Farm Forestry New ZealandBy Nick Kingsford, Northland Forest Managers, September 2014.
Optimal time line to prepare for harvest:
- 2 years before harvest - begin the resource consent process (required if moving more than 5,000m3 of soil)
- 12-18 months before harvest - pre-qualify and select harvesting contractor
- 6 months before harvest - finalise harvest plan
This can be shortened for smaller blocks with good access or where a Resource Consent is not required.
Merits of using a management company
1. Access to a range of professionals in all areas of forestry for:
- Health and safety management
- Resource conmsent applications
- Inventory/resource description
- Harvest planning
- Contractor selection and rate negotiation
- Environmental compliance, management of historic sites
- Marketing/log sales
- Log docketing
- Log quality control, value recovery analysis
- Post-harvest reconciliations and post-harvest cleanup,
2. Access to a range of harvesting systems and economies of scale
3. Compliance with all regulations
4. Greater marketing power due to scale
Doing it yourself
Pros
- Save cost - maybe
- Increase your knowledge of the process over time
- More hands on
Cons
- Legislative risk (i.e. Health & Safety and Environmental)
- Exposure to unscrupulous traders
- Learning can be by trial and error
Possible Sale options
Stumpage sale
- Lump sum
Pros
- A known return regardless of market changes
- Risk of volume, grade, sale price and costs are with the purchaser
Cons
- Purchaser usually builds in risk premium into price
- Market upside stays with the purchaser
- Pay as cut
Pros
- Regular monthly payments
- Less risk to purchaser on volume
- Market risk with purchaser
Cons
- Market upside stays with the purchaser
- Graded sale
Pros
- All costs and revenue known
- Transparent process
- Can capture market upside
Cons
- Risk of grade recovery is with forest owner
Managed sale
Forest owner employs a reputable forest manager to manage the harvest.
Pros
- All costs and revenue known
- Transparent process
- Can capture market upside
Cons
- Risk of market price and grade recovery is with forest owner
How to be aware of the markets
NZFFA market report »
Agrifax >>
Wood weekly / Friday offcuts
Local log traders
Local sawmills
Local pulp mills
Forest management companies
Forest inventory, whether to conduct as Pre Harvest Inventory survey
Pros
- Can be more reliable than Mid Rotation Inventory that is grown on
- Gives you a good benchmark to reconcile harvest actuals against predicted Total Recoverable Volume and grade outturn
Cons
- Additional cost
- Need to get a PLE of around 10% to be accurate
- Actual grade outturns are influenced by markets
Note - inventory may not be needed in a stumpage sale if there is a high level of competition
Timing of payments / Financing the harvest
- Most log sales are paid on the 20th of the month following invoice
- Can get cash in advance were there is a trading risk
- Harvesting and engineering paid on the 20th of the month following invoice
- How to pay for engineering?
- Roadline harvest can fund engineering
- Sale method can reduce requirements e.g. lump sum, pay as cut.
- Can look to use forest as security to fund roaring and harvest
- Each situation is different and needs to be looked at on a case by case basis.
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