Blogging Logging 7 – Capital Investment

Wisconsin’s logging businesses have increasingly high levels of capital investment, with inflation adjusted (2010 USD) median levels increasing from 2003 to 2010 for all but chainsaw based harvesting systems.  We report capital investment in median dollars, as there is quite a large variability in the amount investment both between systems and amongst businesses.

capital-by-system

In 2010 median investments at or above $500,000 were found for businesses defined as cut-to-length and multiple harvest systems, while all harvest systems in 2003 had median investments below a half-million dollar mark. Our data also show that the percentage of businesses reporting investments of $1,000,000 or more increased from 11% in the 2003 to 15% in 2010.

In 2010, the median portion of capital invested in logging equipment ranged from 75% to 90% depending on the harvest system. All portions are higher (range = 6%-21%) than they were in 2003. Logging businesses that are investing heavily in equipment may face greater challenges when it comes to securing timber for harvesting, as the more money invested in equipment tends to leave less money to pre-pay for stumpage.

capital-in-equipment

In 2010, the economy was starting to emerge from the recession, but there was some sense that access to capital (i.e., getting loans) was still a challenge. Capital access may be a factor in the ability of logging business owners to stay profitability and productive. In assessing access to capital (in 2010 only), we found that slightly more logging businesses (37%) reported some degree of difficulty accessing capital (either “somewhat difficult” and “very difficult”), 30% in the middle (“neither easy nor difficult”), and 34% reporting relative ease (“somewhat easy” and “very easy”).
capital-access

Complete index for this series:

Week/Topic

  1. Introduction
  2. Harvest systems & production volumes
  3. Profitability & production capacity
  4. Factors affecting profitability
  5. Business demographics
  6. Employees and contractors
  7. Capital investment
  8. Distance and hauling
  9. Certification
  10. Timber sales
  11. Source of timber supply
  12. Timber products and buyers
  13. Interest in biomass harvesting
  14. Survey methods and response
  15. Summary

Authors: Mark Rickenbach (UW-Madison/Extension) and Melinda Vokoun (UW-Stevens Point) [contact info at links]

The Wisconsin Bioenergy Initiative, which is now part of the Wisconsin Energy Institute, provided initial funding for 2011 logging sector survey. Additional support was provided through the Renewable Resources Extension Act and the McIntire-Stennis Cooperative Forestry Research Program, both of the USDA National Institute of Food & Agriculture. We appreciate the assistance of Tom Steele, Grace Maples, and Sarah Traver in helping bring this project to completion.

 

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