Developing Louisiana s Forest Products Industry: Adding Value for the Future
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1 Developing Louisiana s Forest Products Industry: Adding Value for the Future Richard Vlosky Director, Louisiana Forest Products Development Center School of Renewable Natural Resources LSU Agricultural Center 2005 Ag Outlook Conference-January 12, 2005 Louisiana Forest Products Development Center Outline Industry Development & Adding Value Overview of Louisiana Forest Sector Where is Louisiana Positioned? Louisiana Forest Products Development Center Summary Comments 1
2 Overview If managed properly, forests can provide a sustainable source of products, services and employment. In areas where jobs are scarce, forest-related jobs may provide alternatives to forced migration or commuting. There is unfulfilled potential for jobs creation and expansion of the existing forest products industry in Louisiana. The challenge is to identify high potential sectors for further expansion, new development, and adding value. Industry Development & Adding Value 2
3 What is Value-Added? The increased value at each stage of a manufacturing assembly process Those activities or steps which add to or change a product or service as it goes through a process; these are the activities or steps that the market views as important and necessary Addition of net economic value Value can be added through manufacturing or marketing Why Add Value? Value-added wood products typically require more employees than primary products -- that means more jobs. They usually require more than one mill to complete the process-- that means more companies fueling a wood products economy. The added processing typically means higher valued products -- that means more money stays in-state. For these reasons, value-added wood products are an important link between the timber harvested from the forest and the wood products consumers buy in stores. Adapted from: 3
4 Value-Added Industry Development is Multi-Faceted Workforce Training Marketing Economic Incentives Strategic/Tactical Perspectives Value-Added Industry Development Inter-Agency Cooperation Financing Resource Assessment Government Support Traditional Perspective: Primary vs. Secondary (Value-Added) Wood Products Primary products: produced directly from raw timber input. Examples include chips, lumber, veneer, plywood and their byproducts. Secondary (value-added) products: use primary products as input for remanufacturing. Examples include various types of panels, engineered composites, or dimension stock. secondary products also includes final consumer products such as furniture, cabinets, flooring, etc. 4
5 Overview of Louisiana s Forest Sector Key Louisiana Forest Sector Facts 13.8 million acres of forests (48% of Louisiana land area) ½ Pine: ½ Hardwoods 59 of 64 parishes contain forest land 148,000 forest landowners ~180 Primary manufacturers ~750 Secondary manufacturers Louisiana s 2 nd largest employer 19,703 manufacturing jobs 8,000 harvesting/transportation Source: Louisiana Forestry Association 5
6 Louisiana Agricultural Commodity Economic Contribution (2003) Forestry Sugarcane Cotton Feed Grain Crops Soybeans Rice Nursery Stock-Ornamental Sweet Potatoes $589 $343 $338 $201 $198 $161 $151 $3,701 Vegetables-Commercial $100 $0 $1 $2 $3 $4 $5 Source: LSU AgCenter $ Million Louisiana Agricultural Commodity Economic Contribution (2003) Forestry $3,701 All Other Plant Commodities $2,326 All Animal Commodities $2,121 All Fisheries/Wildlife Commodities $774 Source: LSU AgCenter $0 $1 $2 $3 $4 $5 $ Million 6
7 Where is Louisiana Positioned? Is Louisiana Adding Value? Yes, but Although timber is the number one agricultural crop in Louisiana, much of our harvested wood leaves the state in a raw form allowing value to be added elsewhere. Exporting raw materials reduces economic development potential from value-added industries. This concept is not unique to the forest sector. 7
8 Georgia Alabama N. Carolina Mississippi Arkansas Texas S. Carolina Florida Tennessee Louisiana Lumber Industry Value of Shipments-$ Billion 2001 $0.93 $0.85 $0.65 $0.47 $0.45 $1.52 $1.50 $1.35 $1.33 $1.97 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $ Billion Data source: US Department of Commerce, Census of Manufacturers Louisiana Lumber Value-Added $/$1 of Log Input 2001 $0.56 N. Carolina Tennessee Texas Mississippi S. Carolina Florida Georgia Alabama Arkansas $0.50 $0.47 $0.42 $0.39 $0.38 $0.36 $0.36 $0.31 $0.28 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 Data source: US Department of Commerce, Census of Manufacturers 8
9 Lumber Value-Added $/Employee 2001 Louisiana Georgia S. Carolina N. Carolina Mississippi Texas Alabama Arkansas Tennessee $70,628 $69,688 $62,753 $62,539 $60,266 $54,905 $54,652 $48,014 $37,097 $0 $50,000 $100,000 Data source: US Department of Commerce, Census of Manufacturers N. Carolina Mississippi Texas Tennessee Alabama Georgia Florida Arkansas S. Carolina Louisiana $2.5 $2.5 $2.0 $1.9 $1.8 $1.0 $0.6 $0.1 Furniture Industry Value of Shipments-$ Billion 2001 $3.4 $7.5 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $ Billion Data source: US Department of Commerce, Census of Manufacturers 9
10 Furniture Value-Added $/$1 of Raw Materials 2001 Texas Georgia $1.51 $1.63 Florida Alabama N. Carolina Arkansas Tennessee Mississippi Louisiana S. Carolina $1.24 $1.13 $1.10 $1.09 $1.03 $0.91 $0.89 $0.69 $0.00 $0.50 $1.00 $1.50 $2.00 Data source: US Department of Commerce, Census of Manufacturers Furniture Value-Added $/Employee 2001 Georgia Alabama Mississippi Texas Florida Tennessee N. Carolina Arkansas S. Carolina Louisiana $79,788 $67,416 $58,529 $56,989 $55,136 $52,624 $52,424 $50,790 $45,508 $40,961 $0 $20,000 $40,000 $60,000 $80,000 $100,000 Data source: US Department of Commerce, Census of Manufacturers 10
11 Louisiana Forest Products Development Center Research: Adding Value Through Innovation Lumber Drying 11
12 Wood Strand Composites Oriented Strandboard Wood/Plastic Composites 12
13 Stain, Mold & Fungi Prevention/Mitigation Recycle Out-of-Service Treated Wood/ Develop New Wood Preservatives 13
14 Recycle Agricultural/Wood Residues into New Products Environmentally Friendly Firelogs Ag/Wood Waste & Soybean-Based Adhesives 14
15 Wood/Sugarcane Rind Structural Panels Wood Rind New Adhesives 15
16 Housing Durability Methods and Materials Design criteria for termite infested areas & subtropical climates Housing Durability Termites 16
17 Marketing & Business Development Needs, wants, and demands Products and Services Marketing Concepts Markets Exchange, transactions, and relationships Value, satisfaction, and quality Marketing Primary Products 17
18 Marketing Primary Products Value-Added Products Identifying Opportunities to Add Value Market-based criteria to assess wood product industry sectors for value-added development include: Raw material availability Markets (local, regional, national or global) Market growth rate Competitive environment Provides employment opportunities Infrastructure Business climate Long-term viability 18
19 Summary The forest sector is a leading contributor to Louisiana s economy We lead other Southern states in adding value to logs in making lumber We lag other Southern states in adding value in manufacturing furniture Furniture per se is NOT the answer; value-added added niches should be explored We can and should do better at adding value to our forest resources Innovation and a rational, systematic, strategic approach is the answer Louisiana Forest Products Development Center Questions???? 19
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