Lumber Production–Analyzing Costs, Sales, and Supply Relationships

Production costs and volumes and sales realization for Montana lumber producers are analyzed for the 1963-1972 period. The effect of grade recovery on sales realization is demonstrated to show how Montana’s sales realization might be compared to other regions having appreciably different log quality and product mix from sawlogs. Although lumber production volumes increased by 50 percent through the 10-year period, Region 1 volume cut per year dropped by 250 million board feet on Montana’s National Forests. Contrary to what might be expected, lumber production costs increased as production volume increased. Further analysis shows that stumpage increases more than other production costs as production volume increased. Based on this 10-year period, sales realization is increasing at a faster rate than production costs. Production volumes were positively responsive to sales realization. Regression analysis shows that the highest correlation occurs with the following combination of factors: Stumpage/Sales Realization 0.978; Logging Cost/Manufacturing Cost .956; Stumpage/Manufacturing Cost .869. Other variables are also correlated for the 1963-1972 period.

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