Outlook Optimistic for Red Alder

     Red alder, the fast-growing hardwood species of the Pacific Northwest, has been a favored pallet material for 30 years. While it has been enthusiastically used as a material of choice for pallet stock, furniture, cabinetry, specialized veneers, pulpwood and other applications, however, it has long been a bane to foresters. They consider it a ‘weed species’ to be eradicated in favor of more traditionally favored but slower-growing trees such as Douglas fir.

   The result has been a collision course between an industry that has seen rapid expansion to meet increasing demand for alder and a resource base strained because alder reforestation has not been taken seriously.

    Dave Sweitzer talked about the alder supply at a recent meeting of the Western Pallet Association. “Is there still enough for everyone,” he asked the audience, “or are we going to be in a supply crunch?” Dave is very knowledgeable about the Western hardwood industry. In addition to serving as the executive director of the Western Pallet Assn., he has been secretary-manager of the Western Hardwood Association (WHA) since 1975 and executive director of the Washington Hardwoods Commission (WHC) since 1991. He has studied the alder supply issue at great depth and is optimistic about the future.

Origins of Alder Industry:
‘Enough for Everyone’

   Red alder is found predominantly in a 700 mile strip from British Columbia to northern California. It is so named because the inner bark turns orange-red when exposed to air. Typically found at low elevations, it is an aggressive invader of clear-cuts, burn sites and similar areas. Its rapid colonization of areas with poor soil nutrient levels is aided by its ability to fix nitrogen with the aid of micro-organisms in root nodules and mycorhizae, which are fungal symbionts attached to the roots. An early colonist, alder usually is displaced over time by conifers.

   Commercial harvesting of alder dates back over 50 years, roughly coinciding with the formation of the WHA in 1955. One of the association’s primary goals at that time was to provide a uniform grading standard. “Alder had been produced for some time,” Dave noted, “but because the user didn’t know what the grade was, he was at the behest of the producer.” The WHA quickly established uniform grading rules for Select & Better, #1 Shop, #2 Shop, #3 Shop and Frame.

   The association worked in conjunction with the Grocery Pallet Council in 1973 to approve alder as a species for deckboards for the 48×40 grocery pallet. This step was the beginning of an enduring relationship between alder and pallet manufacturers.

   In the 1970s the WHA enthusiastically promoted alder. It developed testimonial advertisements that touted alder’s availability, uniformity, workability, adaptability and profitability. Consistent quality and grade stamping also were emphasized. “There is enough for everyone!” one ad declared. Another proclaimed alder as “…the most abundant hardwood of the Pacific Northwest.”

   “Then in the 1980s we started labeling alder as alder,” Dave said. “That might sound kind of funny, but before that we were promoting alder as the ‘magician of finishes.’ You could make it look like anything you wanted it to look like.”

   Kiln-dried alder was promoted for finish applications, such as cabinets and furniture, instead of pallet stock. In the 1980s, international demand for alder grew for cabinets, furniture and pallets. The decade also saw the emergence of proprietary grades, which Dave called “a brilliant marketing move.” Specifically tailored for a particular customer’s requirements, proprietary grades proved difficult for competitors to supply. From an association standpoint, however, the proprietary grades proved to be very cumbersome. “We didn’t have those five standard grades that everyone could go with,” Dave explained.

Recent Rapid Growth:

Is There Still Enough?

   Since the 1990s, the resource base and supply have emerged as “the big problem we are having with alder,” said Dave. “This occurred in conjunction with rapid industry growth. Alder production in Oregon and Washington, which accounts for nearly all of U.S. production, jumped from 130 million board feet in 1991 to about 450 million board feet in 2002.”

   With rapidly escalating production, the association began advocating research into the condition and supply of alder forest resources. The U.S. Forest Service Pacific Northwest Research Station conducted research and issued a report in 1995. The report noted that alder inventory levels were higher than at any time in the 20th century, but it warned that rates of supply increase were slowing and projected alder shortages.

   Dave believes that one of the keys to increasing inventory levels in the future is education of landowners. While 70% of the hardwood inventory is on private land, he noted, “Most of those people who have private non-industrial forest lands don’t know that this is a profitable venture for them.” After decades of being considered only a ‘weed species,’ however, it is nevertheless finally getting some long overdue respect.

   In British Columbia, alder has taken a back seat to Douglas fir. Most alder comes from government timberland as a byproduct of softwood timber harvesting, according to John Lewsley, owner of Delta Pacific Lumber in Surrey. He buys alder cants from Vancouver Island and has them custom cut to pallet stock for the U.S. West Coast pallet market.

   In the U.S., however, the percentage of the harvest from public lands is small. “Thirty percent of alder inventory is on public land, but only 10 percent of the harvest comes from public land,” said Dave. Increased logging restrictions on public lands for remediation and urban buffer zones have further compromised alder supply. As a result, private lands will be increasingly important to the supply of hardwoods. “We need to better understand hardwood management silviculture,” Dave said. “The opportunity for the private landowner is there. You can turn in 25 years what it takes Douglas fir 60 years to turn.”

