Landowner Driven Sustainable Forest Management and Value-Added Processing
The Massachusetts Woodlands Cooperative, LLC (MWC) is working to help members conduct sustainable forestry of the highest standards while increasing financial returns from harvest activities. The forests of Massachusetts, the third most densely populated state in the United States, are threatened. Decades of high grading and the threat of forest conversion to alternative use present challenges for maintaining a forested landscape. Despite being 60% forested Massachusetts imports approximately 98% of the wood fiber that its citizens consume.
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MWC is a forest management, processing and marketing cooperative organized by and on behalf of forest landowners in western Massachusetts. An umbrella group certification protocol was developed to provide cost-effective forestland management certification. Members benefit from cooperative management of harvest operations, above market stumpage payments, and value-added processing and production including marketing traditionally low value and small diameter material. The added revenue from developing these new markets is used to fund timber, wildlife habitat, recreational and other sustainable forest management activities. The cooperative works in partnership with local wood processing businesses to spur community economic development. This study on cooperatives may be a successful example of Sustainable Forest Management that can be applied in other regions with private land ownerships.
KEYWORDS. Forest certification, cooperative, cooperation, NIPF, private forest, marketing
Private forests are important in addressing the issue of sustainability both in the United States (National Research Council, 1998) and around the globe (Vilkriste, 1998). The forest controlled by private forest landowners is large and privatization of the world’s forests is expanding (FAO 2001). In some countries, including Finland, Norway, Sweden and the United States, non-industrial private forest (NIPF) landowners own the majority of forestland (Lindstad, 2002). In the United States, for example, 71% of all timberland area is privately owned (Smith, et al. 2004). Non-industrial private forest landowners own 118 million hectares of timberland and in 2001 they accounted for 63% of the volume of trees removed in the United States. A continuing challenge is how to encourage private forest stewardship that ensures the provision of both public and private services now and in the future (Best and Wayburn, 2001).
This paper presents a case study of a landowner driven initiative that supports the twin goals of sustainable forest management and increased revenue from forest management activities. The organization profiled is located in the state of Massachusetts in the northeastern United States. Significant forest characteristics, economic circumstances and social and cultural differences exist across private forest ownerships around the globe. However, portions of the forest management model presented here can be applied in many areas with concentrations of NIPF ownership.
Massachusetts is the third most densely populated state in the United States and home to 6.2 million residents. The forest has been altered dramatically in concert with changes in land-use over the past 300 years. With the arrival of European colonists and the expansion of an agrarian society, land was cleared for farming over the 18th and much of the 19th centuries. In the 1870’s, the reduction in forest cover due to conversion to agriculture was halted. More productive agricultural land was beginning to contribute to the young nation’s economy as the population expanded westward (Barten et al., 2001). Breunig (2003) reports that agricultural land covered 50% of the Massachusetts land area in the late 19th century and has since declined to just 7% in 2003. A significant portion of the formerly agricultural land has now returned to forest. Forest area increased steadily from a low of about 30% of land area in 1870 to a high of nearly 75% in 1960. The most recent, 1998, forest inventory analysis yielded area estimates for forest land (62%), non-forest (33%) and agriculture (5%) (Alerich, 2000). Since 1960, development pressures, including sub-division for homebuilding, have led to a new erosion of the forest base. Forest loss averaged 5,900 hectares (14,600 acres) annually over the period 1985-1999 (Breunig, 2003). The spread of suburbanization and conversion of forestland to other uses poses a growing concern for the forest landowners of Massachusetts.
Even though forest area is losing ground in Massachusetts, the volume of trees continues upward. The growing-stock volume of trees increased by 17% between 1985 and 1998 (Alerich, 2000). A potential tool to help stem conversion may lie in the increased volume of trees. If forest landowners can derive higher levels of revenue from the growing forest resource, then the economic incentive for converting to other uses may be lessened.
Ownership changes in the 20th century have caused many of the re-generated forests of Massachusetts to be managed for reasons other than timber production or neglected entirely (Beattie, Thomspson and Levine, 1993). Forest stands are often too densely stocked and contain a high portion of low-grade trees, a result of the practice of high-grading (Barten et al., 2001). Land ownership patterns have decreased the average tenure of forest properties (Birch, 1996). In our increasingly mobile society, property changes ownership more frequently. New landowners may not have had a close relationship to the land prior to their forestland acquisition. They often lack knowledge of forest management principles and practices. Many forest landowners are beginning to awake to the fact that actively managing the forest has the potential to significantly increase the provision of both timber and non-timber values.
