Farm Forestry New Zealand

Me and trees in Southland - Earning the money

John Purey-Cust, New Zealand Tree Grower February 2009.

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I talked it over with a workmate, Phil Rooney, who I knew had a similar ambition, and it soon became clear that the stumbling block was land. Trees need land to grow on and we had none, nor any money to get any. We reckoned we could fund the forestry side out of income and the 50 per cent government forestry grant then available, but the land was a problem Like many difficult questions the answer in the end was simple – find someone else who had spare land as well as an interest in trees, but whose immediate priorities for time and money lay elsewhere.

Good radiata country

We knew what we wanted to plant and where – radiata pine on the Taringatura Hills in central Southland and no higher than 300 metres above sea level. TheTaringaturas are a part of the Southland syncline, good easy radiata country handy to the market. The aboriginal tree cover had gone some centuries before and all was now largely silver tussock and bracken with a little manuka. There was not too much red tussock and very little gorse.

Finding the land and a partner proved surprisingly easy. Phil was looking after a new Forest Service block on the Taringatura hills, and the neighbour to the east, Tom Day, had both the interest in trees and land which his development programme would not reach for a long while yet. He was keen and he showed us the land. It was clean, under 300 metres, faced east and access was good. At the time Tom was a fan of Fordson County tractors and his definition of good access tended towards a straight line between two points, but in the end, running on rock, it was good. The eventual survey showed 117 hectares, around 250 acres.

Forming a company

So we formed a company,Southern Forests Ltd, with three partners and four shares, three for the two investors and one for the land owner, a lease term of up to 40 years and allowing one rotation, and a peppercorn annual rent of a dollar. Phil and I would establish and manage the forest and look after access, and the three of us would split any ultimate income according to our shareholding.

The programme was simple and conventional – a light burn, then radiata planted followed in due course by pruning of the first log and hopefully a thinning for posts. We thought of ripping planting lines, then a new idea, but did not bother. The only herbicide spraying was where necessary to help the pre-planting burn, usually on small cold faces where re-growth beat the trees anyway.

Finishing the planting

Three years – 1972, 1973 and 1974 – saw planting finished with about an 80 per cent strike, enough by present day standards at 1,800 stems per hectare, and we moved on to pruning and thinning. All eventually got pruned, although not everywhere to the full log length. The 1987 recession settled the hash of thinning for posts, which topography ruled out on about half the block.

From 1982 to 1994 I was working overseas with only sporadic visits back to New Zealand and Phil was in charge. He made the bold decision to thin the older half to waste at the age of 15 years, bringing the stocking down to an average of 260 stems per hectare.

In 1999 we began to get sporadic small windthrows in the usual places such as wet spots and in a wind funnel. Where possible these were salvaged and we began to think of harvest.

We did a MARVL survey, which showed the un-thinned half standing at over 1,000 stems per hectare as against the thinned stocking given above. The 2003 recoverable volume projection for the un-thinned stands was 913 cubic metres per hectare at age 30, and for the thinned an average of 450 cubic metres per hectare at age 31. Would volume beat value?

Selling the timber

Southland is blessed with a versatile timber industry not dominated by any particular participant. There is a considerable trade in logs between businesses to suit individual needs. There is one large forest owner, Rayonier now renamed Matariki, which sells logs but does not process. Their method of sale at that time was to call for a one price bid per tonne for standing blocks of forest, the successful bidder to harvest and log to their own requirement. We were helped by a local consultant, Bill Gimblett, who recommended we follow that course. People were used to it and it was simple.

We tested the system in 2000 on 12 hectares of big pruned but tipply trees. It worked out at $57.86 a tonne for 6,532 tonnes, so we went ahead. We logged the unthinned stands first in two one-year sales for an average in the hand price of $41 a tonne − 36 hectares and 28,891 tonnes. We then moved on in 2003 and 2004 to a sale of the thinned stands for an average price of $82 a tonne − 52 hectares and 27,111 tonnes. So in the end value did beat volume, by about 23 per cent.

In 2004 Southern Forests Ltd was wound up and the use of the land reverted to the Day family. It is now in trees again, mostly, but not only, radiata.

Was it worth it?

Was it a good idea, repeatable now? Bear in mind that then there was a 50 per cent government grant, but at the same time no tax credits allowed, so that 50 per cent was more like 15 to 20 per cent now. Then of course when we sold we were lucky, striking the last of the golden weather. By 2004 demand was slackening. And last but not least I was lucky to have such excellent partners.

Any good financial planner or farm consultant will tell you the whole idea is ridiculous – investment long-term makes no sense, you can never lose with property, shares are certain to rise. But the South Sea Bubble is not dead yet − I lost a lot of money myself in 1987, although without ever knowing I had it or that there had been a crash as I was in Sri Lanka at the time. But all the time the trees went on growing, never noticing recessions, and they were there at the end. What else will be? Yes, it was worth it.