   Public lands in Washington contained 2.5 million acres of alder in standing inventory in 2002. However, once logging restrictions are accounted for, the supply shrinks markedly. “We may think we have 2.5 million acres of hardwood with the mature stock and the juvenile,” Dave pointed out, “but then you have to take off restricted ownerships. Then you take off urban growth management areas, 75-foot riparian zones, 150-foot urban buffer zones, and 50 percent mass wasting. So now all of a sudden you are down substantially.” When these restrictions are factored in, standing volume of alder is reduced from 15 billion board feet to 12 billion board feet.

   Based on current practices, alder resources would be squeezed in the future. “Our baseline is to have 1,665,000 acres, and we have an annual yield of 504 million board feet,” Dave explained. “That’s our baseline.” Unfortunately, if trends do not change, acreage would decline to 1.2 million in five years and to 570,000 in 60 years. Meanwhile, current annual production levels of 367 million board feet would shrivel to about 172 million board feet in 60 years. “But can we do anything about it?” Dave asked. “Yes, I think we can.”

Future Alder Supply:
More for Pallet Stock

   The alder industry is seeking to increase the resource by promoting alder planting, increasing the harvest of mature alder and reducing logging restrictions.

   In Washington, the WHC is pushing for increased harvest of mature alder trees — over 50 years old — on state lands. “By far the majority of the alder is over 50 years old,” said Dave. “When you get to 50 years old with hardwood, it starts to deteriorate. You have diminishing returns. It doesn’t grow as fast, and in a few years it will fall over and rot, and all of that won’t be of use to anyone. There is a significant amount of mature alder, and we are going to do something about it.”

   The goal is to harvest the mature alder before it deteriorates. For state governments looking for revenues, Dave sees the opportunity to harvest the mature trees as a “win-win situation.”

   The increased value of alder should also stimulate interest from foresters and landowners. Alder surpassed the value of Douglas fir and hemlock in 2000, and Dave believes the trend will continue because it is a specialized product. “All reports show it will continue this way,” he said. “The alder will be worth more.”

   “We have been thinking for many years that we are the ugly step-sister of Douglas fir and hemlock,” Dave added. “Now the market has changed to the extent that alder is more desirable than Douglas fir or hemlock. Did you ever think you would hear that?”

   Prices for alder logs exceeded Douglas fir No. 2 saw logs for the first time in 2000 after surpassing hemlock in 1995, Dave noted. Douglas fir prices peaked in 1993; adjusted for inflation, prices have lost 13% in the past 10 years. Hemlock was at a high in 1995 and fared in a similar fashion with prices adjusted for inflation losing 27% the past 10 years. By contrast, alder reached a high in 2000, and prices adjusted for inflation have gained 55% in 10 years.

   A measure of the financial reward of investing in alder is the Internal Rate of Return (IRR). The graph on page 49 (figure 2) compares the IRR of investing in alder planting versus other species. At 8.25%, the return on red alder comes out as the top investment. “It is very valuable,” Dave said. “And now we are ready to push for more harvest.”

   Dave listed a number of reasons why alder should be considered for planting:

   • not susceptible to root rot

   • not susceptible to Swiss Needle Cast

   • it is a nitrogen fixer

   • more valuable than other species

   In fact, there is new interest in planting red alder, Dave noted. “We never thought we would hear this, but the Washington Department of Natural Resources is now ready to plant thousands of acres on state lands, and we know private companies that are planting thousands of acres,” he said. Sustained yield calculations by Washington state officials give a much more positive outlook for the future of alder stocks. Instead of a downward slide to 171 billion board feet, Dave sees a three-fold increase in the alder harvest. “It’s a big, big increase.”

   The association has been promoting alder to the private non-industrial forest landowners, who generate 70% of alder availability. “We have been reaching out through small land forestry associations, like the Washington Farm Forestry Association, and working with them, and discussing how to plant, grow, and manage, and the economic returns you can receive,” Dave said.

   The WHC is also working to have unnecessary logging restrictions eliminated. New research shows that there are no undesirable environmental effects from logging riparian zones and wetlands.

   The Washington Hardwoods Commission and the Western Hardwood Association are working to make sure that there is a future for alder, said Dave. “And I feel that we have a greater future for hardwood availability. We will continue to push for increased sustainable harvest.”

            Some sawmills concentrate on cutting high-grade lumber, which reduces the low-grade material available for the pallet industry. However, with the projected increase in overall volume, the volume of low-grade lumber available for the pallet industry will increase, too. “This is my gut feeling,” said Dave, “that we will most likely have more alder – not less alder — for pallet stock in the future.”