Cooperative Forestry Takes Root
by Sarah Hannigan

In 1976, Jim Birkemeier began his career as a logger. After a few years of following conventional wisdom, which dictates, "Take the best (trees), and leave the rest," he realized that something was not right. He began a quest for an alternate model of forest stewardship, one in which the felling of individual trees did not compromise, but actually encouraged, the vitality of the forest as a whole. He also wanted to help forest owners retain a larger portion of the end-value of their harvest.

Today, Birkemeier’s Timbergreen Farm in Spring Green, Wisconsin, with 200 forested acres, is a working demonstration of his ideas. His consulting company, Timbergreen Forestry, teaches others how to create similar systems.

Sustainable forest management builds up the quality, quantity and diversity of the forest. Plans are site-specific, but all follow the broad practice of removing the smaller, poorer-quality trees and allowing larger trees of greater value to be nurtured for future harvest. The annual yield per acre continues to increase while the annual harvest never exceeds the annual forest growth.

In a conventional timber harvest, a tree with a diameter of 14-18 inches at breast height is considered to be mature and ready for harvest. In a sustainably managed forest, a tree is not considered mature until it stops growing–typically at a diameter of at least 24 to 30 inches. Since the diameter of a healthy tree increases by about 1/2 inch each year, this means waiting another 12-24 years to harvest that tree.

The benefit is a higher sustainable yield: in the long term, a larger storehouse of value per acre. A good red oak with a diameter of 18 inches, for example, contains about 210 board feet of lumber beneath its bark; a healthy 30-inch red oak contains over 1,000 board feet. A board foot is a piece of lumber 12 inches by 12 inches by 1 inch. A finished hardwood floor measuring 31.5 feet by 31.5 feet contains approximately 1,000 board feet of milled lumber.

In 1976, the volume of standing timber on Timbergreen Farm amounted to 350,000 board feet. The forest was in a state of poor productivity because all the large and healthy trees had been extracted decades earlier. Today, the same stand contains 880,000 board feet. In 1976, Birkemeier’s forest was producing about 100 board feet of annual growth per acre, as do most unmanaged woodlots in southern Wisconsin. Today annual growth is about 200 board feet per acre. Of this, about 100 board feet are harvested each year. By 2010, Birkemeier estimates annual growth will support a harvest of 200 board feet per acre, and by 2030 up to 300 board feet per acre per year, or 60,000 board feet for his 200 acres of forest land.

The majority of the timber extracted from Birkemeier’s farm thus far has been comprised of small-diameter logs. Traditionally, there has not been much of a market for smaller hardwood logs. Birkemeier has been instrumental in developing a high-value niche market for these logs: rustic flooring. He operates a sawmill and recently the company has become involved in floor installation. From forest to floor, Birkemeier captures all of the timber’s possible value.

Recent Trends

The majority of all hardwood comes from privately owned wood lots. Generally, hardwood trees are deciduous, as opposed to coniferous softwood trees. Hardwood applications include furniture, flooring, veneer and specialty lumber; softwoods are typically harvested for construction lumber, pulp and paper products. As hardwood end-products are typically of higher value than softwood products, a deciduous tree is typically worth more than a coniferous tree of similar size. The hardwood market depends on nonindustrial private woodlots. In 1997, 75 percent of all hardwood harvested in the United States came from nonindustrial private forests. The USDA’s Forest Service anticipates that by 2050 this will grow to 85 percent.

Most privately owned wood lots are smaller than Birkemeier’s. In the U.S., 93 percent of the estimated 9.9 million private nonindustrial forest owners owned fewer than 100 acres of forest. In Wisconsin, where forestry is the leading industry in 29 of the state’s counties, 57 percent of the state’s 16 million acres of timberland is privately owned by over 200,000 individuals and families. The average size of these forests is 45 acres.

Nonindustrial forest owners rarely manage their small acreage in a manner that maximizes long-term yield, let alone biological diversity or environmental protection. One reason is the lack of knowledge. Another is the lack of resources. Across Wisconsin, for example, privately owned forests yield 660,000 board feet of timber each year–an average harvest of 74 board feet per acre per year. At an average of 34 cents per board foot paid to the owner, this amounts to an annual revenue of about $1130 for the typical Wisconsin nonindustrial forest owner.

But these forests are not typically harvested on an annual basis. Rather, they serve as emergency bank accounts, to be tapped when forest owners need a significant sum of money for the children’s education or for some other purpose. In the last decade a dwindling supply, paired with heightened demand, pushed the stumpage values for hardwood species through the canopy. (Stumpage rates, assigned each year for hardwood species, are based on successful field bids for trees and are a measure of the amount of lumber that could be sawed from a log at a typical sawmill.) In southern Wisconsin, the stumpage value for a red oak in 1999 was twenty times more than it was in 1970. The harvest rate for red oak currently exceeds its regeneration rate by two-and-a-half times.

