine have been severely attacked by blister rust. These species can be Q All white pine ■ All softwoods 1909- 1913 1933 1940 Fig. 6. Proportion of total white pine and softwood lumber production used in specialty manufactures. Selected years, 1909 to 1948. grown only where intensive protection against rust has been provided. Costs of such protection are almost certain to be at least as high as costs of protecting sugar pine (Matthews and Hutchison, 1948). Future market conditions A number of conclusions about the future market for sugar pine lumber seem reasonable in the light of this his- tory of past use. The market with which we are concerned is in the decades fol- lowing the year 2010. Previous to that date, old-growth sugar pine is likely to continue to dominate the market and most of the managed young-growth stands will not have attained optimum merchantability. But at the end of the next sixty years, most of the commercial old-growth timber of all species will have disappeared. Construction and shipping lumber markets. So far as these markets are concerned, there seems to be little reason for special measures to produce sugar pine. Other species perfectly satisfactory for such purposes can undoubtedly be supplied at costs lower than those for sugar pine. Moreover, the size of each of these market sectors may well be smaller then than it is now. Containers made from wood fiber are continuing to displace lumber; they are invading the fruit and vegetable field which comprises such an important element in the con- tainer market for western woods. Al- though the level of construction half a century hence cannot be easily envisaged, curtailment in this use of lumber may take place either as a result of further substitution in the building-materials field or in response to reduced rates of population growth. Specialty market. In this market the outlook is different. Use of white pine lumber for specialty manufactures was 17 per cent greater in 1948 than it was in 1928. Over the same period, use of [19 other softwoods for specialty manufac- ture had increased only 8 per cent, and softwood lumber consumption in all uses had declined about 1 per cent (U. S. Forest Service, 1928; 1948). Thus, even in the face of some reduction of use for construction and shipping, the market for white pine lumber for specialty man- ufacture has been well maintained during recent decades. This is a fact of great im- portance for the future outlook. The future market. The trend of our national economic development is toward greatly expanded and diversified manu- factures. Certain manufacturing indus- tries, now well established, may dwindle in importance, as have the ship- and boat-building and wooden-vehicle indus- tries in the past. Other industries may substitute new materials for lumber, as have automobile and furniture manufac- tures. But new industries will emerge with new demands for quality raw mate- 400- 300 200 100 Eastern white pine All softwoods Fig. 7. Relative increase in use of eastern white pine and of all softwoods in specialty uses, 1933 to 1948. Source: Adapted from U. S. Forest Service data. rials, and established industries will find new uses for wood. No one can foretell what will happen to wood use in each and every type of manufacture in which the American economy engages. But we can anticipate a major expansion and diversification of those manufactures during the next fifty years. And on the basis of past experience, we may conclude that the demand for high quality white pine lumber will be sustained, as it has been for the past two decades, by this sort of industrial growth. The history of wood use during the past forty years makes it apparent that white pine will be excluded from many present uses, if supplies of it are allowed to dwindle. But it also suggests that, if supplies are maintained, demand for those supplies will appear. The experience with eastern white pine is significant in this respect. There, in an area where the forest economy has al- ready matured, we find that manufac- turing use of eastern white pine fell to a very low ebb following 1930. Eastern white pine supplies represented less than 2 per cent of total softwood lumber sup- plies during the Depression. But by 1948 white pine production (largely from second growth stands) had recovered substantially and accounted for 4 per cent of total softwood supplies. During the same years, the specialty market ex- panded its use of eastern white pine by four and a half fold. As shown in figure 7, the growth in eastern white pine use was far more than in proportion to the growth of all softwoods in the same uses. These facts lend support to the conclu- sion that, much of the past decline in eastern white pine consumption is at- tributable to dwindling supplies, and that, given reasonably plentiful and moderate-priced supplies of the wood, the technical properties of white pine are good enough to attract substantial con- sumer demand in a diversified and ex- panding technology. [20] Market outlook for sugar pine timber On the basis of the considerations out- lined in the preceding sections, we have concluded that sugar pine, along with white pine generally, will continue to command the same sort of market pref- erences characterizing them in the past. But in order to make further economic analysis of our problem we must quantify this broad general outlook in terms of what it means for sugar pine stumpage. As a basis for this, we may analyze what has happened in the past to sugar pine stumpage consumption, in the light of trends in prices, incomes, and other re- lated factors. In order to analyze this history, we need a measure of the annual consump- tion of standing sugar pine timber. As the volume of such stumpage cut in any year is closely correlated with lumber output during that year, we may use the lumber production statistics of figure 4 as an index of consumption of standing timber. Stumpage price. One important in- dependent variable expected to influence consumption is stumpage price. Figure 8 shows the average price paid for sugar pine stumpage sold each year from na- tional forests in California during the period 1910 to 1949. This series provides the best available data on market value of stumpage used for current consumption. The bulk of the timber consumed during the 1910 to 1949 period was privately owned and thus does not appear directly in the data of figure 8. However, price data for private timber are not reliable indices of current values of timber for consumptive use, because private timber is often sold in large blocks to be held for cutting at a distant future date (Steer, 1938). Prices in such transactions are heavily discounted below the market value for current consumption. National forest timber, on the other hand, is sold only for immediate cutting. In most areas during the period under discussion, it was sold in markets where private timber was also available to the 1910 1920 1930 1940 1950 Fig. 8. Average price per M board feet of sugar pine timber sold on national forests in California. (Prices in terms of 1950 dollars.) [21] purchaser. Although California stumpage markets are at best imperfectly competi- tive, the degree and kind of competition seem adequate to insure reasonably close correspondence between the series of fig- ure 3 and the current market value of all timber cut for consumption. Apart from a high degree of instability, characteristic of all timber prices, the most noteworthy features of the price series are the gradual but significant ris- ing trend of real prices from about 1916 to 1946, and the very dramatic upward surge since 1946. The lortg-run tendency toward in- creased values is probably greater than the chart indicates. The earliest timber sales on the national forests, from the standpoints of accessibility and quality of material, were naturally located in the most desirable timber. More recently, cut- ting has extended to more remote and poorer timber as the choicest chances were liquidated. Thus, in figure 8, the prices for sugar pine in the 1940's were for a lower quality commodity than those of 1910 to 1920, if all aspects of quality, such as terrain, distance to mill, and density of stand, are considered. A second factor, clearly important in determining consumption, is the general level of economic activity in the nation. This may be measured by gross national product, a statistic which represents the total value of all goods and services pro- duced by the economy during a year (U. S. Department of Commerce, 1951). A third consideration which has influ- enced stumpage prices has been the mi- gration of the lumber industry into Cali- fornia. As timber supplies in other sec- tions of the country decreased and stumpage prices rose, an increasing pro- portion of both the California and the national lumber market was supplied by California. This has resulted in a general long-term rise in the price of all Cali- fornia stumpage (Gulick, 1951) . Changes in this influence may be measured quan- titatively by changes in the ratio of Cali- fornia lumber production to national lumber production (Steer, 1948). Regression analysis of the data just described, for the forty-year period 1910 to 1949, shows a high degree of relation- ship between sugar pine stumpage con- sumption, and stumpage prices, the level of general economic activity, and the competitive position of California in the lumber industry.* About 60 per cent of the variation in sugar pine consumption is associated with changes in stumpage prices, gross national product, and the general shift of lumbering toward California which has occurred during the last forty years. The remaining variability in consump- tion is associated with unidentified mar- ket factors. However, analysis shows that the net effect of these other sources of variability is not correlated with time. In other words, over the forty years of observation, no long-time trends were observed other than those associated with changes in price, gross national product, and shifts in the location of lumber pro- duction. The relationship between consump- tion, price, and gross national product is shown in figure 9, with the effect of the competitive position of the California in- dustry held constant. These historical relationships appear to provide the best available tool for fore- * The following regression equation was obtained: Y = 72.47 - 16.50 X t + 1.078 X 2 + 21.02 X 3 where Y = sugar pine consumption in millions of board feet Xi = average stumpage price in dollars (1939) per M board feet X 2 = gross national product in dollars (1939) X 3 = an index of the competitive position of the California lumber industry The adjusted coefficient of multiple correlation was 0.77. The regression coefficients are all sig- nificant at the 5 per cent level of probability. Readers unfamiliar with the procedures of statistical demand analysis will find a brief further discussion of the subject in Appendix B. [22] casting the demand conditions for sugar pine in the future. Data for a longer his- torical period would of course be highly desirable. But they simply are not obtain- able. In view of the fact that some fore- cast of future market conditions is im- plicit in the nature of our problem, it is proper to base this on the best analytical tools available. If these tools are less than perfect, they are still helpful in suggest- ing the future possibilities. As time goes on and more experience accumulates, the basis for forecasting may be further re- fined within the present framework of analysis. The mathematical relationships estab- lished for the 1910 to 1949 period be- tween consumption, price, gross national product, and economic position of the California lumber industry will therefore be used as a basis for estimating future demand for sugar pine timber. We may project the future market by making cer- tain assumptions about the levels of na- tional output and the competitive position of California lumbering which will then prevail. We may anticipate that after the year 2010, the lumber industry in Cali- fornia will face sterner competition than at present because, by then, its reserve of virgin timber will be practically gone (U. S. Forest Service, 1946). As has al- ready been noted, trends in migration will probably be an offsetting factor. But on balance it seems likely that California will then produce a smaller proportion of the nation's lumber output than it does today. At the same time we may expect an expansive influence in the form of future increases in gross national product. Pop- ulation increases and, above all, the steady rise of output per man hour imply at least a three-fold increase in gross na- tional product over the next half cen- tury (U. S. President's Materials Policy Comm., 1952) . After weighing the proba- bilities and the influence of these factors, a conservative projection of sugar pine demand in the period 2010 to 2069 seems to be that of figure 10. Significance of sugar pine for western pine industry A final aspect of the values at stake in the sugar pine situation concerns whether or not important indirect eco- nomic benefits are involved. Such benefits 40 =?20 o G. N.P. = 1910-1949 average G. N.P.