Economic Impacts of Hurricanes on Forest Owners
Jeffrey P. Prestemon and Thomas P. Holmes
USDA Forest Service Southern Research Station
The United States is experiencing a period of higher hurricane frequencies and intensities, affecting the largest single timber producing region in the world. Recent large hurricanes, including Katrina and Rita in 2005 and the Florida hurricanes of 2004, have resulted in timber mortality of several tens of millions of cubic meters. The effects of such large events are to swamp timber markets in the short run with salvable timber and reduce available timber inventories in the long run. Prestemon and Holmes (2000, 2004) trace the timber market impacts of such storms, particularly on prices and consumer and producer welfare. Research there shows how consumers may be benefited in the short-run but harmed in the long run, while producers of undamaged timber are harmed in the short-run and potentially benefited in the long run. Other research has examined the timber harvest timing impacts of hurricanes, considering timber salvage (Haight et al. 1996). Our paper consists of three main sections. First is a description of the biophysical risk process. Second is an overview of the timber market dynamics following hurricanes. Third is a discussion of what private and public decision makers should do to mitigate the negative economic effects of catastrophic wind storms given alternative management objectives.
The hurricane risk process is described for the U.S. South using information provided by the National Oceanic and Atmospheric Administration, with a focus on intense storms, which apparently cause most of the damage from hurricanes. This section includes a review of multiple risk interactions, such as the impact of hurricanes on the risk of wildfires, the impact of hurricanes on different forest types in the South, and research that may hint at trends and future risks. Timber market impacts from hurricanes are based on recent experience with three intense storms: Hugo (1989), Katrina (2005), and Rita (2005), for which substantial information exists, with emphasis on timber damages. This section quantifies their timber damages in physical and economic terms, placing them into perspective compared to the timber market overall. It describes the timber price dynamics and welfare effects following hurricanes. It also lays out what we know about mitigating the impacts of such storms through timber salvage. In our final section, we focus on the implications of existing research to improve management decision-making for governments, non-industrial private landowners, and the timber industry. We discuss the relative benefits from prioritizing salvage, the equity considerations of government assistance, optimal behavior for owners of undamaged timber and restoration options for private and public managers. This section contains results and information relevant not just to hurricanes but also to many kinds of large-scale natural disturbances involving extensive timber damage (ice, fire, insects and disease outbreaks), which involve salvage and consideration of timber decay (e.g., deSteiguer et al. 1987, Holmes 1991, Lowell et al. 1992), resulting salvage price depressions, and inventory loss-related long-run market price enhancements (e.g., Butry et al. 2001, Prestemon et al. [in press]).
corresponding author:
Jeffrey P. Prestemon
USDA Forest Service
Southern Research Station
PO Box 12254
Research Triangle Park, NC 27709
919-549-4033
jprestemon@fs.fed.us
Encyclopedia ID: p120