When approached by loggers and sawmills offering substantial amounts of cash, many landowners willingly invite loggers, chainsaws and skidders into their woodlots to "high grade." Loggers, who are paid per tree, often employ hasty techniques to cut the best trees. Following such a harvest, only the small, spindly and unhealthy trees remain and the forest is left in a poor state of productivity.

Certification: The Backbone of Sustainable Forest Management

In the last few years, in large part for environmental reasons but also for economic purposes, nonindustrial forest owners have begun to embrace the Birkemeier model: maximize long-term yield and capture as much income as possible from cultivation to installation.

Economies of scale tend to deter individual owners of smaller parcels from managing their property for wood production, much less for value-added processing. Additionally, with no formulaic plan applicable to any two parcels of land, the inherent complexity of sound forest management can seem daunting to forest owners. Forestry network organizations and cooperatives are proving to be effective ways for landowners to pursue forest stewardship and processing.

The emergence of forestry certification standards in the last decade has helped to provide the framework for sustainable value-added forestry. In the broadest context, forest certification is a series of nongovernmental strategies designed to provide assurance that forests are well managed. These strategies range from self-certification to external assessments by independent and presumably objective nonprofit organizations. The leading international certification initiative, the Forest Stewardship Council (FSC), has established ten principles of sound forestry as well as an FSC label that connotes adherence to these principles. FSC accredits and monitors independent, third-party certifiers. SmartWood, a project of the Rainforest Alliance, is recognized by FSC as a forest management and chain-of-custody certifier. SmartWood certification applies to forest managers and processing operations.

The process of certifying privately owned forests involves the development of and adherence to long-term management plans based on FSC principles. A certified resource manager writes the plan and performs annual evaluations of its effectiveness. Currently, Jim Birkemeier is one of two SmartWood certified resource managers in Wisconsin. Through the consulting arm of his business, he serves as "a coach and cheerleader" to landowners. Resource managers are also responsible for overseeing crews who work in the forests.

Sustainable forest stewardship typically entails lower harvest levels per acre, longer harvest cycles, measures to improve the health and quality of the timber, increased monitoring and tree-by-tree management, all of which takes longer and often costs more than conventional forestry. The direct costs for certification vary greatly depending on the size and state of the forest. Generally, for larger forests (>50,000 acres) costs range from a fraction of a cent to 8 cents per acre. Certification of forests in the range of 500 acres can run up to about 85 cents per acre. For smaller forests, certification costs $5-10 per acre. Through cooperative and group certification small forest owners can achieve economies of scale, with costs estimated at $200 per landowner. Certified forests also require annual audits, typically costing 10 percent of the initial assessment cost.

Many states offer property tax incentives and cost-sharing programs for forest management and improvements. In Wisconsin, under the Managed Forest Law, property tax breaks are available for forests with management plans approved by the state Department of Natural Resources. The tax breaks can be significant–$5-6.50 per acre, which is more than enough to cover certification and audit costs. In 1998, the Wisconsin Forest Landowner Grant Program began to provide cost sharing for forest management plans and improvement. To date, close to 3,000 landowners, holding over 19,700 acres of forest, have taken advantage of the program.

Certification ensures sustainable management practices in the forest. It can also assure the public that wood products in the retail market actually originate from certified forests. Companies that meet SmartWood standards for handling certified products without intermingling them with noncertified materials can be approved for chain-of-custody certification. Through SmartWood’s chain-of-custody certification system, certified logs are followed from the forest through each level of production. The initial investment required for a sawmill for such certification runs between $500 and $3,000 per operation.

For a facility that buys wood from several sources, tracking all inventory would entail bar-coding certified logs and lumber, stopping production between runs of certified and noncertified products and creating separate storage yards and processing facilities. Large-scale secondary processors have not generally been interested in chain-of-custody certification due to costs associated with keeping certified and noncertified wood products separate. Small operations dedicated to processing only certified wood therefore at this time have a competitive advantage in chain-of-custody certification.

Like a certified organic label on an apple, a certified label on a forest product is meant to convey a message of environmental responsibility to consumers. Whether the general public is willing to pay increased amounts for certified wood products remains a question. Various studies show that with consumer education and steady supply, certified wood products could capture a 5 to 20 percent premium over noncertified products. To date, however, customers who actually pay a premium for certified wood products stand out as exceptions.

Corporate retailers like Home Depot and Lowe’s recently pledged to give preference to certified products when available. This fall, the Andersen Corporation announced a similar commitment in the manufacture of its wood window and door products. While these initiatives hold promise, these companies do not pay a premium for certified wood.