= 1940-1949 average 50 100 150 200 250 Annual stumpage consumption (million bd. ft.) 300 Fig. 9. Net relation between sugar pine stumpage prices and consumption, at selected levels of gross national product. [23] might accrue if, for example, the lumber industry of the region were largely de- pendent on the sugar pine resource. The industry of the western white pine region is in exactly this position (Matthews and Hutchison, 1948). Analysts have sug- gested that if the white pine component of production were eliminated from the sawmills of northern Idaho and western Montana, the entire industry would col- lapse, because its profitability depends almost entirely on white pine manufac- ture. But similar conditions do not appear for sugar pine. The potential economic effects on the lumber industry of decimation of the sugar pine resource depend on two fac- tors : 1 ) the relative importance to the in- dustry of the existing scale of sugar pine utilization; and 2) the ease with which the industry could compensate for the loss of sugar pine. In California, sugar pine comprises about 12 to 15 per cent of the output of the industry of the pine region. In local areas the proportion runs higher, amount- ing (in 1946) to over 25 per cent in Fresno and Tuolumne counties (May and Simontacchi, 1947) . In 1946, 57 produc- ers cut 25 per cent or more of their output in the form of sugar pine. These produc- ers accounted for about one fourth of all pine-region output. According to data supplied by the Division of Forest Eco- nomics of the California Forest and Range Experiment Station, of the 57 firms, 16 large ones were responsible for more than 90 per cent of the output of the entire group. Without doubt, major problems would be posed for these large sugar pine pro- ducers and for the lumber economy of those counties which cut large volumes of the species, if the supply of sugar pine were to be severely curtailed. They might well have to speed up liquidation of old growth in order to minimize mortality, with consequent reductions in the vol- ume, quality, and value of their cut. In the longer run, the permanence of these enterprises might be endangered by loss of raw material supplies suitable for their operation. However, for most of the in- dustry the effects would be by no means disastrous. Although there might be some temporary reduction in the size of the timber resource base, it seems unlikely that this would exceed 5 per cent in ag- 80 -6 ^ 60 CL Jj "5 - """"" -* '^— — — -. „^ a. a> o> D to • 100 200 Annual stumpage consumption (million bd. ft.) 300 Fig. 10. Estimate of potential demand for sugar pine stumpage during the period 2010 to 2069. [24] gregate. Probably the industry could more than compensate for such a volume loss by closer utilization of other species. A more serious matter from the stand- point of profit margins would be the lower average value per unit of lumber cut, which might result. Elimination of a substantial volume of premium quality material from the "mix" of lumber pro- duced by some firms would undoubtedly have significant adverse effects on them. These should not be overemphasized, however. Even in old-growth timber, less than 40 per cent of the sugar pine cut is premium material. The rest is common grade which could be replaced by pon- derosa pine commons or even by other species with little effect on gross returns and profit margins. The indirect impact on the lumber economy, of the loss of sugar pine thus comes down to the question of how the industry might be able to adjust to the elimination of the 6 to 8 per cent of its present cut which constitutes premium grade sugar pine. Here the critical factor is one of how quickly the adjustment must be made. There is little doubt that if sugar pine resources were to be wiped out within a very few years, many firms would face serious difficulties as a result of curtailed profit margins, losses of capitalized timber values, and the need to reorganize drastically their marketing arrangements. Those firms whose pro- duction runs heavily to sugar pine might well be unable to survive. But such a prospect seems wholly unlikely. If sugar pine is not protected from blister rust, and if the disease does wipe out the com- mercial stands, it will probably do so only over an extended period of years. During this period of several decades, industry would have both the opportunity and the ability to adjust itself to the changed re- source situation. There would be time to salvage the capital values which would be jeopardized. Operating policies and marketing programs could be adjusted gradually and without major dislocation to more than a very few individual firms. In view of these circumstances, there seems no reason to believe that sugar pine is indispensable to profitable oper- ation of the lumber industry. We must conclude that the principal economic values at stake are the direct ones, derived from the growth and manufacture of a high quality commodity, even though some indirect influences would be felt throughout important segments of the industry. COSTS OF GROWING SUGAR PINE AND PROSPECTIVE SUPPLIES The considerations of demand, which have just been analyzed, are the first major element in the economics of the sugar pine situation. Equally important is the second of these elements — what it will cost to grow the species. If we grant that sugar pine stumpage has definite and measurable values for our economy, we still must show that these values will equal or exceed the costs of obtaining them. For if these costs are greater than the values derived from sugar pine, then it is clearly uneconomic to expend effort in producing them. The costs of growing sugar pine vary tremendously. On good sites with heavy sugar pine stocking and low costs for blister rust control, established young sugar pine stands may be brought to ma- turity for an additional cost as low as $7.50 per M board feet. But where the land is less productive, or where there is relatively little sugar pine growing stock, or where rust control is difficult, the addi- tional costs may easily exceed $150 per M. Accordingly, we need to know how sugar pine production costs vary — what quantities of sugar pine could be pro- [25] duced at various alternative levels of ex- penditure. Basis of cost estimates We are concerned with those particular costs which we will have to incur in the future especially because of sugar pine. It now seems certain that all of the com- mercial forest area in the sugar pine re- gion will be protected from fire and will receive a minimum amount of general administrative care regardless of whether or not we grow sugar pine on the area. Both public agencies and the principal private land owners have followed this policy for many years. Because of the nonsugar pine values which are present there — timber other than sugar pine, watershed protection, and recreation — these policies seem certain to continue regardless of what is done about sugar pine. Thus future fire protection, general administration, and perhaps certain other costs of this kind need not be charged against sugar pine for purposes of the present analysis, because the land will receive this kind of care as part of the general forest management program to which the mixed conifer forest now seems certainly committed. The principal special costs of sugar pine management with which we are con- cerned, therefore, are those for protec- tion against blister rust and for special silvicultural measures needed to insure survival of sugar pine in optimum quan- tity and quality. As the several items of cost will be in- curred over a period of years, they must be placed on a comparable basis by use of customary discount procedures. Choice of the discount rate appropriate for this purpose is, of course, fraught with all of the customary difficulties of such prob- lems. Because of the long-time period in- volved in investments in sugar pine young growth, the rate must be low enough to reflect realistic possibilities for earnings of any investment involving a number of decades. Also, in order to avoid arbitrary inflation of risk allow- ances as a result of compounding, a risk- free rate seems appropriate. The risk item can then be handled as a separate factor, as discussed below. Finally, the present appraisals are of the entire sugar pine industry, and of its importance to the rest of the economy. Therefore, the economic viewpoint is that of the public at large, rather than that of the private entrepreneur. Accordingly, the average yield on long-term government bonds, as of 1950, appears to be appropriate. Fur- ther discussion of the rate of interest ap- propriate for use in evaluating projects where questions of the public interest pre- dominate is presented by the United States Interbureau River Basin Commit- tee (1950). For purposes of this study the rate has been taken as 2% per cent. As discounting is to be done at a risk- free rate, some further allowance for risk is required. There is practically no basis in experience for appraising such risk. It may be noted, however, that the invest- ments here envisaged will be in inten- sively managed enterprises with a high level of protection from all kinds of forest enemies. The risks of loss of the forest capital as a result of destructive human or biological agencies would thus appear to be no greater, and perhaps less, than those of most current forest management enterprises. Great uncertainty of future markets arises as a result of the long-time period involved. But again, the market uncertainty would seem to be less than that for most forest investments because we are dealing with a product of high intrinsic quality and wide adaptability. Moreover, some allowance for market risk has already been made through the use of generally conservative assump- tions as to future levels of economic ac- tivity. In the light of these considerations a risk allowance of 25 per cent of other costs will be employed. All prospective costs are estimated in terms of 1950 dollars in order to avoid the complications of a changing price [26] 24 1 1 / - t\l - r s \ J / f / / / / /-^ r^ / / j / V Eradic Check ation ing 1 . i 1934 1940 1946 1952 Fig. 11. Average cost of Ribes eradication and of checking on sugar pine lands. Pacific Coast Region, 1934 to 1952. Source: U. S. Office of Blister Rust Control. level and to insure comparability with the demand estimates of figure 10. Blister rust control. Such costs vary with the density of Ribes occurrence, the nature of the ground and vegetative cover, and the extent of disturbance to the stand by logging and similar activi- ties. Where these factors are constant, the costs of control vary directly with the size of the area controlled and are inde- pendent of the quantity of sugar pine present. Traditionally, control has been achieved by hand eradication of Ribes bushes. As a result, money costs per acre have increased rapidly during recent years because of rising labor charges (U. S. Bur. Entomology and Plant Quar- antine, 19516). However, important rel- ative economies have been realized by development of chemical methods of eradication and by replacement of wage labor (housed in government camps) by contract workers. Past trends and varia- bility of costs are shown in figure 11. In the light of the experience of the Office of Blister Rust Control, the basic cost rate assumed in this study is $18.00 per man-day for field work. On this basis, eradication costs per acre can be computed for various levels of needed control effort ranging from half a man- day to five man-days per acre. (The term five man-days per acre means that an ag- gregate of five man-days of work, applied in several successive treatments of the area, will be needed to reduce the Ribes potential to the point where the species can be effectively controlled by occasional maintenance work.) The resulting rates are shown in table 6. They include the basic labor charge of $18.00 per man- day, plus $2.00 per man-day for super- vision and $0.25 per acre to cover costs of selecting control areas. The rates are adjusted for economies which experience shows can be achieved in contract work. They include the costs of the repeated workings of an area which are necessary in order to maintain protection. The total control effort is spread over a num- ber of years. Hence, the cost rates shown give the present worth of all expected future control expenditures, using a 2% per cent per year rate of discount. Thinning. These costs must be charged against the sugar pine crop because, un- less sugar pine crop trees are kept free from competition of fir and other asso- ciates, their rate of growth will be seri- Table 6. Present Worth of Total Costs of Ribes Control, for Protection from 1950 to 2070 Eradication effort required Total present worth of control (Man-days/acre ) 0.0-1.0 1.1-2.0 2.1-3.0 3.1-4.0 