Farm Forestry New Zealand

Selling alternative species

Allan Levett and Dean Satchell, New Zealand Tree Grower May 2009.

Over the years many members have milled their own trees and turned them to good account. Don Tantrum wrote about making a good looking eucalypt floor from his own trees for his and Viv’s new house in Taihape. Benjamin Lee recently reported on trees from the family farm milled on site for macrocarpa cladding on his brother and partner’s spacious house in the Bay of Plenty. Most exotic and inspiring of all, Mike Halliday told in a Hawkes Bay Branch newsletter of doors made of home grown deodar cedar in the house he and Helen have built.
Many of us have seen the lovely hardwood bench tops and bathroom sinks that Peter King of Carterton makes from fine flitches of eucalypt, blackwood and native beech. There is
demand for the timber of our attractive alternative species – it is just a matter of connecting up to the market.

Reasonable returns

There is evidence that the price differential between the alternatives and radiata pine are showing that the dreams of the early pioneers in farm forestry are coming to fruition. Denis Hocking in his usefully detailed article,‘Macrocarpa magic or cool cypresses’ in Tree Grower, November 2004, showed that once he got the right selling arrangement, he achieved pretty reasonable returns. It proved to his satisfaction that macrocarpa was more profitable than radiata pine.

On the basis of his figures which also took into account value from production thinning, he argued further that pruning of cypresses appears to be a very good investment, and made suggestions for silviculture practices that would improve on those returns. Furthermore Allan Laurie’s latest market report in the February 2009 Tree Grower indicates more than satisfactory margins in returns between his macrocarpa and radiata pine in South Island log sales.

At present in New Zealand there appear to be three main ways of selling alternative species −

• Sell logs to an agent or miller who has special knowledge of the species and has developed regular markets for their timber
• Mill the logs on site and sell timber to discovered users, in other words do your own marketing
• Sell logs to local sawmillers.

The specialised agent

A recent example was the Davies-Colley’s Eucqual sawmill that milled and sold quality eucalypt timber for many years. More recently in 2006 Laurie Forestry Ltd of Waimate established a macrocarpa lumber processing and retailing business in Christchurch out of concern for the lack of integrity and standardisation, variable low prices and the generally poor treatment of this timber in the market.

Allan Laurie told of his experiences with this company in a stimulating talk to the combined alternative species groups meeting in Marlborough in November. He gave an insight into the wide market for cypress timber when he reported on 136 transactions totalling about $100,000 over a six month period. He stated the company policy of never paying less than $100 a tonne for logs landed at the mill and never selling timber for less than the cost of producing it.

Buyer	Number of sales by volume	Value of total sales
Sawmills	2%	4%
Construction and building companies	6%	3%
Box stores	10%	3%
End users - home owners and farmers	29%	29%
Furniture manufacturers, timber retailers	39%	51%
Trade Me customers	8%	3%
Architects	6%	7%

On the basis of his experiences Allan concluded that availability determines the market and not the converse.When we have trees ready there will be a market.

Allan explained that it is essential when marketing diverse species to establish a point of difference. Therefore it will be necessary to initiate a programme of awareness and education about the various alternative species for end users, retailers, processors and policy makers. He suggested perhaps that the NZFFA should implement a programme of industry wide participation and engagement in diverse species use.

Milling and marketing by the grower

Paul and Ash Millen’s Tai Tane partnership has grown a number of diverse species on their small woodlot in the Marlborough Sounds. They have sold small quantities of E. regnans, E. fastigata, E botryoides, E. saligna and cypresses for flooring, furniture and boat building. Their experience indicates how much more the grower must do if they decide to sell timber.
The material is mostly production thinning with minimum small end diameters of 30 cm. The timber is processed and dried on site, to sizes and dimensions determined by prior discussion with buyers.The demand is such that additional timber storage area is planned with permanent timber racks and a small solar kiln for finishing high value clear boards.

Discover the market

In order to handle sales the Millen’s established Marlborough Timbers Ltd to brand their timber and establish the point of difference that Allan Laurie urges is essential. But they had
to get out and discover the market. The company has found strong local demand by talking to architects, builders and a local Carters’ branch and they have developed a marketing brochure.
By vertically integrating the enterprise in this way the grower can capture higher returns by adding value to each step in the production chain. However individual growers may not have the critical mass to overcome the economies of scale required to mill and market timber. One opportunity with this model would be a co-operative approach of neighbouring farm foresters willing to pool their resources.

An important issue to consider when milling timber is knowing the demand and milling for this market. It means finding a market before the timber is sawn.

Selling logs

Selling logs is probably the most common option, but one with potentially lower returns for the grower.

Sawmillers are used to processing radiata pine and often do not understand the best ways of handling alternative timbers. So for example a sawmiller with an existing market, expertise and a monopoly on purchasing logs will dictate the market value of logs. In addition the log buyer will always err on the lower side of quality and price. Therefore the grower may not get the best price for the logs. Even so, the Denis Hocking report cited above shows that it is possible to secure a price margin that covers the additional costs of producing the trees for sale.

Local or regional markets

The moral of the story so far is that most of the sales of locally grown alternative species are within local districts or under-developed regional markets, and mostly by individual growers. Imported special-purpose timbers are marketed throughout the country and are valuable, However the mechanisms do not seem to exist for the nationwide purchase and sales of home grown alternative species timbers. Some opportunities remain for sending specified hardwood timber to highly developed processors such as Peter King of Carterton.

Is there an opportunity for a national approach by farm foresters with a collective interest in selling high value niche timbers? Could initiating, developing and co-ordinating a collaborative marketplace even be undertaken from within our organisation? NZ Wood have asked the NZFFA to provide an online marketplace so they can direct interested parties to the appropriate venue.

To get the ball rolling the NZFFA have set up a web page as a portal from which members can market their timbers. Access is from www.nzffa.org.nz/specialty-timber-market/, and look for timber marketplace. This will only work if all interested vendors and prospective timber merchants come to the party, and buyers become aware of this market place.

Quality and branding

The most important point of difference for adding value is defining a consistently high quality product. This could be achieved by developing standards for processing each timber. Such standards would apply to hardwoods like eucalypts, where sawmilling and drying techniques significantly influence timber quality and value.

Providers who keep to such standards could take part in a branding scheme and attract corresponding premiums for their timber. Branding also gives proprietary interests a motive to invest in infrastructure and markets, benefiting both themselves and the grower by increasing value.