Lumber Production

Robert S. Plecas
National Post
March 1, 2001

Read Free Trade For Dummies

Lawrence Solomon, in Free Trade for Dummies (Feb. 6), provides a misleading picture of the stumpage system that applies to timber harvesting in British Columbia. During 1999, the B.C. forest products industry paid $1.4-billion to the provincial government in stumpage and related charges, This represents an average stumpage rate of $21 per cubic metre on a total Crown timber harvest of 66.7 million cubic metres. The average stumpage rate rises and falls in response to softwood lumber prices. At today’s low price, stumpage charges leave no profit margin to the producer. Logging costs, reforestation costs and timber conversion costs must also be recovered out of the lumber dollar.

B.C.’s minimum stumpage rate of 25¢ per cubic metre applies only to certain low grades of timber, and to timber whose health is endangered by insects and other infestations. If some timber is sold at the minimum stumpage rate, other timber must be sold at stumpage rates that exceed the average rate to, in effect, waterbed the cost impact, ensuring government revenues but impacting companies’ bottom lines.

U.S. lumber consumption has grown strongly over the period of the Softwood Lumber Agreement, 1996-2001, while exports into this market from Canada’s quota-constrained provinces have remained stationary. The share of the U.S. lumber market supplied from these four provinces has fallen from 33.4% in 1995 to 28.4% in 2000. B.C.’s market share of the robust 1999 U.S. market was down 20% over 1995. The SLA-exempt producers from Canada saw their production rise 59.9% during the same time period. Irrespective of what Mr. Solomon says, observers are looking elsewhere in Canada to determine U.S. angst with our softwood lumber trade.

If a lumber exporter pays a premium to the Export Development Corporation for receivables insurance, this may reduce cost of carrying an inventory of unpaid sales. But the insurance purchase does not reduce the cost of producing the lumber itself. There is no subsidy to lumber production.

Robert S. Plecas President, B.C. Lumber Trade Council

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