Publication Date:
1988-08-01
Description:
Overrun has been increasing in United States sawmills, particularly in recent years. While some of this increase may be attributed to log scaling biases, a substantial portion is apparently due to technological improvement. Have these technological improvements increased or dampened the rate of stumpage price inflation? Proponents of residual pricing theory argue that higher overrun causes stumpage prices to increase because lumber producers are able to pay more for stumpage. On the other hand, some analysts argue that higher overrun causes stumpage prices to fall by reducing the demand for stumpage. This paper addresses the controversy by means of a simple theoretical model of an integrated lumber market. The effect of improved overrun on stumpage price inflation is ambiguous and depends on the elasticity of both lumber demand and stumpage supply. However, by choosing reasonable values for key parameters, we conclude that at the level of the large producing region, say the Pacific Northwest, technology-based overrun improvements have most likely slowed the rate of stumpage price inflation.
Print ISSN:
0045-5067
Electronic ISSN:
1208-6037
Topics:
Agriculture, Forestry, Horticulture, Fishery, Domestic Science, Nutrition
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