4.1-6.0 (Cost/acre) $ 13.00 27.00 42.00 59.00 85.00 [27 ously impaired. Such crop tree release cuttings are needed about every twenty years until the trees attain an age of sixty years. Thereafter, sugar pine growth is better maintained than is that of its asso- ciates, and further silvicultural aid is not needed. As a basis for our cost estimates, we as- sume that sugar pine crop trees will re- ceive one release cutting now and another at the end of twenty years. Costs per acre are based on the number of crop trees which will require release and on an hourly cost rate of $3.85 per crew of two men. As release cutting costs will vary with the size of the trees being cut, per acre costs also reflect variations in the age of stands. The release costs used are summarized in table 7. Pruning. Pruning is required because the value differential in favor of sugar pine is based on Clear grades of lumber (see page 16) . In the absence of pruning, only a small proportion of the yield from young growth stands will meet these grade requirements. Unless quality sugar pine is produced, the resultant product will be little better than lumber from com- peting species, which could be grown at substantially lower costs. The basic cost for pruning assumes a one-man crew costing $1.92 per hour (1950 dollars). Output of pruned trees is based on results obtained in pruning ponderosa pine in the Pacific Northwest (Shaw and Staebler, 1950). These rates agree with the experience of California Forest and Range Experiment Station and with that of other agencies in prun- ing sugar pine. They cover the cost of pruning the butt log on all crop trees. Accordingly, per acre costs will vary with the number of crop trees per acre. The values used are shown in table 8. The net effect of pruning on lumber grade recoveries cannot be forecasted with assurance because pruned sugar pine trees have not yet reached maturity. Some general indicators of the probable results are available, however. Old- growth trees 32 inches in diameter (the average size of the harvested trees here considered) yield about 25 per cent of lumber in grades better than No. 1 Com- mon (Brundage, Krueger, and Dunning, 1933). Theoretical analysis of the knot structure of the butt log of a 32-inch tree, pruned when it was 12 inches in diameter, also indicates that 20 to 25 per cent of the yield of the entire tree will be sawable as knot-free lumber. It thus seems prob- able that pruning will permit production of a crop containing 25 per cent of Clear material. The average grade recovery is then likely to be somewhat below that of the virgin stands currently being logged (see page 16), but far above that of un- pruned stands. Whether or not this high- grade material will be fully reflected in stumpage prices received by the owner Table 7. Present Worth of Total Cost of Release Cutting (Two cuttings, twenty years apart, all sites) Present age of stand Number of crop trees and costs*, acre 14.0 or more 10.0-13.9 6.0-9.9 2.0-5.9 0.0-1.9 (Years) 1-20 $ 10.10 11.00 13.50 14.40 $4.70 5.40 6.50 7.10 $3.90 3.90 3.90 3.90 $2.20 2.20 2.20 2.20 $1.00 1.00 1.00 1.00 21-40 41-60 61 + * Assumes each release cut will remove one tree of equivalent size for each crop tree on the area. [28] Table 8. Present Worth of Pruning Costs Density of sugar pine stocking and costs/acre Heavy 3 2 l Pruning cost/acre* $12.60 $5.40 $3.60 $1.80 Present worth of pruning cost 11.10 4.80 3.20 1.40 * Assumes cost of $0.45 per tree for each crop tree. will depend on the extent to which satis- factory means are developed for identi- fying pruned growing stock when it has reached maturity. Road and other capital develop- ments. These are included as special costs of growing sugar pine because the necessary intensity of management is substantially greater than that now char- acteristic of general forestry practice in the pine region. In order to permit crop- tree release, pruning, and harvest cut- tings at frequent intervals, more roads and operating facilities will be required. Hence, a fixed capital charge of $8.80 per acre is included in costs to cover such items. The cost estimate is based on the additional road development required for representative sample sugar pine man- agement areas. Replacement by other species. A final aspect of cost concerns the other values that must be foregone in order to grow sugar pine on the areas in question. If sugar pine were not managed, would it not be replaced by other competing trees which would yield substantial val- ues? Therefore, shouldn't these values which we forego in our effort to produce sugar pine be considered as a kind of cost of sugar pine management? In the- ory this view is correct. Moreover, where sugar pine is likely to be replaced by high-value ponderosa pine, it is likely to be practically important. However, preliminary but suggestive studies of this question of replacement indicate that in most instances sugar pine crop trees will be supplanted by fir, or incense cedar, with relatively low stumpage values, or by brush (U. S. Forest Service, 1952). On sample areas, less than half of the sugar pines were subject to replacement. When allowance is made both for the fractional rate of replacement and for the lower value of the resulting yields, the costs, because of this, appear to be of the order of $3.00 to $4.00 per M board feet of sugar pine. Considerable addi- tional detailed study would be necessary to estimate the specific effects of replace- ment satisfactorily. For the present study, a uniform cost rate of $3.50 per M board feet of yield has been included because of the replacement factor. Potential yields per acre The items of cost which we have just enumerated must be paid for by the in- creased yields which result from sugar pine management. This increase in yield per acre depends in part on the number and rate of growth of sugar pine crop trees and in part on the extent to which their growth and survival are increased by management. Yield estimates for stands protected from blister rust are based on: 1) the present number and the diameter of su- gar pine crop trees per acre; and 2) the rates of growth of dominant sugar pines of different diameters as observed on cut- over areas. The growth rate data (fur- nished by the Division of Forest Man- agement, California Forest and Range Experiment Station) are shown in figure 12. In order to be consistent with other assumptions of this study, it is assumed [29] 140 16 24 32 Present diameter (inches) Fig. 12. Number of years required for sugar pine crop-trees to reach maturity in managed young-growth mixed conifer stands. (Based on growth of dominant stems on cutover areas during the first twenty-five years after logging.) that crop trees will be harvested when their current annual growth per cent de- clines to 2% per cent. As current annual growth per cent varies with site quality, the size of a mature crop tree will vary with Site class as follows: Diameter of Volume of mature tree mature tree Site class (inches d.b.h.) (bdft) A-200 38 2780 1-175 34 1750 11-150 30 1050 III-125 26 700 (No analysis has been made of growth on Sites IV and V because such areas obviously are not ordinarily sufficiently productive to produce sugar pine eco- nomically under management.) Using the premises just outlined, yields may be computed for any young- growth stand whose present stocking and Site class have been observed. For ex- ample, sugar pine reconnaissance data show that the average stocking on Site 1-175 land cut within the last twenty years and moderately well stocked with sugar pine (10.0 to 13.9 crop trees per acre) is as follows: Present d.b.h. (inches) less than 2 2 4 6 8 10 12 14 16 18 20 22 24 26 or greater No. of crop trees/acre 1.56 2.90 1.50 1.18 0.94 0.92 0.94 0.73 0.71 0.62 0.35 0.28 0.26 0.35 Using figure 12 to determine when trees of given present diameter will reach maturity (34 inches d.b.h.), the number of crop trees and volume of yield during successive twenty-year cutting cycles may be determined as shown in the middle column of the tabulation below. Similar calculations may be used to forecast the yield for stands of different Site-class and different present stocking. The yield estimates just described as- sumed that the sugar pines in the stand Cutting cycle Yield per acre With sugar pine manage- ment Without sugar pine manage- ment 1950-1969 M board feet 0.3 0.2 1970-1989 0.8 0.5 1990-2009 2.2 1.4 2010-2029 4.2 1.0 2030-2049 5.3 1.3 2050-2069 10.4 1.4 Total from established growing stock 23.2 12.8 [30] would be protected from blister rust and managed to maintain maximum growth. Yields in the absence of such special management measures may also be esti- mated. Starting with the present crop- tree stand table, the rust survival rates of figure 3 (medium hazard) are applied, diameter class by diameter class, to ob- tain an estimate of the number of sugar pines which will mature in the face of the rust. The growth of these surviving trees is now projected at rates appropri- ate for stands in which sugar pine will not receive preferential thinning treat- ment (Dunning, 1949). The results, cu- mulated to provide estimates of the yield per acre, are shown in the last column of the preceding table. Cost per M of sugar pine yield We may now estimate the additional costs of growing sugar pine, under vary- ing circumstances, by combining fore- casted yields with the estimates of cost per acre which have previously been dis- cussed. For example, on land cut twenty- one to forty years ago, which is moder- ately well stocked with sugar pine crop trees (10 to 14 trees per acre) and where blister rust control effort will average 1.5 man-days per acre, reference to tables 6, 7, 8, and the related text shows that the present worth of the additional costs of sugar pine management measures is esti- mated as follows: Per acre Blister rust control $27.00 Release cuttings 5.40 Pruning costs 4.80 Allowance for replacement 3.50 Roads and other capital improvements 8.80 Total extra cost of management $49.50 This represents the value, now, of all the expenditures which will have to be made in the future in order to bring through to maturity the crop trees now existing in this stand. Costs incurred at future dates have been discounted to present worth at the rate of 2% per cent per year. All cost rates are based on experience [31 with each of the indicated types of activ- ity conducted as a separate operation. An integrated program of management work could conceivably result in some- what lower levels of cost. These costs may now be expressed in terms of the additional yield obtained, that is, costs per M board feet of addi- tional sugar pine harvested. As an illus- tration, let us assume that the stand in question is on Site-class 1-175. From the preceding section we learn that the in- crease in yield resulting from blister rust control and stand improvement measures is as follows: Increased yield Cutting cycle (M bd ft/ acre) 1950-1969 nil 1970-1989 0.9 1990-2009 0.8 2010-2029 3.1 2030-2049 6.1 2050-2069 6.9 These yields represent the joint product of all of the management efforts begun now and continued over the years. In other words, the cost per M of all these yields is the same, regardless of the cut- ting cycle in which the yield is realized. Thus, if this cost per M be designated as X, the present value of the cost per acre of the yield in a single cutting cycle is equal to X times the yield during that cycle, discounted (at 2% per cent inter- est) by the number of years between now and the midpoint of the cycle. Thus the present value of the costs per acre for the third cutting-cycle may be written: 0.8 X (1.025) Similar terms may be calculated for the present worth of each of the other cut- ting cycles. The sum of these terms is equal to the present worth of additional sugar pine management costs for one acre. For the stand in question this was already estimated at $49.50. This rela- tionship provides us with the necessary algebraic equation to estimate the aver- ] age additional cost per M of sugar pine yield for the stand in question. The ex- pression is : 0.0 X 0.9 X 0.8 X + + (1.025) 10 (1.025)"° (1.025) 50 3.1 X 6.1 X + (1.025) 70 6.9 X + (1.025) (1.025) 90 = $49.50 Solution of this expression gives a cost estimate of $20.34 per M of additional sugar pine produced. This represents the value, now, of all the expenditures which will have to be made on stands of this kind in order to bring all of the crop trees through to maturity. Similar cal- culations have been carried out for other representative sites, conditions of stock- ing, and levels of management cost. The range of costs under different timber growing conditions is very great, depending on site quality, difficulty of rust control, density of stocking, and re- lated factors. On Site A-200, with moder- 120 V Site 11-150 S"ioo -6 -O 5 ^30 Jj "o 3 0) TO g. 60 E 3 40 V TO Site 1-175 < ^V^ ^^"-""—^^^ 20 ^""•"■^Jsite A-200 5 Sugar pine crop trees per acre Fig. 13. Variation in estimated cost per M board feet of additional sugar pine