Landscape changing to forestry ‘by stealth’
Sales of pastoral land for conversion to forestry is putting huge pressure on rural communities, after three working sheep and beef farms in the King Country were sold to an overseas investor.
The properties were sold to Kingheim Limited nine years after the sale of Taranaki land which was converted into forestry blocks by the same owner.
‘‘It’s going to kill [rural communities]. We’ve already got schools struggling around Waitomo district. We need more people,’’ said farmer Reon Verry.
Dani Darke, also a farmer from Te Kuiti district, said as student numbers dropped at the local school, the ability to offer a range of sport options and subjects became harder.
Much of the unpaid work rural people did in their communities, providing vital activities and opportunities to connect with each other, was also shrinking, affecting the special character of rural life, she said.
Information published on the Land Information website show three farms, totalling 1476.74 hectares in the King Country, were approved for sale by the Overseas Investment Office (OIO) in February under the special forestry test.
Lobby group 50 Shades of Green spokesman Andy Scott said the sales were risk-free investments, in which purchasers had little incentive to harvest the forests if the price of carbon continued to rise, despite rules set by the OIO that these must be used for timber production.
It was ‘‘a tragedy’’ that the pace of farm sales to forestry was going largely unnoticed by the public, he said.
One of the three properties sold for $5.1 million, according to the Real Estate Institute (REINZ). Another sold for $4.25m.
Two of the farms were prime pastoral land, and farmers would have ‘‘lined up’’ to keep them in production, but couldn’t compete with forestry prices, Scott said.
‘‘One billion trees has been a magnificent political communication tool driving for a good aspiration, but as landscapes are being changed by stealth, the public are being misled on what is going to be delivered,’’ he said.
Current policy settings ensured that every farm that came up for sale would attract carbon investors, he said.
Agriculture Minister Damien O’connor, who is also Minister for Rural Communities, told Parliament’s Primary Production Select Committee last year that land conversions might have to be reviewed if they reach 40,000 hectares a year.
The figure was an estimate but would require in-depth analysis and a decision made by ministers through due process.
The total percentage of beef and sheep pasture taken up by forestry was 0.6 per cent, and was mostly deemed not highly productive for farming, he said.
Real Estate Institute rural spokesman Brian Peacock said there was no transparency about how much farm land was going to forestry because only the current land use is recorded at the time of the sale. The sales appeared to be driven by carbon credits, he said.
The concern from affected communities had only increased as sales that were previously concentrated in the Wairarapa and Tararua districts had widened to reach Waikato, particularly the western side of the district, he said.
O’connor said the Ministry for Primary Industries was working to better understand farmer decisions around sales and forestry. A two-yearly report would shortly be commissioned to gather detailed information on farm sales, land-use change intentions and regional reports about local sales trends.
50 Shades of Green noted the 2019 sale of Hadleigh Station near Masterton, for $13.4m, with 1300ha converted for forestry, as an example of how high the return on investment could be.
Based on the current carbon price of $38 a tonne, the return on investment in one year would be $1.3m, and over 18 years it would reach $23.4m, a 14 per cent return.
If the carbon price were to rise to $50 a tonne, this would increase to a 20 per cent yearly return, while $100 a tonne would return 39 per cent to investors.
Institute of Economic Research principle economist Bill Kaye-blake confirmed investors could make money converting sheep land to carbon forest, but said that was the point of the Emissions Trading Scheme (ETS).
‘‘ New Zealand has few carbon-sequestration technologies, and one of the cheapest and most reliable ones is planting trees, especially radiata.’’
The opportunity was available to everyone, including townies and sheep farmers, not just overseas investors.
Verry said in an ideal scenario farmers would plant areas of their farms in pine, but the reality was that most farmers were in debt.
‘‘We can’t afford to plant up hundreds of hectares and tell the bank just to wait a few years and we can start paying you back. Cashflow is an important thing for farmers.’’
Peacock said prices for farm land going to forestry was rising above $10,000 a hectare. On average, forestry investors were paying $1500 a hectare more than the pastoral sector would pay.
A rigorous process overseen by the OIO meant most investors had to prove a ‘‘substantial and identifiable benefit’’ to the country to be approved, a spokeswoman said.
But in 2018, a fast-track process was established for commercial forestry investments, partly in response to government priorities .
The ‘‘special forestry test’’ is only for production forests and can’t be used for permanent forestry/carbon farming and trees must be replanted after harvest.
The OIO monitors and enforces sales terms, and applicants must regularly report on their investment to the office, including any planting, maintenance or harvesting of the relevant crop of trees.