The forests of Massachusetts are in a transitional area comprised of both central and northern hardwood and softwood types (Barten, 2001). Although the tree volume continues to increase overall, it is not uniform across species. The rate of growth in volume across species reflects, in part, the relative market values and merchantability of the predominant species. In recent decades northern red oak and eastern white pine have commanded the highest stumpage prices. New markets need to be developed for the less-valued species of red maple (Acer rubrum) and hemlock (Tsuga canadensis) that are the 2nd and 4th most abundant species by growing stock volume. Table 1 shows the percentage of growing stock volume for all species in Massachusetts from the most recent, 1998, forest inventory analysis (Alerich, 2000).
Table 1 – Volume of Growing Stock by Species in Massachusetts, USA, 1998
(Source: Alerich, 2000)
Percentage of Total Growing Stock Volume
|White Pine (Pinus strobus)||25%|
|Eastern Hemlock (Tsuga canadensis)||10%|
|Red Maple (Acer rubrum)||18%|
|Sugar Maple (Acer saccharum)||4%|
|Birch (Betula papyrifera, B.lenta, B. alleghaniensis)||7%|
|Beech (Fagus grandifolia)||3%|
|Ash (Fraxinus Americana)||4%|
|Black Cherry (Prunus serotina)||3%|
|White Oak (Quercus alba)||2%|
|Red Oak (Quercus rubra)||17%|
Berlik, Kittredge and Foster (2002) highlight the inconsistency of US consumers desire for global environmental protection and the reality of their current level of forest products consumption. Wood consumption in Massachusetts is estimated at over 13 million cubic meters annually but harvests from state timberland amounts to only 300,000 cubic meters. Massachusetts currently produces only 2% of the wood fiber that it consumes (Ibid. p. 13). This stems from a combination of increasing population and demand for wood products coupled with a shrinking sawmill industry (Damery and Boyce, 2003). The number of sawmills operating in the state has fallen by 55% from 1971 to 2001. Berlik et al. recommend reducing consumption and increasing harvest levels to improve the level of self-sufficiency. Current rates of forest growth exceed harvest rates by a significant margin. An argument can be made for higher levels of sustainable production of forest products within Massachusetts. Private landowners own almost 80% of the state’s forestland. Coordinating this diverse group through outreach and education activities presents a major challenge to achieving higher levels of sustainable production (Clawson, 1979).
Though we may recognize, from a policy perspective, a need for higher levels of local production, the decision to actively manage Massachusetts’ forests still lies with individual landowners. Apart from the “macro” perspective on demand and supply, individual landowners have varying perspectives and goals. Private forest landowners have many values and ownership objectives beyond revenue from timber harvesting (Young, Riechenbach, and Perkuhn, 1985).
To gain insight into the values of private forest landowners Damery (2001) surveyed 232 western Massachusetts forest landowners who had active forest management plans. When asked to rate their level of interest in 8 different forest management goals, landowner income came in fifth. Wildlife habitat, tree and plant quality, ecosystem health and water quality all ranked higher. Rankings for all options are shown in Table 2.
Table 2 – Landowner Rankings of Forest Management Goals
(n=232, Source: Damery (2001))
|Issue||Percentage of Respondents who ranked issue as “Strong” or “Moderate” Interest|
|Tree and Plant Quality||56%|
Clearly, these landowners desire to maintain and improve their forestlands. The results from this survey led to the adoption of forest certification as a method of achieving recognized standards of sustainable forest management. The survey also showed that timber management is only one goal among many. Achieving the various landowner goals is costly. Timber harvesting is often looked on as the means to finance other activities. A confounding factor is the need to improve the overall stand quality for long-term management. This often requires thinning or selective harvests. Small diameter, crooked stem, or low value species that might be targeted for removal, often bring little or no value in the market place. This problem of finding markets for this material has been identified as a key goal by the landowners of the MWC.
Traditional market factors also stand in the way of a solution regarding the financing of thinning cuts. Local markets for small diameter wood are thin (Clawson, 1979). That is, there may be few, or no buyers for this material within an economically feasible trucking distance of the property. This has sometimes led to the practice of high grading, where the largest and best-formed trees are regularly harvested leaving an inventory of poorer quality trees (Beattie, Thompson and Levine, 1993). Recent outreach and forestry education activities are raising the consciousness of both foresters and landowners and this is serving to lower the level of high grading activity.
