Economic Impacts

Because major severe weather events can cause the direct loss of great quantities of timber, large numbers of landowners can suffer revenue losses and the entire forest products sector can be affected. Revenues from salvage operations are generally lower than those from typical harvests because saleable volume is reduced, particularly in cases where there is extensive stem breakage, but also because fungal decay reduces wood quality. At the same time, costs of salvaging damaged stands are usually higher than costs of conventional harvesting. Manley and Wakelin (1989), who took into account the effects of increased costs and reduced revenues, calculated that the discounted net present value of an impacted forest decreases by as much as 11 percent for a 1-percent annual level of damage. Forest landowners also may be affected by depressed timber market prices (at least in the short run) because of the large volume of salvaged timber on the market. Other things being equal, greater production risk unambiguously reduces optimal rotation length and decreases expected returns to forestland and land values, although the effects of price risk are ambiguous (Prestemon and Holmes 2000, Prestemon and others 2001). Economic Impacts of Hurricanes on Forest Owners provides more information on this topic.