RESTORING A HEALTHY WOOD SUPPLY SYSTEM
August 13, 2020
There are many people in New Brunswick – especially the roughly 42,000 private woodlot owners – who have been waiting for a long-needed correction to the wood supply system in this province, a correction that will restore fairness and balance in our timberlands.
“It doesn’t take a rocket scientist to look at the situation today and see that something has gone awry.
While we await those hoped-for changes, it’s worthwhile to reflect on where we are four decades after the Crown Lands and Forest Act was drafted as a means of bringing order and stability to our most valuable resource – our forests.
It doesn’t take a rocket scientist to look at the situation today and see that something has gone awry. Prices for private wood have plummeted, market share has shriveled and our biggest customer, the United States, continues to impose punishing duties on New Brunswick lumber because it believes industry here is subsidized.
It’s not just the woodlot owners who are suffering – the whole province has been ill-served by provincial governments that have caved to the desires of big industry and the push for access to cheaper, Crown timber.
NB LOSING $100M A YEAR
“If a private company managed our Crown land the way successive New Brunswick governments have, that company would be broke. — Don Roberts, resource economist
Over the past few years, reports and expert analyses have reviewed government management of Crown land and found a lot of problems. In his report, resource economist Don Roberts suggested that if a private company managed our Crown land the way successive New Brunswick governments have, that company would be broke.
Roberts estimated we should be realizing a stumpage profit off our Crown land of $100 million a year. The actual profit is hard to pinpoint, but it’s nowhere near the Roberts’ estimate.
Right now, woodlot owners can’t get any money at all for stumpage for pulp. If the private wood stumpage is artificially depressed, Crown royalty rates are also depressed. It all trickles down. If one part of the system isn’t working, it affects the whole system.
Things began to go wrong when a key element of the original Crown lands act, the principle establishing private woodlots as the primary source of supply, was weakened, allowing industry to bypass private wood in favour of less expensive Crown timber.
“When the Act first became law, Crown land was only to be the residual supplier of wood.
When the Act first became law, Crown land was only to be the residual supplier of wood. It was a straightforward equation: mill demand was defined on one side of the equation and on the other side was the wood supply from a company’s own land plus the wood supply from private woodlots.
If that added to 80 and the company requirement was 100, the residual, the 20, would come from Crown land. That gave private woodlots primary source of supply because they were built into the equation before the residual Crown requirement was defined.
WE PAID THE PRICE
However, over the years the equation for private wood supply has been altered – there has been a clear shift by industry towards the use of Crown timber.
“There has been a clear shift by industry towards the use of Crown timber.
We had a system that worked for woodlot owners and would have been a fair deal, but it was changed. We can see the results today: much lower prices and unstable market access.
Industries knew exactly what they were asking for and it’s straightforward -- they wanted to put themselves in a better negotiating position to purchase wood at the lowest possible price and that’s what they got.
From the government perspective, officials figured opening access to Crown timber would bolster the companies, create more jobs and generate taxes in the long run.
NO WINDFALL OF JOBS
“We can all see that there has not been a windfall of jobs with the policy shift.
That didn’t happen. We can all see that there has not been a windfall of jobs with the policy shift.
The impacts on private woodlot owners, markets and stumpage rates were not considered as important as industry and we are still paying the price. As suppliers of raw material, private woodlot owners have only one source of revenue -- the money we get from the sale of our wood.
Government says it can get money on the back end if it can’t on the front, but that’s not an option for us and it has cost us dearly.
Consider softwood pulp, for instance. Before the erosion of marketing boards, woodlot owners were fetching about 20 per cent of the selling price of softwood pulp – today it is less than five per cent.
“Before the erosion of marketing boards, woodlot owners were fetching about 20% of the selling price of softwood pulp – today it is less than 5%.
The decline, coupled with the deliberate undermining of marketing boards, has eroded a once competitive market for our wood.
CIRCUMVENTING MARKETING BOARDS
While industry has increased its reliance on cutting Crown forests, it is actively circumventing marketing boards and resorting to dealing one-on-one with woodlot owners to drive prices lower.
A more organized system where private woodlot owners are once again ensured fair access to the market, along with strong marketing boards, will be better for our members, their families and for the whole province.
Thanks for listening,
Rick Doucett President, New Brunswick Federation of Woodlot Owners