Official website of the New Zealand Farm Forestry Association

By 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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