Landowners are sometimes unaware of the benefits they can gain by obtaining professional assistance, such as that offered by consulting foresters. Landowners who undertake harvest activities without professional assistance have been shown to receive lower returns from their sales and were less satisfied than those who contracted with a consulting forester (Clark, Howard, and Parker, 1992). Owners of smaller forest parcels are less likely to seek professional assistance and may be at a competitive disadvantage in negotiating stumpage prices with buyers (Clawson, 1979; Birch, Hodge, and Thompson, 1998). In summary, the individual forest landowner is faced with both educational and economic challenges in achieving their desired management goals.
COOPERATION AS A SOLUTION
A group of forest landowners in Western Massachusetts began meeting in 1999 to share their experiences and address some of the issues discussed above. Two needs emerged from the initial meetings; a desire to improve their knowledge of sustainable forest management and the desire to improve the economic return from their harvest activities. Cooperation is one method with the potential to address these needs. The potential benefits of cooperation can stem from both economies of scale and from economies of scope (Baumol, Panzar, and Willig, 1982).
Economies of scale provide the potential to develop better markets for the small diameter and lesser-valued materials. Coordinated harvest activities can lower the unit costs of harvest. Costs are lowered through more efficient use of consultants and loggers. By combining their management efforts a group of landowners are able to offer a steady stream of forest products, over time, from a much larger combined forest area. Larger harvest volumes, and more reliable supply have the potential to generate higher timber sales revenues (Clawson, 1979; Simon and Scoville, 1982).
Economies of scope affect the number of different types of activities that are enabled by coordinating efforts. The ability to achieve landscape level ecosystem objectives is enhanced through cooperation (Belin et al., 2005) Non-timber management activities including wildlife habitat, ecosystem health and recreational activities were identified as examples of these in the 2000 landowner survey (Damery, 2001). Other examples of the potential benefits of cooperation include identifying capabilities and quality of work histories of service providers such as consultants and loggers.
THE COOPERATIVE FORMATION PROCESS
The mission of the cooperative contains three primary objectives. The first is a desire to perform forest management in an environmentally responsible fashion. The second is to coordinate value-added operations in order to improve the financial returns to the landowner. The third is the desire to conduct business operations with local partners in order to foster local community economic development. The organizing process leading to incorporation took 2 years. The Limited Liability Corporation (LLC) form of organization was selected based on ease of formation and operating flexibility. Though formed as an LLC the MWC operates as a cooperative where each member has one vote, and profits are returned to the members based on their share of the value of the wood that the cooperative processes. In the case where profits are available to distribute back to members, they are apportioned on the basis of the stumpage value that each member contributed to the cooperatives operations that year. The MWC is a for-profit organization and membership is by invitation. In addition to the landowner founders, a group of resource professionals was assembled to advise and inform the membership regarding forestry and business operations. Professional advice was sought from forest products producers, lawyers, accountants, university faculty, state forestry professionals, consulting foresters, and non-profit groups interested in cooperative formation and economic development. The group of resource professionals provided specific knowledge in the areas of sustainable forest management, incorporation, business management, accounting, manufacturing, drying and marketing.
COST EFFECTIVE FOREST CERTIFICATION
MWC members have a strong desire to conduct forestry activities consistent with the world’s highest standards. The FSC Northeastern US Regional certification standard was chosen at the outset as a recognized measure for achieving this goal. With the help of grant funding from the US Department of Agriculture, Forest Service, the MWC developed a protocol for certifying members forestlands. Working with the University of Massachusetts-Amherst faculty and students, and state forestry personnel an “umbrella” protocol for group certification was developed. This was designed to provide a cost-effective way for small landowners to have their forests certified as being sustainably managed. MWC’s application for FSC group certification was approved in 2003.
One requirement for MWC’s group certification was that each member must have an approved forest management plan that addresses the 9 guiding principles of FSC. The majority of landowners joining MWC are already covered under a forest management plan. Typically these plans are part of a Massachusetts forest property tax reduction program known as Chapter 61. This program requires a 10-year commitment to keep the land in it’s forested state and to follow the management activities that are described in the plan. Chapter 61 participants are eligible for a property tax reduction of up to 95% of the assessed value of the forestland. Penalties are applied for any early withdrawal from the plan. The required forest management plan is comprehensive addressing both timber and non-timber objectives. Landowners typically contract with a consulting forester to survey their property and work with them to identify specific landowner goals that are written into the plan. Members with these types of plans need only slight modifications, at a modest cost, in order to upgrade their Chapter 61 plans so that they meet the broader FSC guidelines. The annual audit fee is approximately $1,500 USD, which is covered by the cooperatives general operating expenses. Apportioned across more than 40 members this represents roughly $40 USD per member annually.