produced, by site-class and present degree of stocking. (Rust control requiring 1.5 man-days per acre- medium rust hazard.) ate sugar pine stocking (10.0 to 13.9 crop trees per acre) low control costs, and medium rust hazard, sugar pine yields may be increased by 21 M board feet per acre at an additional cost of $10.00 to $13.00 per M. On the other hand, on Site 11-150 land, with light stocking (two to six trees per acre), and heavy control costs (3.5 man-days per acre), the costs may exceed $200 per M to get an addi- tional yield of 900 board feet per acre. The relationship between additional cost per M and site quality and present stock- ing is shown in figure 13 for areas where rust-control costs are moderate. Potential sugar pine supplies from young-growth areas Having recognized that costs vary so widely with stand conditions, we need now to estimate how much sugar pine could be produced at the various pos- sible levels of cost. To do this, we need to know, first, the site, stocking, and rust- control characteristics of the available cutover land. Estimates of these charac- teristics have accordingly been prepared, based on reconnaissance data obtained by the Office of Blister Rust Control and the Forest Service. Physical productivity. A number of classifications of land, representing the different sites, densities, and ages of young-growth sugar pine were first set up. All young-growth sugar pine land of Site 111-125 or better quality was then classified into one of eighty site-density- age classes. The estimated area of land in each class is shown in table 9. Field samples of each of these eighty classes were measured in order to get an esti- mate of the number and size of sugar pine crop trees in each class. Crop-tree stand tables were then prepared for each of the 80 classes. Using these stand tables, the yield per acre from each class was next calculated, assuming no special measures to favor sugar pine. The methods of forecasting yield per acre were those described above. 32 Table 9. Estimated Area of Cutover Sugar Pine Land in California and Oregon by Density of Sugar Pine Stocking and by Date of Cutting (Area in thousands of acres) Sugar pine crop trees per acre Date of cutting Total area Pre- 1891 1891 to 1910 1911 to 1930 1931 to 1950 14 or more Site A-200 0.1 * 0.1 0.1 0.5 0.6 0.5 1.0 1.3 5.2 3.2 1.9 2.5 4.7 13.6 3.8 2.4 3.6 6.1 19.3 10.0-13.9 6.0- 9.9 2.0- 5.9 . . 1.9 or less Total 0.8 8.5 25.9 35.2 14 or more Site 1-175 0.4 0.2 0.3 0.3 0.8 1.9 5.8 2.3 3.7 3.3 8.5 35.3 14.6 22.9 17.8 77.1 28.7 15.9 26.5 38.2 117.9 70.2 32.9 53.3 59.6 204.3 10.0-13.9 6.0- 9.9. 2.0- 5.9. . 1.9 or less . Total 23.6 167.8 227.2 420.5 14 or more Site 11-150 * 0.1 * 0.3 0.4 0.1 0.1 0.1 0.3 1.3 12.3 7.6 9.5 11.3 63.5 26.8 21.4 33.4 62.8 134.2 39.3 29.1 43.1 74.4 199.3 10.0-13.9 6.0- 9.9. 2.0- 5.9 1.9 or less Total 2.0 104.2 278.7 385.2 14 or more. . 10.0-13.9 . . . Site III-125 2.0 1.5 2.5 3.5 9.7 5.2 3.3 8.5 9.6 32.7 7.8 7.6 12.0 21.3 49.7 15.0 12.4 23.0 34.5 92.1 6.0- 9.9. 2.0- 5.9 .. . 1.9 or less. . Total 19.2 59.3 98.5 177.0 All densities . All sites 2.3 45.5 339.9 630.3 1,017.9 * Between and 50 acres. Note: Totals may not add because of rounding. [33] These per acre yield estimates were then combined with the acreage figures of table 9 to obtain an estimate of the sugar pine yield which would be obtained if no special sugar pine management were undertaken — that is, the supply that would be available at $0.00 per M of ad- ditional cost. The estimate indicates an average annual yield of 22.4 million board feet per year during the period 2010 to 2069. Cost of management. Next, the acreage data of table 9 were further sub- divided on the basis of variations in the level of rust-control cost. For example, reconnaissance data indicated that of the 35,000 acres of sugar pine land in the "Site I — 14 or more crop trees — 1911 to 1930 cutting" element of table 9, 15,500 acres were land where control costs were estimated at from zero to one man-day per acre ; 5,800 acres were where control would cost one to two man-days per acre; 10,700 acres would cost two to three man- days per acre; and 3,300 acres would cost more than three man-days per acre. As a result of this further classification, estimates were obtained of the area in each of 280 site-stocking-age-control cost classes. Similarly, the increase in yield per acre resulting from special management meas- ures was calculated for each class by using the stand tables and the yield pro- jection methods already described. These increases in yields per acre then provided the basis for estimating the additional cost per M on each of the 280 classes of land, using methods given on page 31. Finally, the 280 classes of land were arrayed in order of increasing additional cost per M, as illustrated in table 10. Potential supply from young growth. Inspection of this table will help to clarify the relationship between sugar pine supply and the additional cost per M needed to produce that supply. As already noted, an average annual yield (over the period 2010 to 2069) es- timated at 22.4 million board feet of sugar pine per year will be obtained with no special management effort whatsoever. If we are willing to spend not more than $5.00 per M for special measures to in- crease yield, the increase in supply will be nil because there is no young-growth 80 -*- 1 ' ^ 60 a> a. i/> a i 40 o "5 c P20 a :E i 1 50 100 Average annual yield (million bd. ft., log scale) 150 Fig. 14. Potential sugar pine yields from existing cutover lands, at alternative levels of maximum additional (marginal) cost. [34] Table 10. Portion of Tabulated Array Showing Supplies of Sugar Pine Obtainable from Cutover Land as Management Is Extended to Areas of Increasing Costs per M Class of cutover land Additional cost per M of added yield Additional area (M acres) Average annual yield (MM bd ft) Additional Cumulative total All land without special management . . . A-31-3-0 $ 0.00 7.05 9.62 10.16 10.56 10.69 11.29 13.23 13.31 13.45 14.03 14.28 14.31 14.86 0.2 0.2 0.1 0.1 2.1 0.4 0.6 0.2 1.1 0.1 0.7 15.5 4.4 0.10 0.30 0.06 0.16 2.71 0.46 0.19 0.22 0.48 0.05 0.91 10.83 2.26 22.4 22.8 41.1 A-31-4-0 A-51-4-2 A-31-4-2 A-11-4-0 A-11-4-1 A-31-2-0 A-31-4-2 A-11-3-0 A-31-3-1 A-11-4-2 I_30-4-0 1-50-4-0* * Remainder of table not reproduced. area available on which the costs will be this low. If we are willing to spend as much as $10 per M, yields can be in- creased a little, but the area of high site, well stocked (and hence low cost) land is so small that the aggregate increase in supply is only about 400 M board feet per year. However, if we are willing to spend as much as $15 per M for addi- tional sugar pine, supplies can be almost doubled, because at this level of maxi- mum additional cost a relatively large acreage of land is available for manage- ment and it will produce relatively high yields per acre. The entire array, of which table 10 presents only the first few items, is rep- resented by the curve of figure 14. The curve is obtained by plotting cumulative sugar pine yields (column 5 of table 10) against maximum additional cost per M (column 2 of table 10). It represents what we may call the potential supply curve for sugar pine from existing cut- overs. It shows the estimated amounts of sugar pine that could be supplied at any desired level of maximum additional cost. In passing, it should be noted that the curve does not tell us the average cost per M of the several levels of output. This average cost will be considerably below the maximum cost shown in the figure, and is not relevant to the problem we are trying to solve. One feature of the cost curve of figure 14 merits comment. Potential increases in supply become relatively small after we go above the $60 per M level of cost. This is so because, in this portion of the curve, a principal reason for increasing cost is a low rate of sugar pine stocking. Obviously, if the stocking is low, the in- creased yield obtained by management will inevitably be small, even if the acre- age of land which can be brought into production at this cost level is large. [35] Total potential supply The last several sections have focussed attention on the cost of growing sugar pine on lands which are now cutover. Because the growing stock on these lands is of widely varying age, the yields from these areas will be spread over a period extending from the present to the year 2090. But the great bulk of the yield will be concentrated in the period 2010 to 2070. Thus, relatively little sugar pine young growth will be ripe for cutting until about sixty years hence. Old growth. In the meantime, we must depend heavily on the remaining stands of old growth to meet our needs. In 1951 there was an estimated 18.8 bil- lion board feet log scale of sugar pine remaining in commercial old-growth stands. From 1940 to 1948 the average rate of cut of sugar pine was about 320 million board feet per year. At this rate of use, the old-growth supply represents a little less than sixty years' cut. In other words, if all sugar pine cutting were con- centrated in old-growth stands, those stands would last until 2010. However, the future supply outlook is complicated by several factors. On the one hand, much of the old-growth sugar pine is in ownerships which are com- mitted to sustained forest production. On such areas, the liquidation of the old- growth stems is likely to be spread over a longer period of time, and, as growth is built up, the yield from old growth may exceed the present estimates of volume. On the other hand, our analysis of de- mand suggests pressures for further ex- pansion of the cut, which may well result in consumption above the 320 million foot annual level. Some expansion can be achieved by reductions in waste — in effect, increasing the available supply. But there are sharp limits to this sort of economy. Finally, existing data on past sugar pine production probably under- state the actual level of cut because most mills do not sort out common-grade sugar pine lumber. Hence, at least some of it is probably not reported as sugar pine pro- duction. Although the outlook is thus obscured, it seems highly probable that by the end of another half century the sugar pine economy will begin to rely very heavily on the yields from lands which are now cutover. Other supply elements. But total supply will not be confined to material obtained from these presently cutover areas. Residual stands will be left on such old-growth areas as are cut during the next several decades. These residual vol- umes will also contribute to the supply of sugar pine available after 2010. In other words, from 2010 to 2070 total sugar pine supply will exceed the annual yields of figure 14 by whatever amount is then available in reserve growth on presently uncut areas. At first glance it might appear that pos- sibilities of establishing sugar pine plan- tations, now or in the future, should also be considered in relation to the current discussion of supply. However, this is not the case. Any plantations set out hence- forth will not mature until after the end of the 120-year supply period under dis- cussion. For this reason, analysis of planting possibilities falls outside the scope of the present work. Total supply. Figure 15 suggests what this total sugar pine stumpage sup- ply may look like. The estimates are de- rived by adding to the previous estimates of supply from cutover land (see fig. 14) the potential reserve volume on lands now uncut, which would mature during the market period in question. The esti- mates are based on the assumption that existing old-growth stands will be cut at a rate equal to that of the last decade, and that the pattern of site, stocking, and cost of control on future cutovers will be similar to that of those which now exist. We should note carefully that figure 15 does not attempt to show what future sugar pine supplies will be. Rather it at- tempts to estimate what those supplies [36 80 ~o 40 o c '5)20 o 50 100 150 Average annual yield (million bd. ft., log scale) Fig. 15. Potential total supply of sugar pine— average annual supply for the years 2010 to 2070. would be if we put into effect special measures for sugar pine management by extending those measures first to lands of lowest cost, achieving expansions in our supply by including successively higher cost areas. Timing. For simplicity, figure 15 has been drawn in terms of average annual yield over a sixty-year period. Actually, because of present size distribution of sugar pine growing stock, it will be quite difficult to realize the yields on an equal 400 c # o o no '=> q~ JZ % o i_ D) "6 O 0) c q "5 .g- _n o -a O l bd. ft., log seal CO o o c # g o *3 q~ _c % o i_ O) O o t= onn u O C c inn 0) O) o 0) > < 1950- 1970- 1990- 2010- 2030- 2050- 1969 1989 2009 2029 2049 2069 Fig. 16. Average annual mature sugar pine supply during the next 120 years, by twenty-year periods, if sugar pine management is applied to all areas where costs are less than $50/M board feet of yield. [37] annual basis. Much more