Canadian Forest Service Publications

An economic analysis of lumber manufacturing costs in the interior of British Columbia. 1996. Stone, M. Natural Resources Canada, Canadian Forest Service, Pacific Forestry Centre, Victoria, BC. Working Paper WP-6-014, copublished by the BC Ministry of Forests.

Year: 1996

Issued by: Pacific Forestry Centre

Catalog ID: 4329

Language: English

Series: Working Paper WP (PFC - Victoria)

Availability: PDF (download)

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Abstract

This study examines lumber manufacturing costs in the Interior region of British Columbia through the development of a cost function. The manufacturing costs were derived from the cost of processing the logs into lumber and did not include delivered log costs. Data were obtained from the 1990, 1991 and 1992 annual surveys on lumber manufacturing from the Revenue Branch of the B.C. Forest Service. The cost function was developed using the firm’s output and its factor input prices (prices of capital and labour). A measure of the firm’s operating rate was also included in the model to account for the effects of market fluctuations due to the cyclical nature of demand. The mill’s lumber recovery factor (LRF) was used as a measure of the quality of logs being fed into a mill. Regression analysis showed that the coefficients were highly significant. The cost function presented in this study may offer a potential improvement to the way in which lumber manufacturing costs are estimated by providing an empirical relationship between a stand’s average LRF and the resulting lumber manufacturing costs.