Kentucky is the leading producer of hardwood timber in the South and one of the top three producers in the nation. A major contributor to the commonwealth’s economic health, the forestry sector added nearly $10 billion to Kentucky’s economy in 2012, according to the 2012-2013 Kentucky Forestry Economic Impact Report.

The report, recently released by the Department of Forestry in the University of Kentucky College of Agriculture, states that direct revenue resulted in $6.4 billion with an additional $3.6 billion in indirect and induced contributions. The sector employed 51,928 people, which resulted in $1.25 billion in earned income last year.

“The good thing about the wood industry and the forestry sector overall is that it generates wealth broadly across Kentucky,” said Jeff Stringer, professor of silviculture in the UK Department of Forestry and an author of the study.

Kentucky boasts 12.4 million acres of forest, with 75 percent of that acreage being family-owned. There are more than 100,000 individuals in the state who own 10 woodland acres or more, with more than 90 percent of the timber that supplies the forestry industry coming from those woodlands.

“Those lands are distributed throughout the commonwealth, from Pike to Fulton,” Stringer said. “The industries are distributed across the state as well. So woodland owners in every part of the state have the ability to participate in this economic engine.”

The forestry sector covers a wide range of industries that include logging, paper production and conversion, and a diversity of wood and finished or secondary product businesses, such as manufacturers of furniture, trim, flooring and barrels. These industries include 708 individual facilities located in 109 Kentucky counties.

Logging is the smallest component in the sector, directly employing 2,276, not including owner/operators. In 2012, it had a direct economic impact of $164 million. Though small, the logging industry plays a pivotal role in supplying timber resources for the entire sector.

Solid wood manufacturing, which includes lumber mills and component manufacturers, contributed $3.68 billion to the economy. Paper manufacturing had direct revenues of $3.7 billion with $900 million from pulp and paper production and $2.8 billion from paper converts that include packaging and industrial and writing paper, but does not include printers. Total impact attributed to paper was $5.4 billion in 2012, according to the report.

“Paper consumption in the U.S. is predicted to continue to decrease at about a 3 percent clip over the next five to 10 years. That’s paper overall, and includes packaging, cardboard, writing paper and newsprint,” Stringer said. “Our factories in Kentucky don’t produce newsprint. A mill in Wickliffe produces heavier cover stock paper and one in Hawesville makes copier paper. As long as greeting cards are being made and magazines are printed, our industries in Kentucky are OK. That’s why we predict pulpwood production to be fairly stable.”

Annual pulpwood production in the state remained at nearly 993,000 tons.

Though the economic contributions of the state’s forestry sector are significant, the country’s soft economy and slow housing starts in 2012 caused a contraction of 3.7 percent compared to 2011. The 2012 output of 593 million board feet is significantly below the Kentucky high of 1.1 billion board feet produced in 1999. That translates to a loss of 942 jobs and a drop of $256 million in revenue. Manufacturers of paper products were the hardest hit, dropping 4.7 percent.

Current data on forest inventories indicate growth still exceeds removals in Kentucky forests, but timber quality shows a different picture. There has been a 38 percent decrease in the percent of high quality trees in Kentucky, from 20.7 percent of the timber volume in 2004 to 12.9 percent in 2011.

“Some of the quality has been mined out, and some of the low quality has not,” Stringer said. “That’s not necessarily a bad thing, because you want to wait to grow a nice, high-quality log. But the way you get more higher quality trees in woodlands is to practice good management, so management of the woods by family forest owners is very, very important for the long-term health and stability of the forestry sector and the economic impact that comes from it.”

The study’s authors, Stringer, Billy Thomas and Bobby Ammerman all from UK’s Forestry Department, and Alison Davis from UK’s Department of Agricultural Economics, report that some timber products and species showed price increases or stability in 2012. Railroad tie logs had a delivered price of $293-$332 per thousand board feet, with hickory commanding the highest prices. Stave logs, particularly those made of white oak, rose to their highest price in several years, topping out at $875 per thousand board feet in the third quarter of 2012.

The U.S. Forest Service predicts that there will be continuing demand for hardwood, but also potential shortages in the future, not only nationally, but globally. While most of the forest products produced in Kentucky are consumed domestically, exports do play an important part in some industries.

“Kentucky has the ability, because our forests are very diverse, to produce a wide range of quality hardwood species. That positions us well,” Stringer said. “What our industry has to be able to do is to maintain their competitiveness in a global market. They have to be able to grow to encompass exporting and position themselves to participate in global markets, because that’s where it’s all headed. I think that’s the biggest challenge facing our forestry sector. But I legitimately think we can meet that challenge.”

UK’s Department of Forestry and Cooperative Extension Service conduct workshops and provide information on proper woodlands management. Instructional materials, information on upcoming workshops and field days, as well as a complete copy of the 2012-2013 Kentucky Forestry Economic Impact Report are available at http://www.ca.uky.edu/forestryextension/.