timber will ma- ture in the latter part of the sixty-year interval than in the early part of it. The situation is depicted in figure 16. The bulk of the existing cutovers has been logged during the last twenty years. As a result, a disproportionate share of the growing stock is in the zero- to twenty- year age class which will not mature for a century. A comparably small propor- tion is in the forty- to sixty-year age class which will mature between 2010 and 2029. As a result, the sugar pine supply situation will probably be considerably tighter in the two decades following the year 2010 than at any other time in the foreseeable future. However, the situa- tion will not be so bad as figure 16 sug- gests. Forest management is a flexible process and by deferring cutting in some of the old-growth stands and by some "premature" use of the younger second growth, it should be possible to ease ma- terially the short supply in the critical 2010 to 2029 period. This flexibility justi- fies use of the longer term average field. AN ECONOMIC PRODUCTION GOAL FOR SUGAR PINE The estimates of potential sugar pine supply and demand made in the preced- ing section were designed to help define an economic production goal which could serve as the broad objective of sugar pine management. Such a goal is needed as a basis for evaluating the extensive pro- grams of state and federal action which are aimed at sugar pine production. Are these programs so large or so expensive that they involve a waste of public funds which could better be devoted to some other use? Or are they too small to in- sure adequate protection of resources which could contribute to the future eco- nomic well-being of the American econ- omy? In order to answer these and re- lated questions, we must have in mind some bench mark showing what levels of production of sugar pine timber are con- sistent with long-term economic balance between its supply and demand. This bench mark is here referred to as the goal in the production of sugar pine tim- ber. A more thorough discussion of the theory of such goals is given by Vaux and Zivnuska (1952). Growth goal. Economic criteria sug- gest that future production should be in- creased to the point where the additional cost of the last increment of sugar pine output is just equalled by the returns from its sale. The demand curve of figure 10 can be interpreted as an estimate of the average sale value of sugar pine stumpage at various alternative levels of output. The potential supply curve of fig- ure 15 shows the additional cost of pro- ducing the last increment of output (marginal cost) at various levels of pro- duction. When the two curves are super- imposed, as in figure 17, their intersec- tion indicates the theoretical answer to our present question. From the figure we note that an aver- age annual yield of 155 million board feet of sugar pine can be produced at a marginal cost of $50 per M — that is, by placing under sugar pine management all land which can grow sugar pine at special costs of $50 per M or less. At the same time, we see that the anticipated price of sugar pine stumpage, with con- sumption at 155 million board feet per year, is also about $50 per M. Hence, we conclude that an average yield of 155 million board feet per year during the period 2010 to 2069 represents the theo- retical optimum level of sugar pine growth. If more than this volume were pro- duced, owners would have to place under management land with such poor sugar pine stocking, or such high levels of rust- control cost that the unit cost of produc- ing this additional yield is estimated to exceed its anticipated value. On the other hand, if less than 155 million board feet were produced, owners would be allow- ing some potential sugar pine yields to be 38] 80 £.60 o 0) .a 40 u Q. 0) O) O Q- E I 20 0) O) o Potential 1 - supply - *"-*""-». ~"~~if~— Potential demand — - - r 1_ i ■ 50 100 150 200 250 Average annual supply or demand (million bd. ft., log scale) 300 Fig. 17. Potential supply-demand situation for sugar pine stumpage: years 2010 to 2069. (Prices in 1950 dollars.) lost to disease or other enemies, which could have been preserved at a cost esti- mated at less than the prospective returns. Average cost. Although it would cost $50 per M to grow the last few mil- lion feet in a 155 million board foot annual sugar pine budget, the average costs for the entire volume would be far less, perhaps about $25 per M. A large percentage of the crop would come from lower-cost land where productivity is high. The margin between this average cost and the potential $50 per M return represents a kind of rent and is a measure of the economic value of existing sugar pine growing stock. At the time of har- vest this margin would provide funds, over and above those needed to cover the cost of the prospective management pro- gram, which could be used to help bear the general cost of land administration, to write off past investments in blister rust control, and to return a profit to land owners. In other words, a sugar pine management program of the scale sug- gested does not result in a mere trading of present dollars for future dollars, plus interest. Rather, it represents that scale of use of our sugar pine resource which would result in the maximum possible net economic return to the economy as a whole, if we are willing to grant the premises on which the estimates of sup- ply and demand are built. Goal is tentative. This answer to the question of how much sugar pine we ought to grow is, of course, a preliminary and tentative one. The nature of the case makes it so. Much of the data underlying the supply-demand analysis are based on scanty sampling or, at times, merely in- formed judgment. It appears to be the best information now available, but it can and should be improved over the years, particularly as our concepts of what we need most to know about the sugar pine problem become more clearly focussed. A further reason for regarding our answer as tentative lies in the fact that the method of analysis we have used rep- resents a rather drastic oversimplifica- tion. Like any problem in economic de- velopment, the sugar pine problem is extremely complex. The answer is influ- [39 enced by a tremendous number of physi- cal and economic factors. Moreover, some of these influences are either obscure or can be forecasted only with questionable accuracy. The only way we can handle problems of this sort is to simplify them — to select for analysis those factors which seem to be the most important ones and to ignore deliberately many other in- fluences which undoubtedly exist. As a result of this simplification the present analysis does not consider a number of things which may ultimately prove important. For example, no atten- tion has been paid to differences in the accessibility of sugar pine land and the effect of this on costs ; the very important matter of the interdependence of sugar pine supply and demand between differ- ent periods of time has been noted but largely brushed aside ; and we have made no analysis of the effects on costs of vari- ation in the type and intensity of sugar pine management. To have considered these things would have required kinds and quantities of data which simply are not available at the present time. More- over, the intricacy of the resulting analy- sis would have been compounded. In the future much more careful attention and study must be given to these influences, and the current results must be used with full recognition of these inherent limita- tions. But, we may still regard these re- sults as helpful and suggestive in the present stage of development of the sugar pine situation, provided we keep their limitations clearly in mind. SELECTING THE MOST ECONOMICAL AREAS FOR SUGAR PINE PRODUCTION To meet a production goal of 155 mil- lion board feet of sugar pine per year will probably require the specialized management of at least 650,000 acres of the most productive available sugar pine land. As there is several times this acre- age within the sugar pine region, careful selection of areas for management will be necessary to insure the production of supplies at the lowest possible cost. The analysis which has already been made can be of considerable help in guiding this choice of the most desirable areas for growing sugar pine. Economic criteria Cost the basis of choice. From the standpoint of the sugar pine economy as a whole, it would be desirable if all of the most productive areas were placed under management for sugar pine, re- gardless of their present ownership. They represent the most economical areas for sugar pine production. If highly produc- tive land is not managed, because of ownership characteristics, the 155 mil- lion foot goal could be achieved only by putting under management additional land which is less productive and, hence, more costly to the economy as a whole. Accordingly, the basis for selecting sugar pine management areas should be the eco- nomic productivity of the land, without reference to ownership considerations. Up to this point our analysis has shown that to produce an average an- nual yield of 155 million board feet will require special management measures on all land where the additional costs of such management are $50 per M or less. Hence, this $50 per M cost figure pro- vides the basic economic criterion which should govern the choice of management areas. Examination of the cost data under- lying the supply curve of figure 17 shows that, by managing all land with a cost of $50 per M or less, we will utilize about 230,000 acres of cutovers and 400,000 acres of currently uncut areas. Area to be managed. The yield ob- tained from existing cutovers will then average about 95 million board feet per year during the 2010 to 2069 period. The [40] 230,000 acres will include virtually all Site A-200 sugar pine land which sup- ports more than two crop trees per acre — about 15,000 acres in total. Some 183,000 acres of Site 1-175 land will be included. This is about 43 per cent of the Site I cutovers. It includes virtually all of the Site I land which now has ten or more sugar pine crop trees per acre, plus some areas where lighter stocking is offset by low blister-rust-control costs. Only about 32,000 acres of land of Site 11-150 qual- ity would be included, representing that portion of the area with a favorable com- bination of heavy sugar pine stocking and low control costs. The character of the old-growth acre- age needed to meet the 155 million foot goal cannot be described so readily, be- cause much depends on what happens to sugar pine stocking at the time the old growth areas are logged. Rating cutover land for sugar pine management In order to apply the general criteria just suggested, it is necessary to have some scheme, adapted to field use, for evaluating sugar pine areas. Such a scheme may be developed on the basis of the estimates of cost already described. Let us assume that we wish to distin- guish, in the field, between those stands which will more than recover the future costs of sugar pine management and those which will not earn enough to cover such costs. Let us also assume that returns will be based on the $50 per M potential stumpage price previously suggested as the probable result of 155 million board foot annual output. Number of trees in marginal stands. The typical sugar pine stand consists of trees of a considerable range of sizes, and the economic value of a single tree will depend in a very complex fashion on its present size. If our rating scheme is to recognize this, we need sep- arate numerical ratings for trees of each size. To obtain these we proceed as fol- lows. For a given tract of land of known site quality, degree of rust hazard, and level of blister-rust-control cost, we com- pute the number of sugar pine crop trees of specified present diameter which we would have to have on each acre if the increase in returns from sugar pine man- agement is merely to cover the costs uf such management. The needed arithmetic expression is: R + I + A S(Y-Y X ) (1) -P where n = the required number of crop trees per acre R = present worth of expected blis- ter rust control costs per acre I = present worth of expected road and other improvement costs per acre A = allowance for replacement by other species S = expected stumpage price (per M bd ft) at time of yield Y = expected yield (in M bd ft) per crop tree, with special man- agement measures Y 1 = expected yield (in M bd ft) per crop tree, without special man- agement measures P = present worth of pruning, crop tree release, and other stand improvement measures, on a per tree basis i = rate of interest t = number of years until crop trees reach harvest size All of the terms on the right side of this expression may be evaluated on the basis of the cost and return estimates already discussed. Stumpage value (S), stand improvement costs (P) and the length of time until trees are harvested (t) will all vary with the present size of crop trees. Hence, different values of n will be ob- tained for