Thus forest owners are increasingly concentrating on Birkemeier’s second sustainable development principle: capture the value added from cultivation to installation.

Adding Value: Sustainable Woods Cooperative

The value of a board foot of standing red oak averages $0.34. That is what harvesting companies pay the landowner to go in and cut the trees. The value of a board foot of logs delivered to a sawmill is $0.50. The average value of a board foot of sawed lumber falls between $0.61 and $0.80 depending on the quality of the wood. Drying the sawed wood increases the value to between $0.87 and $1.10 per board foot. The average wholesale value of a board foot of red oak is $1.07, its retail value is $2.14. A board foot of milled tongue and groove flooring wholesales for $2.85, and retails for up to $4.00 and $5.00.

Traditionally, much of the added value is realized beyond the community in which the tree grows. Forest owners can capture some of this value by becoming involved in the sorting, saw-milling, kiln drying, S4S (surface-four-sides) milling and wholesale and retail marketing of their logs. Economies of scale make cooperation essential for small-scale forest owners looking to enter into wood processing. In the Upper Midwest the Sustainable Woods Cooperative (SWC) of southwestern Wisconsin is leading the way.

SWC’s mission is to maximize the long-term aesthetic, ecological and economic benefits from the area’s forests through environmentally responsible forestry practices, landowner and consumer education and local manufacturing of value-added FSC certified wood products. The strategy is to convert members’ certified timber into high value hardwood flooring, millwork and kiln-dried lumber. According to Tom Theiding, SWC’s president, "the primary driving force for membership is a strong stewardship ethic: forest owners are looking to improve their forests for future generations. The prospect of financial gain through value-added processing is typically a second thought for members."

In the four years since its inception, 124 members have joined. Collectively they own some 17,000 acres of certified forests with about 70 million board feet of standing timber. Initially the members will harvest low-quality wood in order to improve the health of the forest. Birkemeier anticipates that in 20 years, with sustainable forestry management techniques, current members’ forests will contain about 100 million board feet of much higher quality standing timber. In 2000, about 250,000 board feet were harvested from SWC forests. An ideal sustainable harvest from these forests would be about 2.5 million board feet–currently, the annual harvest is dictated by the cooperative’s processing capacity.

In June 2000, SWC opened its forest products processing center in Lone Rock, Wisconsin. The center currently includes a small-scale sawmill, solar kiln and retail store. The cooperative processed 200,000 board feet of lumber in the second half of 2000. The addition of a larger sawmill, an edger, four electric dehumidification kilns and a moulder in 2001 will boost SWC’s annual production capacity to one million board feet.

Any value-added sustainable forestry cooperative will face two primary marketing constraints. Because of the small scale, operating costs will be higher than the industry average. Also, during the initial years of sustainable forest management most of the annual harvest is low-grade wood. To overcome these constraints it is essential for cooperatives to add as much value as possible to all wood harvested: to minimize waste, to process low-grade wood into value-added products like rustic flooring, to maximize retail sales and to allow flexibility through initial phases of start-up.

Small is Beautiful

Unlike softwood, which is cut to specific sizes (2x4s, etc), hardwood is sawn to variable widths so as to achieve the widest, clearest boards possible. The quality of wood in a log will vary throughout. The highest-grade lumber is typically derived from the outermost portion of the logs, where the wood is strong and knots are infrequent. The very center of a log, known in the industry as the juvenile box, is the oldest and weakest part of a log. This lumber is often best suited for pallets. Between the outer rings and the log’s core, the quality varies. The grade of the lumber will vary depending on clarity, grain and presence of knots. In the rough cutting process, or the cutting of a log into boards, a good sawyer will maximize the amount of high-grade lumber created through her cuts.

Portable sawmills provide the right level of production at a price that enables forestry cooperatives to get into business. The largest manufacturer of these mills is WoodMizer of Indianapolis, Indiana, which has sold more than 28,000 mills worldwide. The majority of people using portable sawmill technologies are hobbyists. Approximately 30 percent of the mills manufactured by WoodMizer are put to use in small-scale commercial operations. With an average portable sawmill costing $5,000, a single operator can process up to 600 board feet per day. Larger electric-powered mills, capable of handling 6,000 to 8,000 board feet per day, are available as well. SWC will acquire a robust industrial version of WoodMizer’s largest sawmill in early 2001. The mill includes a wood conveyor roller stock as well as an in-line edger, and will cost about $60-65,000. The mill provides a relatively inexpensive alternative to industrial mills that can cost, at the very least, $100,000.