In order to keep audit costs to a minimum MWC acts as an internal auditor to ensure compliance with FSC guidelines. Staff, members and volunteers including forestry faculty from the University survey each member’s property annually. Harvest activities performed on member properties are reviewed by MWC staff. Smartwood, part of the Rainforest Alliance, has been the FSC auditor. Having the internal review team allows Smartwood to select a random sample of all member properties to review during their annual audit. By selecting a sub-set of all member properties, the time and expense of the outside auditor can be kept to a reasonable minimum. Documentation of MWC’s internal audit team visits are also reviewed as part of the annual outside audit. The process developed provides a lower-cost method of forest certification, than individual members could have achieved on their own.
OPERATIONS AND MARKETING
Three part-time staff, currently manages MWC operations. Two co-Executive Directors manage membership, harvest activities, value-added production, and sales and marketing. An office manager handles day-to-day clerical operations for the cooperative. The cooperative contracts a part-time bookkeeper and retains accounting and legal help as needed.
Staff reports to a board of directors and the general membership. Staff is presently funded through a major US Dept. of Agriculture, Rural Business-Cooperative Services Grant. These funds, awarded in 2004, were designed to provide start-up working capital that would enable the MWC to be financially self-sustaining by 2007. Membership fees, and product sales generate other income. An annual membership fee of $85 USD has been assessed each member for each of the years 2004 and 2005. The MWC business plan was developed using data from pilot projects where trees were harvested from member properties and then managed through a variety of value-added processing steps. The business plan included operating, marketing and financial plans and projections. A break-even production rate was estimated and is projected to be 1,200 cubic meters (350 MBF) of processed timber annually. MWC staff coordinates steps in the value-added process. Staff consults with landowner members and their consulting foresters to purchase stumpage at above market rates. In addition, staff contracts with independent loggers for harvesting, sawmills for primary processing, dry kilns, and molders for secondary processing into flooring and other products.
Manufactured products include: rough sawn lumber, finished tongue-and-groove hardwood flooring, timbers and logs. These products are marketed to local homeowners, building contractors, and architects for inclusion in residential and commercial construction. Several pilot-project case studies were conducted to produce hardwood flooring, timbers, poles and lumber. Data was gathered from each of these projects including; yields, costs, prices, and time involved. Data from the pilot projects and the field experience gained were used to develop a business plan.
Pilot projects included production of hardwood flooring, and the harvest and production of black locust (Robinia pseudoacacia) for lumber, posts, railings, and firewood. These projects required coordination of: landowners, consulting foresters, loggers, trucking, sawmilling, drying, and value-added processing (moulder). Higher than expected yields were achieved, but at the added cost of additional labor time and management expense (Campbell, 2004).
The flooring project involved processing 30 logs, mostly of black cherry (Prunus serotina), that were left over from a harvest and lumber milling project. This material was of relatively small diameter and low to medium low in quality. This provided an opportunity to experiment with the production of strip hardwood flooring. Strip flooring can be sold in relatively narrow widths and short lengths. The material was trucked to a local circular saw mill, owned by a cooperative landowner member where it was milled and dried. The dried material was trucked to a custom moulder for production of tongue and groove flooring in a variety of widths. Costs were tracked throughout the process and the material was marketed at a competitive price. Two factors should be noted in this project. The first is that the species, black cherry, commanded a premium price in the marketplace. Marketing the less popular species, red maple, yielded lower margins. Secondly, the flooring material was marketed locally as a “natural” or “character grade” flooring, and was not separated into traditional grades of flooring. This “run of the log” grading process requires education of the consumer in the market place.
A second pilot project involved the harvest of a small stand 0.4 hectare (1 acre) of black locust located in close proximity to a cooperative members home. As black locust is not a common species in the region, this project involved finding a potential buyer for the harvest and processed material prior to starting the project. One of the highest and best uses of black locust is in exterior applications. Black locust is considered to have very high decay resistance (Forest Products Laboratory, 1999). A buyer was identified who specializes in the production of outdoor walkways. MWC co-director Susan Campbell coordinated the activities of the landowner, forester, logger (who also purchased the end material), and sawmiller. Details of the particular end-uses that the buyer was interested in were obtained. This information was used by the logger and sawmiller to produce a much greater volume of material than either the initial forester inventory, or subsequent log-tally indicated. The overall sawlog volume recovery was 2.2 times what was expected in a conventional harvest. The estimated value of products recovered was even greater. Value at the log landing was estimated at $3,547 USD under the cooperative managed scenario vs. an estimated $1,158 USD that might have been received in a conventional stumpage sale (Campbell, 2004).