each present diameter class. [41 By an identical procedure, the mar- ginal number of crop trees may be deter- mined for other site qualities (involving changes in Y and t), and for other con- ditions of control cost (involving changes in R). When these values have been found for the relevant magnitudes and ranges of diameter and cost variables, we may calculate the percentage of the marginal stand contributed by one tree of given diameter. (A marginal stand is defined as one where the expected return from the additional sugar pine produced by special management measures is just equal to the additional costs of those measures.) Illustration of rating. As an ex- ample, for an area of Site 1-175 with medium rust hazard and a level of con- trol cost of two to three man-days per acre, solution of equation (1) shows that a stand of 11.3 eight-inch crop trees per acre would just recover the costs of man- agement. Thus, one eight-inch crop tree contributes , or 8.85 per cent, of the _L J. .D growing stock needed for a marginal stand. Similar ratings may be calculated for other tree diameters and cost and return conditions. A sample rating table based on such calculations appears in Ap- pendix A. To determine whether or not a given stand is above the margin for sugar pine production at the $50 level of anticipated price, we first sample the stand in the field to determine the average number and present size of sugar pine crop trees on the area. This might result in a tally sheet similar to that in the first two col- umns of table 11. At the same time, we estimate in the field the site quality and the probable level of control cost for the stand (U. S. Bur. Entomology and Plant Quarantine, 1951a). For the sample we may next calculate the average number of crop trees per acre as in column 3 of table 11. Using the rating table of Ap- pendix A for the indicated site and level of control cost we then enter in column 4 the appropriate rating per tree for each diameter class. The product of each of these ratings by the number of trees in that diameter class gives us a set of ele- ments which may be added to get a total rating for the entire stand. If the sum exceeds 100 per cent, the stand may be expected to produce yields sufficient to cover the costs of future sugar pine man- agement. If the rating is less than 100 per cent, the stand is probably submar- ginal for production at a $50 price level. The rating of 100.3 in the illustration of table 11 indicates that the stand in ques- tion is just at the margin of economic management. Use of ratings. The method of rating sugar pine stands just outlined considers the major factors which apparently in- fluence the problem. But as has already been noted, many factors have been ig- nored. For this reason the ratings are to be considered as guides. They cannot be applied arbitrarily without the exercise of careful judgment. For example, if the stand of table 11 were known to be in a very inaccessible location, it might well be excluded from management even though rated at better than 100 per cent. Similarly, a stand rating only 95 but in a favorable location, surrounded by an extensive area of managed land, might well be included in the management pro- gram despite the nominally unfavorable rating. Rating old-growth stands* Selection of old-growth areas for sugar pine management is complicated by a number of factors not encountered on young-growth areas (U. S. Forest Serv- * The concepts discussed in this section originated with personnel of the U. S. Forest Service and Office of Blister Rust Control. See U. S. Forest Service letter to U. S. Office of Blister Rust Control, S-PLANS, Timber Survey (Sugar Pine Management), dated March 27, 1952, with attached draft memorandum by W. R. Howden. [42] Table 11. Evaluation of a Sample Sugar Pine Stand Using Field Tally of Crop Trees on the Area* and Crop-tree Ratings of Appendix A Tree d.b.h. (inches) (1) Number of crop trees (2) Crop trees per acre (3) Rating per tree (4) Total rating (5) less than 2 18 18 23 24 23 22 16 8 8 4 3 4 3 1 2 1.12 1.12 1.44 1.50 1.44 1.38 1.00 .50 .50 .25 .19 .25 .19 .06 .12 4.4 5.4 6.4 8.0 8.9 10.9 13.0 14.8 16.5 8.7 10.3 11.4 12.5 13.6 14.4 12.0 4.9 6.1 9.2 12.0 12.8 15.0 13.0 7.4 8.2 2.2 2.0 2.9 2.4 0.8 1.4 2 4 6 8 10 12 14 16 18 20 . 22 24.. . 26 28 30 Total 177 11.06 100.3 * Location: S}4 Sec. 26, T27N, R7E. MDM. Date of field work: May 27, 1951 Site quality: 1-175 Control cost: 2.5 man-days per acre Area of block: 320 acres Area of sample strip: 16 acres Rust hazard : Medium ice, 1952). The most important of these is the effect of logging the mature stand on advance sugar pine regeneration. This can be determined only after logging has been completed. Hence, it is apparent that final selection of old-growth areas must wait until they have been converted to cutover status. However, in practice it may be neces- sary to form preliminary judgments about old-growth areas in advance of cut- ting. In such instances, the advance re- generation now on the ground may pro- vide a significant guide. Three general sorts of area may be recognized. First are areas which now have enough ad- vance regeneration to qualify under the rating procedure outlined above, pro- vided it is not destroyed by logging. Such areas obviously should be given priority for sugar pine management. A second class of old-growth stand is one where there is little or no advance sugar pine re- generation and where, because of ground cover conditions, lack of seed sources, or other circumstances, there is little chance of securing additional sugar pine grow- ing stock. Until such time as more ade- quate facilities for artificial regeneration become available, areas of this kind may well be excluded from sugar pine man- agement planning. Finally, there is an intermediate class of stand, containing in- sufficient advance reproduction to qual- ify, but providing favorable opportuni- ties for getting more sugar pine stocking when the old growth is harvested. Final decisions on this sort of area would de- pend on more detailed study than can be outlined here. [43] POLICIES FOR HANDLING THE SUGAR PINE RESOURCE This survey of the sugar pine situation raises many questions. What sort of sugar pine program is in the public interest? Should public and private agencies spend more money or less money than they are now doing for perpetuation of the spe- cies? Do existing public policies and leg- islation contribute as effectively as pos- sible to wise objectives in this phase of forest management? Policy questions such as these involve a wide range of considerations, including many not introduced in an economic study. But, having recognized this, it is still apparent that economic forces should and do play an important role in policy formation. In view of this, we may well consider the implications for policy of the economic forces that we have just appraised, and formulate, at least tenta- tively, certain recommendations as to the course which action on the sugar pine problem should take. To develop these implications and recommendations let us consider a number of rather specific problems in the field of sugar pine policy in the light of the economic appraisal we have made. In doing so we recognize that other, noneconomic, aspects of the sit- uation may need consideration before final decisions are made. Total expenditures Past outlays. For almost twenty years, public and private agencies have been undertaking special expenditures to favor sugar pine. Although the total out- lays have varied greatly from year to year, the total allotment of $1,388,500 for blister rust control in the fiscal year 1933 1937 1941 1945 1949 1952 Fig. 18. Total expenditures for blister rust control on commercial forest land in California and Oregon, by calendar years. [44] 1951 indicates that substantial outlays are involved (fig. 18) . The total expendi- ture on special measures is probably somewhat greater than this. The United States Forest Service carries on a certain amount of stand improvement work and occasionally a private owner undertakes to prune crop trees or otherwise favor sugar pine. But, in the aggregate, these efforts over and above rust control are known to be small. In recent years about one fourth of the total allotment has been for work on na- tional park lands (U. S. Bur. Ent. and Plant Quaran., 1951J) . So the average expenditure on special measures on com- mercial sugar pine land has been in the neighborhood of SI million per year. Cost of recommended program. This aggregate level of expenditure ap- pears to be economically justified in the light of our preceding analysis. As has been shown, it seems likely that sugar pine management may pay its way on some 230,000 acres of presently cutover land. If we were to place this area under sugar pine management immediately, going over the whole area during the next four years to establish blister rust control, and doing the necessary stand improvement and development work over the next decade, the annual cost during the next four years is estimated at $950,000. In addition, about 60,000 acres of virgin sugar pine land is now being cut over each year. It is estimated that perhaps 12 to 13 per cent of this acreage would qualify for management under a $50 per M sugar pine program. Protec- tion and stand improvement work on this currently logged area would cost an es- timated $230,000 per year. Some prelim- inary disease control work would also have to be done on old-growth areas. Al- though this area would be relatively large, the cost per acre would be low. An estimated $160,000 per year would be needed for this purpose. The sum of the annual outlays just enumerated is $1,340,000. Thus the cur- rent $1,000,000 per year outlay is some- what below the total level of current ex- penditure, which seems justified in the light of economic analysis. Purposes of expenditure But the estimates just quoted are ag- gregate expenses for all of the several kinds of measures needed to grow sugar pine. Because sugar pine management is a complex job, it is just as important to allocate expenditure appropriately be- tween such things as protection and stand improvement as it is to limit total outlays to the proper amount. Optimum allocation of funds. Of the $1,340,000 annual cost of a $50 per M program, $660,000 represents needed expenditures for disease control. The other half is for stand improvement, road development, and other measures of in- tensive management. The optimum distribution of available funds among the various measures needed for sugar pine production is a matter of great importance. Cost per M of sugar pine produced rises rapidly if a proper balance of expenditure is not maintained. For example, on Site I land with mod- erately dense sugar pine stocking now twenty to forty years old, and rust con- trol costs of 1.5 man-days per acre, the average additional cost of growing sugar pine is $25.40 per M board feet of yield, if management is carried out with prop- erly diversified efforts on protection and stand improvement. However, if such areas receive blister rust protection but no other measures to facilitate sugar pine growth, the costs rise to $55.50 per M board feet produced. The reason for this is that in the latter case we are paying to protect the entire stand from disease but, because we fail to prevent inroads of competing vegetation, part of the stand which is saved from the rust is lost to competitors. We may look at the matter from a slightly different point of view. For the same stand, the costs of intensive sugar [45 pine management have a present worth of about $49.50 per acre. They result in an estimated increase in sugar pine yields of 13,400 board feet per acre. If blister rust control alone were applied to this area, the present worth of the anticipated future costs would be only $27 per acre. Hence, for every acre put under complete management, we could put 1.7 acres under disease protection alone. But pro- tection alone would increase the esti- mated yield by only 4,800 board feet per acre. Thus $49.50 spent in coordinated management of a single acre would in- crease yields by 13,400 board feet, but the same sum spent entirely for disease control would increase yields by only 1.7 x 4,800, or 8,200 board feet. Needed increases in manage- ment. This critical dependence of effi- ciency on appropriate allocation of funds between protection and other manage- ment measures raises vital questions as to current sugar pine policy. As already noted, the great bulk of present special expenditure for sugar pine is directed toward disease protection. Although cur- rent expenditures for other management measures cannot be estimated, they are known to be extremely small. We must conclude, therefore, that a substantial in- crease is needed in outlays for stand improvement, road and other capital de- velopments, and related measures de- signed to foster sugar pine growth. Is a program of public action needed? That a substantial investment of funds is required to grow sugar pine success- fully