WoodMizer officials insist that their machines are not only cheaper to buy; they are cheaper to maintain and are more efficient. A replacement blade for an industrial band saw costs hundreds of dollars, while a WoodMizer blade can be replaced for $25. But the milling efficiency of a WoodMizer offers the greatest potential for savings. A blade on a saw in a large commercial mill is 1/4-inch thick. The blade on a WoodMizer is 1/16-inch. A thicker blade will cut logs faster, but it will also produce more waste. In a commercial mill, one cut of the blade through a log will produce three times as much sawdust waste as would the same run on a WoodMizer saw, and what is not sawdust is lumber.

WoodMizer officials claim that their machine extracts one third more lumber out of a log. Using a WoodMizer portable saw, Jim Birkemeier was able to extract even more: 180 board feet out of a log that was scaled at 110 board feet.

The estimated operating costs for SWC’s sawing operation are $0.25 per board foot. The average value of a board foot of hardwood coming off the mill is between $0.61 and $0.80, depending on the quality of the wood.

Kiln-Drying

Once milled, lumber can be immediately sold on the commodity market as "rough green." Before most hardwoods can be further processed, it is necessary to remove nearly one quart of water per board foot of lumber. The timber industry typically employs expensive and energy intensive large wood-fired or electric dehumidification kilns. Community forestry groups are embracing a simpler technology for curing woods: solar kilns. SWC removed its first batch of dried wood from its 13,000-board-foot solar kiln last April. The average value of a board foot of kiln dried rough lumber falls between $0.87 and $1.10.

Solar kilns slowly cure wood, allowing it to expand and contract as the temperature varies throughout the day. Subject to less stress throughout the drying process, the wood retains more natural color and is less likely to buckle and warp. Solar kilns allegedly produce better quality lumber best suited for specialty markets. The downside of solar drying is time. While a dehumidification kiln can cure up to thirteen batches of wood annually, solar kiln in the upper Midwest will cure about five batches each year. The annual capacity of SWC’s solar kiln is 65,000 board feet. In an effort to better match demand on an ongoing basis, SWC plans to build four dehumidification kilns. These electric kilns will help match estimated demand without bottlenecks associated with solar drying cycles.

Milling

Kiln-dried rough lumber is made into final products in a mill. Surface-four-sides (S4S) lumber, tongue and groove flooring, and paneling are examples of finished products. Typically, smaller forestry operations contract milling out to large-scale specialty mills, which charge $0.25 per lineal foot for secondary processing.

Realizing the potential for onsite milling, SWC plans to add a moulder to its processing line. The moulder will match the sawing and drying output with a capacity of 8,000 to 9,000 board feet per day. The average value of a board foot of red oak lumber coming off a moulder is $1.07; for tongue and groove flooring it is $2.85.

Marketing

While it is likely SWC will prosper from its involvement in sawing, drying and secondary processing, the key to the cooperative’s success lies in marketing. In the traditional market, wholesale and retail markups account for more than half of the price tag on a piece of lumber. By selling forest products, the cooperative will reap what would otherwise be lost to middlemen. For a board foot of kiln-dried red oak lumber, this could be as much as $1.07; for tongue and groove flooring, the retail mark-up can be as much as $2.15 per board foot. SWC’s retail operation is located on the same property as their processing center–selling wood from the processing location saves transportation costs.

In the initial days of any forest products processing venture, it is necessary to allow members to sell their timber to the conventional market. Currently about 40 to 50 percent of the logs cut from member forests are sold in the commodity market. According to SWC’s president, Tom Theiding, once all processing components are online the cooperative will process as much as 80 percent of its members’ timber. Ultimately, processing infrastructure and capacity will match the annual allowable cut anticipated from members’ woodlots at full stocking levels–in other words, sustainably managed forests will balance with sustainably managed processing.

In the meantime, niche markets are important.

Sustainable forestry follows harvest guidelines calling for the extraction of the ‘worst-first.’ As the initial years of value-added processing typically correspond with the initial years of certified forest management, markets for low-grade wood must be developed. Rustic flooring holds the most market potential. Successful marketing can also be achieved by targeting custom projects and architects and builders interested in environmentally sound building materials. In late 2000, SWC received an order from a customer interested in rough green lumber who will pay a 5 percent premium on his initial order of 30,000 board feet. Although garnering premiums for certification is not the norm, this order indicates that relationships with like-minded customers can offer potential for generating higher income for members.

Timbergreen Farm and the Sustainable Woods Cooperative represent the first concentrated efforts to develop sustainable value-added forestry on small private nonindustrial wood lots. Interest in the idea is sprouting across the Upper Midwest. In Michigan, Minnesota and Wisconsin, six forestry cooperatives had been established and eight were in the development phase as of March 2000. Cooperative efforts to promote sustainable forestry and value-added processing have it right, and then some–preserving not just the integrity, stability and beauty of privately owned forests, but also that of the communities in which these forests are rooted. ß

A publication of the Institute for Local Self-Reliance

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