MWC is developing value-added markets for traditionally under-valued and smaller diameter wood. The production of red maple flooring is an example. In recent decades Red maple has attracted lower stumpage prices than many other species. One result has been rapidly growing volume of this species. Comparing the two most recent forest inventory results, 1985 to 1998, growth of red maple has exceeded removals by a factor of 6.5 times (Alerich, 2000). Product markets like flooring can utilize smaller diameter logs, and short cuttings. The pilot projects helped establish the economic feasibility for this market. Further market development may provide members with higher returns for red maple that can lead to increased harvest activity.
If the cooperative is to succeed on an expanded level, markets must be found to absorb a much higher level of production. Two primary markets have been identified as holding the best potential. The western Massachusetts region has a reputation for cultivating “buy-local” markets. There is a minority, but significant, portion of the consuming public that prefer to buy local material over, possibly less expensive, products imported from outside of the state. On a more global scale, mechanisms such as the Low-Energy and Environmental Design (LEED) architectural standards promote the purchase of locally produced materials. Marketing materials and promotion campaigns for MWC produced products will promote this buy-local message.
The second major market opportunity is associated with sustainable management and green certification. A different, but perhaps overlapping, consuming public appreciates the notion of sustainable forest management. To support the expansion of green certified forest products, the MWC has embarked on a project to certify local forest products businesses. A group “chain-of-custody” umbrella protocol has been developed and several local businesses are in the process of applying for certification. The “chain-of-custody” process ensures that businesses can document their material purchases and manufacture of products that utilize “green certified” wood. This provides the end-consumer with an audited level of assurance that the product they are purchasing can indeed be traced back to material that came from a sustainably managed forest.
MEMBERSHIP GROWTH AND THE FUTURE
Growth of the MWC has been incremental. Conservative governance has focused on developing partnerships with existing manufacturers rather than purchasing new plant and equipment. This has helped to avoid large capital investment, borrowing, and debt-load. Challenges remain in expanding the membership to enable balancing the harvest activities of the membership with the market demand for MWC value-added products. Educating potential new members of the costs and benefits associated with the cooperative is time consuming. Current members of MWC include 42 individuals, families and organizations with 1,900 hectares (4,600 acres) of forestland. The average property size is approximately 45 hectares (110 acres).
The economies of scale and scope provided by the cooperative are dependent on the identification of higher value markets for these less-valued materials. If successful, more timber stand improvement work can be conducted on member properties. These management activities have the potential to increase timber growth rates and stumpage values. Non-timber management goals, such as recreation, wildlife habitat, and ecosystem management, will also be less costly to achieve if higher values are received from associated harvest activities.
If MWC can achieve its management and marketing goals, additional revenues will be generated for the member landowners that should provide an incentive to keep their property in forestry. Improved forestry returns combined with practicing the highest recognized standards of sustainable forestry would enable members to help preserve the forested landscape of western Massachusetts for future generations.
MWC has worked continuously to broaden its own membership and to assist other groups with similar goals. Publications, conference presentations, and a recent grant aimed at promoting this sustainable forestry model to farmers are some of the methods that have been used to disseminate the knowledge that has been gained. MWC pilot projects are featured in the book, Profiles from Working Woodlands by Susan M. Campbell (2004). Various projects undertaken by MWC have been presented at forestry related conferences in the United States, Canada, and Australia. The United States Department of Agriculture, Sustainable Agriculture Research and Education program awarded MWC a 2-year grant, begun in 2005, to encourage farmers with woodlots to adopt sustainable forestry practices. As knowledge is gained and problems are solved, MWC will continue to publish their findings with the goal of promoting sustainable forestry practices worldwide.
MWC has shown that small private forest landowners can successfully collaborate to achieve sustainable forestry goals. They have developed a model for obtaining FSC land certification cost effectively. They are producing value-added products for “buy local” and “green certified” markets, and providing the landowner members with higher rates of return for their forest management activities. Recommendations for landowners in other regions who wish to achieve similar results are:
- Obtain grant financing to assist with start-up costs
- Obtain technical assistance from forestry and business professionals
- Minimize capital investments, if possible, to limit borrowings and it’s associated debt load
- Partner with existing value-added service providers (sawmills, dry kilns, moulders) to produce value-added products
- Identify and sell into niche markets where a competitive advantage exists
When landowners are able to cooperate, they may be able to achieve recognized standards of sustainable forestry at a lower cost. Through careful forest management and business planning they may be able to increase returns from management activities and improve the level of both public and private services from the world’s private forests.
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