is apparent. As has been shown, under appropriate circumstances such in- vestments may be economically justified in the sense that, throughout the life of the crop, the principal of the investment will be returned along with adequate earnings. But this does not necessarily mean that such investments will auto- matically be forthcoming under existing economic conditions. Obstacles to private investment. In fact, the economic problem of sugar pine production is essentially that of how to secure the desired level of investment in the measures needed to grow sugar pine. In the present state of our economy and institutions, almost all investments in any kind of timber growing are prej- udiced in comparison with other invest- ment alternatives. This prejudice results from existing systems of taxation, insur- ance, credit, and land ownership. Be- cause of defects in these institutions, in- vestments in timber growing are cur- rently less attractive to liquid capital than many other classes of investment of no greater basic economic merit. Sugar pine shares this general disad- vantaged position. In addition, the spe- cial problems of sugar pine production compound the disadvantage. The physi- cal risks of sugar pine production appear to be greater than those for most other timber species, and this serves to inten- sify institutional obstacles to investment. For the economy as a whole, these risks are spread over a large area and over a variety of activities, so that they can be borne at reasonable cost. But for the in- dividual investor they often represent insuperable obstacles to satisfactory fi- nancing of a program of sugar pine pro- duction. For example, in our economic analy- sis, an interest rate of 2% per cent per year and a risk allowance of 25 per cent seemed appropriate from the standpoint of the economy as a whole. But because of the greater risks which individual in- vestors would face, a 4 per cent rate of earnings is probably the smallest one which would attract any substantial amount of capital. Probably less than 40,000 acres of the best sugar pine land is productive enough to earn 4 per cent or more on the investment required for successful sugar pine production. Thus, if the solution of the sugar pine problem is left to the operation of capital market forces as they work under exist- [46]' ing financial institutions, our economy is practically certain to produce far less sugar pine than the 155 million board foot ultimate annual yield which has been suggested as a reasonable economic goal. To grow more, the institutional obstacles to investment in sugar pine production will have to be modified; that is, some sort of public program favoring the spe- cies will be needed. Desirable lines of public action Emphasize timber growing. We have already noted that, with minor ex- ceptions, past public action has been di- rected solely at blister rust control. As a result, disease control has in the past been instituted on many areas without being followed up by the other measures needed to insure a sugar pine crop. Such situations illustrate the importance of proper formulation of objectives for pub- lic programs. Work on such areas has contributed substantially toward the ob- jective of disease control. But some of it has contributed relatively little toward the more meaningful public goal of growing more sugar pine. Encourage sugar pine production. Thus, one major modification of public action should be a reformulation of ob- jectives. Rather than a public program of blister rust control, we need a public pro- gram to encourage sugar pine produc- tion. Public assistance in disease control is one of the major ways in which that end can be achieved. But it is important to distinguish the means from the ends. National forest lands. If we recog- nize sugar pine production as the central aim, a number of modifications of exist- ing programs immediately suggest them- selves. On national forest lands, for ex- ample, it is virtually impossible to carry out a balanced program of sugar pine management because of the limitations which apply in the use of various types of public funds. Forest Service appro- priations for blister rust control appear to be sufficient for the protective work needed under an economic program of sugar pine production. But the Forest Service receives no appropriation for the stand improvement and other silvicul- tural measures which must complement protection if sugar pine is to be grown successfully. A certain amount of such work can be financed under provisions of the Knutsen-Vandenburg Act, but this applies only to lands currently being logged, and is of no help whatsoever on the great area of restocked cutovers which is the heart of the sugar pine re- source. Consequently, changes are needed which will permit the Forest Service to develop on its sugar pine lands an inte- grated program of sugar pine manage- ment. Only in this way can the present badly unbalanced situation be corrected. Private lands. The situation on pri- vate lands is much more complex. About half of the most productive sugar pine land is in private ownership, and eco- nomic use of the resource requires that these privately owned areas be brought into production. The problem, of course, is one of stimulating the necessary in- vestment in sugar pine production. To date, the public has been investing in these areas directly by assuming respon- sibility for disease control. But in so doing it has overlooked the coordinate need for investment in silvicultural de- velopment. Moreover, the possibility of encouraging private owners to share part of the investment burden has not been sufficiently recognized. We have noted that, under existing institutions, investment in sugar pine production will not ordinarily be attrac- tive to the private owner. But a different sort of public sugar pine program — a change in the institutional framework — might well encourage private investment. This would have the dual advantage of reducing the need for public financing and of giving the private owner a per- sonal stake in the sugar pine program. Without such a stake his interest is neg- ligible. With it, the efficiency in sugar [47 pine management on private lands might be considerably increased. One essential feature required by such a reorientation would be to direct public aid at sugar pine growing, not just at disease protection. As in the case of Na- tional Forest land, aid to private owners should be aimed to produce more wood, not just to curtail the rust. It should be extended so as to encourage the under- taking of all the measures needed to mature a sugar pine crop. A second important feature would be to get the land owner himself actively into the program. There are numerous administrative de- vices which could conceivably be used to achieve these ends. This is not the place to evaluate each of these and to recom- mend a detailed procedure. But among the possible sorts of effort which seem worth study the following may be men- tioned: 1. A program of public disease control under which an owner's land would re- ceive protection only if he himself under- took the silvicultural measures needed to complement protection. 2. A system of carefully supervised bounty payments payable to those land owners who put into effect and main- tain an effective plan of sugar pine management, including both protective and silvicultural features. 3. A program of cooperative invest- ment, under which the public would match (in some appropriate proportion) the private owner's investment in sugar pine management with a public invest- ment on the owner's land. Each of these alternatives has obvious disadvantages as well as advantages. Careful study of the administrative and economic problems involved in each would be needed before a wise choice could be made. It may well be that the desired results can be achieved by means other than those mentioned. But each alternative illustrates the essential fea- tures of a desirable program on private land — it must encourage direct partici- pation and investment by the owner him- self and it must insure that whatever sort of technical program is applied will be a balanced one, not a one-legged affair in which disease control or any other single facet of the sugar pine situation is given exclusive attention. ECONOMIC SIGNIFICANCE OF THE SUGAR PINE RESOURCE A wise program of public encourage- ment of sugar pine production can help to increase the net economic returns ob- tainable in the future from the pine for- ests of California and southern Oregon. These returns will not represent any huge bonanza in relation to the lumber econ- omy of the West, but they should provide a satisfactory yield on the public and private investments which are required, and they will undoubtedly reflect more effective use of the resources that are available. In addition, a sugar pine program pro- vides a further sort of benefit not meas- urable in concrete terms, even though it is of considerable long-run economic sig- nificance. The spectacular growth of the American economy and the relatively high standards of material living to which Americans have attained are due in no small measure to the magnitude and the diversity of the natural resources which have been available to us. Con- tinued expansion of the economy de- pends, among other things, on the extent to which we maintain this substantial and diverse resource base. Of the hundreds of natural resources which support our farms and industry, perhaps no single one is indispensable. We could get along without sugar pine or without any one other resource which might be mentioned. But we could not [48 get along satisfactorily if a quarter or a tangible contributions to make, and these third of our resources were lost or de- we have already analyzed. But beyond stroyed. What may be true of one re- them, maintenance of sugar pine within source in isolation is not true of any sub- the complex of our resource base con- stantial aggregate of resources. tributes to one of the essential founda- Hence, the fact that sugar pine is not tions on which our economy has been indispensable has no particular meaning built — it helps to maintain both the vari- for problems of conservation policy. The ety and the quality of these resources, important question is not "Can we get To allow it to disappear is to permit de- along without it?", but rather "What struction of at least a small part of the will it do for us if we protect it?" On root system essential to general economic this ground the sugar pine resource has survival and growth. ACKNOWLEDGMENTS The economic problems of sugar pine management have for several years con- cerned many individuals and agencies responsible for sugar pine resources. Out of a common concern for these economic problems grew a formal study which, during its later years, was carried on by the Agricultural Experiment Station, University of California. The information and analysis reported in the preceding pages had the advantage of a high degree of informal cooperation and exchange of information and ideas between a wide variety of interested people. The author therefore is heavily indebted to the following agencies and to many individuals on their staffs, although they are in no way responsible for the analysis and conclusions. These agencies are. California Forest and Range Experiment Station, United States Forest Service (under whose auspices the study was begun) California Division of Forestry California Forest Protective Association Office of Blister Rust Control, United States Bureau of Entomology and Plant Quarantine Region Five, United States Forest Service Much of the primary information presented originated in the files of these agencies, and much of the analysis stemmed from numerous and informative discussions with their representatives. APPENDIX A Crop-tree Rating Tables Tables A-l, A-2, and A-3 are on the following pages [49] -Q s hi I •6 a © CO 1 t-J tJJ 00 OS CO COWWMO d t> oo* d d rH t^Oiiooq O rH d id r-i rH ■d 2 NO>0|00) IO id CO 00 GO C- CN CNOSrH OS rH CN CN ^ r-i 7-i rH -* CN O t-; r-J t- 00 OS OS o rH pp pp ci TAaiia rH rH ■a p i-j co p -*t* to C«" 00 d CN 00 ^ OS CN p ^V 00 O H p O M CN t> O rH rH rH O W p pp rA tA d id 3 eo "v. •d a o i CO o Hi l> rH p ■<* t> p cn ^j p co 00 ©r-i CO 00 rH rH rH rH r}< t-00 00 OS O rH CN CO rH 7-i rH r-i t- rJICN p •^ d co oo" rlrlH •d o CO CN p O CO l> 00 d r-i CN rH rH W ^ 05 00 05 co id co" t-^ os rH rH rH rH CN W "* "* O O rH CN CO ^" rH rH rH rH rH p -^ CN |p ti" d co od rH rH rH ■a CN 00 OS lO eg oo d i-i -^ t>" rH rH rH p O CN O p O "^ d od id CN CN CN CN rH p CN t> p p ^" id id id tj" rH rH rH rH rH p "^ CN O <0 o eg \ a © CO 1 tN o rH (O N H Oi CO C— 00 OS OS O rH "^ p CN rH rH rH CO id 00 rH rH rH rH rH rH CN p l> r-J -^ CN co' id t»" 00 rH rH rH rH rH t> p p t> d rH* t>* O rH CN rH rH •6 t-; p t> r> «-tf d i-i cn ^ co tH r-i rH rH O CO lO p CN 00 O CN CO CO rH CN CN CN rH CO rH tO OS CO co" id d c-* oo rH rH rH rH rH P P p t> d r-J t> d rH CN rH rH ■a O rH p CO p r-i co »d os cn rH rH rH rH CN ^ O OS CO CO C"^ CN "^* l> rH CN CO CO CO CN "^| M P p t> oi <6 cS d ai rH CN CN CN rH P p p t> O rH t> O CN CN rH rH © 3 eo •6 a © c4 o 00 CD OS rH CO O rH CN Tji Tji l-{ T-i l-i T-i ■>-* CN tJJ lO t- p d OS rH id id rH rH CN CN rH CO CD OS CN «* CO rH rH CN CN rH -^ id CN CO CN rH •d t^ p p oq cn co id oo d co rH rH rH CN CN wwcjooi> id OS rH CO 00 CN CN CO CO rH P TJJ p TJJ T}J d rH co id d rH CN CN CN CN P rH p CN 00 rH rj" id CN CO p O i> oo d d od CN CN CN CM CN p rH p CN d r-i ^ id CN COCN rH <£> h O 3 d a o i-i O o rH t> O CN CN p t> OS rH CO CO rH rH CN CN CN p p "^ CN p d rH id cn id CN CO CO "^ CN p CN lO p 00 oo cn d d cn CN CO CO CO "^ p rH p OS id rH O ^1* "^ lO "* CN •d e W W CD (N H rH oo cn id d tji tj< m io co t> rH p p Tt< rH id 00 rH CO CO CO CO ^ ^ p rH p p tOHO^' "^ lO "^ CN bo p "# p p *tf id d i> id co os co i> oo oo "^ PP C-; rH p id i> oo od id p rH p p 00 rH O ^l" "^ U3 -^ CN "2 o> J3 t> d -2- CNCN^CDOO 1 OCN-* CO 00 rH rH rH rH rH O CN "^ CO 00 CN CNCNCNCN O CN "^ CO CO CO CO CO "WW (B 4) V *» V * an ho" '•*; ho- ->• -■ - 03 co M O O o> op hhh .2 .2 -2 > t-eo a rHrH a a eo CO £0 ■$■£•£ v huh o o o aaa o o o S w w w w w .3 O o o o o CO o o o o o ^'o'oo'o'o .5 c d c fl fl boo o o o o h O o O O O 2 w w w w w R >>>»>>>»>> -, o3 cd C^ Ctj G$ *■ d a a a c bo co co co co co .2 a a a a a aqqooo "3 r-i CN co" ■*' CO u I I I I I O rHtNCO'* c o (A 0) h. 