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<br />OUTSIDE INFLUENCES
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<br />Many important regionai i8IId natioDllI economic conditions impact local western timber economics. Some
<br />of these include mortpge rates, housing starts, and timber production levels in other regiOllS or COIIDtries.
<br />For the most part, the relevant effectS arc incorporated into local supply and demand considel31ions
<br />. tbrOllgh the pricing system. Local stwnpage and lumber prices arc related to broader economic conditions.
<br />On the demand side, many relevant influences of concem arc ret1ected in forest product prices. Lumber
<br />prices reflect most of the informatiOll that is relevant including information from the housing market,
<br />remodeling market, and from moTtpie rates. The economic principle that describes this "cac:apSll1ation" of
<br />cffec:ls is known IS "derived demand." Lumber prices arc included in this assessment, and they arc directly
<br />ClOIl5idered i8II important element of sawtimber dCllWld. On the SIIpply side, outside influences arc of less
<br />_cern, but they iIlc1ude iDdustry wide advances in techDology and its availability. These effccls arc
<br />captllred in processing eq11iplllCDt prices, and these arc beyond the scope of this study. Jntmst rates also
<br />affect the SIIpply side by influencing the debt SInIcture of processors and purdwers. Lower intmst rates
<br />reduce interestcbarges 011 capital improvements and OIl their operating capitallllXlOlUlts~ BecI"'" this
<br />study does DOl address the input markets for processors, these SIIpply side effectS arc DOl addressed.
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<br />ANALYTIC STRUCTURE AND DATA USED
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<br />The following illustration depicts the overall stnIc:t\Ire of the sawtimber market analysis.
<br />
<br />Overall Structure of Sawtimber Analysis
<br />Iu"ty
<br />........MrPflll...". ,
<br />.TIM""'MCf
<br />.RIO a"Me ,.,.. ,.nuN'
<br />......... a...1 'n...... ,.c....lfty
<br />.... C..."'riItic1
<br /> TirnlMltWIed ,......
<br /> f---- Rio O,.nft F..... r- ....,uoatIDftIIty..io
<br /> .auNI, ...,...... O,.ftd...."I)'.....1
<br />D.""nd eD'fR.M'''''''.
<br />Prftll'J P,..UI\IIh'IoIcture f--- ,VOl"",. UNII., ......ct
<br />....fltIfy"'i1I1'.,l ,P,eeo
<br />,wrctI...'" RtO Ora"-,
<br />..-n~."".C1
<br />.MiII.ollml' ftul>lIlty
<br />...."'...... ",11 ".." ......1
<br />."III,TOChlN
<br />.._ra'.......,.._e.,.~.. ' ....11
<br /> k'"'''''
<br />.R. a,.flde Po_.._llltc Ota"il ",,,,,lIfl
<br />.TiIft~i feriI;iOf'lIUPpty...." ,.....,..
<br /> "fIIIl ""MraMi "",,1)'
<br /> ..,.1s '" Mutt ....,.1 "",.,
<br /> level, 1ie",..M ."'lyzeG.
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<br />Sawtimber I\1PPIy is first developed using Forest Service sales records for the Rio GraDde and its
<br />timbershed. These records show volumes sold and the overall cbaracteristics of these sales. Timber
<br />demand is next estimated \ISing information OIl purchasers, primary processors and historic CIIt 1eve1s on the
<br />Rio Grande and in the timbershed. Supply and demand arc then combined with additional market data,
<br />including average prices and volumes IIDder contract, to describe the overall market situation for the Rio
<br />Grande in its timbershed. Finally, potential Rio Grande futllre timber supply levels arc used with the
<br />market infOrmatiOll to suggest the likely futllre of the sawtimber economy IS a resuh of these hypothetical
<br />supply levels.
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<br />(I J2535
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