Growing the log industry needs sturdy support
Roving ‘log grabbers’ in Northland buying immature trees for export may exacerbate log supply pressure at the expense of our local construction industry (Sunday Star-Times, August 21). But these procurers did not create the problem.
The first cause is that large forests are simultaneously coming to the end of their first rotation. Secondly, there has been virtually no new planting over the past two decades.
Slapping restrictions on exports would do little to increase log availability, but would do a lot to damage forest investor confidence. Farmers, Maori landowners and city based investors would exit the industry.
Our irregular plantation forest area and age profile is a result of a positive forest investment environment up until the late 1990s. Since then, land prices have risen dramatically and log prices have not kept pace until recently.
Government policies have favoured pastoral land values against forest land use.
Disincentives to plant forests include the bogus Eastern European carbon credits, fortunately no longer permitted in the Emissions Trading Scheme (ETS). While not a Northland issue, allocation of more Nitrogen Discharge Allowances (NDA) to dairy farms has increased their land values relative to land used for dry stock and forests.
This sort of regulatory philosophy tilts what should be a level playing field in favour of grass and against trees.
Forestry remains New Zealand’s second or third most important primary industry on export values, and is forecast to continue to grow.
Large scale forest owners usually sell to both local processors and exporters. Local mills take the higher value pruned and structural logs. Few are set up to profitably process industrial logs, and in Northland, only the Summit triboard plant in Kaitaia is set up to process pulp logs. The export market is crucial for forest owners to sell these lower grade logs.
In most regions of New Zealand forest owners choose to supply local mills first against much more volatile export markets with their large price swings of foreign exchange and sea freight rates.
For small scale forest owners, a decision to sell is often a once in a lifetime retirement income decision. After waiting at least two decades for the trees to grow, the temptation for investors or farmers to sell earlier than the tree growth optimum can be considerable.
But selling may not be the best option. From 18 years, trees add a lot of value in both volume and log quality. A prudent seller will take professional advice on market prospects a few years ahead.
We as a nation need more trees planted outside the established forest areas, including in Northland. Confidence in future wood supply is critical for investment in internationally competitive wood processing plants.
Brian Stanley is Chairman of the Wood Council of New Zealand.