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CD CO CO O t- CO O CO CO O "tf tH O CN "tf CD tH tH tH tH tH tH ea o oo co ^ co oo oo o m oo tH 00 CN CO CO a o CM cn ■«* m CO cd th ^ m co tH tH tH CN CO m CD tH tH tH tH tH tH e± -s tOMONH CD CO CM ** tH in oo cn co co £ H M M I- w o o o o o ^aaaaa * o o o o o "S!z;!z;!zi!zi!z; bc^; ^ _y _y £ B oj w tn w w "5 O O O O O eg o o o o o --"o o'o'o'o .ScflSBfl boo o o o o M o o o o o fl in »i m oi »i H >>>>>>>>>> rt^ c3 c^ rt oj o3 • T3 T3 T3 73 T3 *• C B C B B bo eg eg eg eg eg .s a a a a a doooqc "3 t-i CN CO Tj< CO o I I I I I "-9 O tH tH tH tH o i-i ci eo i" s APPENDIX B Statistical Analysis of Sugar Pine Demand The tools of statistical analysis have frequently been applied to agricultural com- modities (Schultz, 1938) , but little effort has yet been made to use them in studying markets for wood. As the techniques used in this bulletin may thus be unfamiliar to many readers, a brief summary of procedures used in the statistical analysis of consumption may be of interest. In its simplest form, the problem is to determine what relationship exists between the level of consumption in successive time periods, and the levels of those independ- ent variables such as price, economic activity, and the like which logic indicates are important determinants of consumption. As there is usually more than one such independent variable, the method of multiple regression and correlation analysis is suited to the purpose. In using this method, the form of the relationship must first be assumed; that is, whether the relation between independent and dependent variables is straight line, logarithmic, or of some other shape. Choice of form is ordinarily suggested by logical considerations. However, alternative forms may subsequently be tested by the method itself in order to determine which form provides the better fit to the available data. After a given form of relationship has been chosen, an equation is fitted to time series data (such as those presented in Table B-l) by the method of least squares. The normal equations and other details of mathematical procedure may be obtained from Bruce and Schumacher (1950) or from any standard statistical textbook. The resultant multiple regression equation sums up all of the evidence provided by the basic data in a single mathematical statement. This shows in quantitative form the extent to which variation in the dependent variable is associated with variation in each independent variable. For example, in the present case, straight-line relations between the several vari- ables were initially selected on logical grounds. Solution for the constants of such an equation gave the expression Y = 72.47 - 16.50 X, + 1.078 X 2 + 21.02 X 3 where the symbols are identified as in table B-l. Subsequent checks showed that a higher coefficient of multiple correlation was obtained with the straight line function than with semilogarithmic, logarithmic, or other logically defensible forms. The coefficient of multiple correlation, 0.77, indicates that about 60 per cent of the varia- tion in Y is associated with variation in X 19 X 2 , or X 3 . The coefficients of each of these terms indicate the change in Y, which was associated with a unit change in each independent variable when other independent variables are held constant. The method of regression analysis thus provides a powerful tool for analyzing complex interrelationships between economic variables, and for expressing in simple quantitative form the average relationship found to exist between historical observa- tions. Table B-l is on page 54 [53] Table B-l. Consumption and Price of Sugar Certain Related Economic Variables, Pine Stumpage and , 1910-1949* Year Comsumption (MM bd ft) (Y) Stum page price/M (1926 dollars) (Xi) Gross national product (billion 1926 dollars) (X 2 ) Competition index (X 3 ) 1910 105.3 120.3 135.0 152.9 138.9 117.7 169.3 132.6 111.8 133.7 146.0 133.6 194.1 228.6 245.7 307.0 306.5 282.2 305.9 349.3 205.2 106.1 47.7 110.0 192.8 285.0 319.2 267.1 308.9 363.0 369.9 338.4 277.9 317.8 228.1 344.0 343.2 315.0 311.8 $6.11 3.85 5.09 4.70 4.39 4.86 4.12 2.43 2.59 2.45 3.26 4.35 3.92 4.38 4.33 4.23 4.50 4.19 3.36 4.86 7.33 6.26 5.73 complete dat 4.67 3.88 3.45 3.28 4.53 4.06 3.88 3.91 4.82 4.03 5.03 6.91 5.96 8.24 10.60 12.48 52.1 56.7 55.7 57.3 56.5 60.6 55.9 50.6 49.9 55.6 55.8 72.0 75.0 83.8 85.0 87.0 95.3 98.0 98.9 108.9 105.2 104.0 90.0 i not available ) 86.6 90.3 102.1 104.5 107.8 118.4 129.0 144.7 163.5 188.5 205.5 203.4 174.3 153.4 156.9 164.9 3.17 3.30 3.12 3.13 3.53 3.59 4.05 4.28 4.36 3.70 4.95 5.04 5.45 5.70 5.57 5.32 5.93 5.99 5.71 5.32 5.80 5.81 6.70 6.52 6.96 6.78 6.85 6.74 6.68 6.74 6.93 6.41 6.85 7.50 8.04 7.37 9.63 10.97 11.84 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1922 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 . 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 [54] LITERATURE CITED Anderson, Arthur B. 1952. Pinitol from sugar pine. TAPPI 35(5) : 198-202. May. Baker, F. S. 1934. The theory and practice of silviculture. McGraw-Hill Book Co., Inc. New York. Pp. 433; 434. Bruce, D., and F. X. Schumacher. 1950. Forest mensuration. 3d. ed. McGraw-Hill Book Co., Inc. New York. Chapters 14 and 17. Brundage, M. R., M. E. Krueger, and D. Dunning. 1933. Economic significance of tree size in western Sierra lumbering. California Agr. Exp. Sta. Bui. 549. P. 42. Burks, G. F., H. J. Vaux, et al. 1948. Commodity production from commercial forest land in California, 1946. Forest Survey Release 6. California Forest and Range Experiment Station, Berkeley, Calif. (Processed) P. 8. California Department of Natural Resources. Division of Forestry. 1952. Forest insect conditions in California — 1951. A report prepared in cooperation with the Forest Insect Laboratory. Division of Forestry, California. P. 8. Dunning, D. 1949. Forest management field discussion — mixed conifers, California. California Forest and Range Experiment Station, Berkeley, Calif. April. (Processed) Pp. 9; 22-25. Dunning, D., and L. H. Reineke. 1933. Preliminary yield tables for second-growth stands in the California pine region. U. S. Dept. Agr. Tech. Bui. 354. Wash., D.C. P. 16. Fowells, H. A., and G. H. Schubert. 1951. Recent direct seedling trials in the pine region of California. Forest Research Note 78. June 28. California Forest and Range Experiment Station, Berkeley, Calif. P. 5. Gulick, L. C. 1951. American forest policy. Duell, Sloan, and Pearce. New York. P. 109. Hallin, W. E. 1951. Unit area control in California forests. Forest Research Note 77. March 15. California Forest and Range Experiment Station, Berkeley, Calif. P. 8. Harlow, W. M., and E. S. Harrar. 1950. Textbook of dendrology. 3d. ed. McGraw-Hill Book Co., Inc., New York, Pp. 64-70. Harvey, A. G. 1947. Douglas of the fir. Harvard Univ. Press, Cambridge, Mass. Chapter 9. Jepson, Willis L. 1910. The silva of California. Memoirs of the University of California v. 2. California Univ. Press. Berkeley, Calif. Pp. 70-73. Keen, F. P 1928. Insect enemies of California pines and their control. Division of Forestry Bui. 7. Cali- fornia Department of Natural Resources, Sacramento. Pp. 33-36. Matthews, D. N., and S. B. Hutchison. 1948. Development of a blister rust control policy for the national forests in the Inland Empire. Station Paper 16. Northern Rocky Mountain Forest and Range Experiment Station, Missoula, Montana. (Processed) Pp. 94-96; 56-61. May, R. H., and A. Simontacchi. 1947. Production of lumber and other sawed products in California and Nevada. Forest Research Note 55. California Forest and Range Experiment Station, Berkeley. (Proc- essed) P. 8. Merrick, G. D. 1951. Wood used in manufactures, 1948. Forest Research Report 2. U. S. Forest Service. Wash., D.C. (Processed) P. 4. Miller, J. M. 1915. Cone beetles: injury to sugar pine and western yellow pine. U. S. Dept. Agr. Bui. 243. Wash., D.C. Pp. 2-8. Quick, C. R. 1951. Ecology and control of the Sierra Nevada gooseberry. U. S. Bur. Ent. and Plant Quaran- tine. Bur Ms. 9819. Berkeley, Calif. (Processed) P. 35. [55] Schultz, Henry. 1938. The theory and measurement of demand. Univ. of Chicago Press. Chicago, 111. 193<°. Shaw, E. W., and G. R. Staebler. 1950. Financial aspects of pruning. Pacific Northwest Forest and Range Experiment Station. Portland, Ore. P. 14. Show, S. B., and E. I. Kotok. 1924. The role of fire in the California pine forests. U. S. Dept. Agr. Bui. 1294. Wash., D.C. Pp. 13-18. Steer, H. B. 1938. Stumpage prices of privately owned timber in the United States. U. S. Dept. Agr. Tech. Bui. 626. Wash., D.C. Pp. 5-14. 1948. Lumber production in the United States: 1799-1946. U. S. Dept. Agr. Misc. Pub. 669. Wash., D.C. P. 233. Sudworth, George B. 1908. Forest trees of the Pacific slope. U. S. Gov't. Print. Off. Wash., D.C. Pp. 23-27. U. S. Bureau of the Census. 1949. Census of manufactures — 1947; lumber and timber basic products. (MC-24A) Wash., D.C. 21 pp. 1951cr. Facts for industry: lumber production and mill stocks — 1949. (M13G-09) Wash., D.C. 7 pp. 19516. Facts for industry: lumber production and mill stocks, fourth quarter, and selected annual totals— 1951 (preliminary). (M13G-1-4-1) Wash., D.C. 1952. Facts for industry: lumber production and mill stocks— 1950. (M13G:00) Wash., D.C. U. S. Bureau of Entomology and Plant Quarantine. Division Plant Disease Control. 1951a. Present and potential white pine commercial values — Pacific Coast region. Office of Blister Rust Control. Berkeley, Calif. May. (Typewritten tabulation.) 19516. Annual reports on the control of white pine blister rust in the Pacific Coast region, 1938-1951. Office of Blister Rust Control. Berkeley, Calif. 1951c. Blister rust control handbook — Pacific Coast region. Office of Blister Rust Control. Berke- ley, Calif. (Processed) Pp. PA24-PA32. 1951r/. Annual report on the control of white pine blister rust in the Pacific Coast region for the calendar year 1950. Office of Blister Rust Control. Berkeley, Calif. (Processed) P. 21. 1952. Forest insect conditions in California — 1951. A report prepared in cooperation with the Forest Insect Laboratory, Division of Forestry, California. U. S. Department of Commerce. 1951. National income: 1951 edition. A supplement to the survey of current business. Wash., D.C. Pp. 1 ; 150. U. S. Forest Service. 1928. Lumber used in manufactures — 1928 . . . preliminary statistics, Forest Survey of the United States. Wash., D.C. In cooperation with U. S. Bur. of the Census. (Processed) P. 54. 1946. Gaging the timber resource of the United States. Report No. 1 of Reappraisal of the Forest Situation. Wash., D.C. (Processed) Pp. 41-42. 1948. Wood used in manufactures — 1948. U. S. Forest Service. Forest Research Report No. 2. Wash., D.C. P. 66. 1952. Summary of sugar pine management field data calendar year 1951, California region. Memorandum from Assistant Regional Forester to Supervisors; file: S-PLANS-Timber Surveys (Sugar Pine Management). June 2, 1952. Attachment, p. 2. U. S. Interrureau River Basin Committee. 1950. Proposed practices for economic analysis of river basin projects. Subcommittee on Benefits and Costs. Wash., D.C. U. S. President's Materials Policy Commission. 1952. Foundations for growth and security. Resources for Freedom, v. I. U. S. Gov't. Print. Off. Wash., D.C. P. 6. Vaux, Henry J., and John A. Zivnuska. 1952. Forest production goals: a critical analysis. Land Economics 28(4) :318-27. Nov. Wieslander, A. E., and H. A. Jensen. 1946. Forest areas, timber volumes, and vegetation types in California. Forest Survey Release 4. California Forest and Range Experiment Station. Berkeley, Calif. (Processed) 7V 2 m-l,'54(A9977)MH [56]