AbstractsBusiness Management & Administration

Montana Logging Costs: Resources for Continued Industry Viability

by Joshua P Meek




Institution: The University of Montana
Department: College of Forestry and Conservation
Degree: MS
Year: 2014
Keywords: Montana logging cost; expert opinion survey; machine rate method
Record ID: 2045418
Full text PDF: http://etd.lib.umt.edu/theses/available/etd-02092014-104322/


Abstract

Montanas logging industry has changed significantly over the past two decades. Increased operating costs and subsequent diminishing returns, combined with a shifting paradigm in regards to active forest management have had significant impacts on the economic and demographic make-up of the industry. One way to address these changes and mitigate the associated challenges of continued viability is through analysis of the factors and constraints impacting routine operational costs. Two methods were employed to estimate regional logging costs and changes over time. First, to provide a resource for comparison between commonly-utilized logging equipment, the hourly owning and operating costs of select mechanical, ground-based machines were calculated using the machine rate method from data supplied by western Montana equipment dealers. Second, an expert opinion survey of Montana and Idaho loggers was conducted, asking respondents to provide a simulated bid for a harvest unit typical of this region. The results from each method were compared to historic cost data, and reasons for increased logging expense were studied and discussed for fixed and variable cost categories, as were the impacts of changing operating conditions on costs. Results from the machine rate analysis suggest that inflation-adjusted operating costs for ground-based equipment are 47-93% higher than 20 years ago. Expert opinion survey results suggest that though costs are increasing, loggers are bidding at levels lower than actual costs merely to stay in business. Research on the reasons for these increases showed that costs have increased across certain fixed and variable categories, namely in equipment purchase price, fuel, labor wages and benefits, and repair/maintenance expense. Further, the number of operational days per year has decreased, administrative costs have increased, and there is increasing concern over volatile market conditions and the uncertainty over guaranteed future work. Clearly, this situation should be of considerable concern to those interested in retaining this sector in Montana. Vigilant consideration of operating costs and productivity will become increasingly critical to maintaining current infrastructure and helping to ensure the future of active forest management in Montana.