Trees are the answer
From New Zealand Tree grower May 2010
Tenco is one of New Zealand’s largest exporters of forest products. We have built to this position since 1991 when the company was set up to export lumber to growing Asian export markets. Experience and reputation count; from small beginnings Tenco has become the largest independent exporter of New Zealand lumber and New Zealand’s 4th largest log exporter. Tenco has a regular shipping program of their own log vessels and in combination with these and other ships currently calls at 7 New Zealand ports (5 North Island and 2 South Island).
Tenco buys standing forests. Tenco currently has a number of forests which they purchased at harvestable age to log over a number of years for export and domestic markets. Tenco also regularly buys smaller tracts of forest to harvest immediately or immature forests to hold until harvest time. Tenco is interested in broadening the base of owners from whom it purchases forests and stands of trees. A deal with Tenco is a certain transaction. The owner and Tenco will agree on a value of the tree crop and then Tenco will pay this amount to the owner either in a lump sum amount or on rate per volume unit out-turn from the forest depending on the nature of the tree crop.
Tenco knows there are a lot of farmers who have trees that are close or ready to harvest and will be asking themselves how they should proceed with the sale of their trees. For some farmers the kind of certain transaction with money in the bank could well be appealing. Tenco is actively interested in buying harvestable forests or trees from areas including all the North Island (except the Gisborne and East Coast districts) and Nelson & Marlborough in the South Island .
If you own a forest in this area (16 years and older) and are ready to enter into this kind of agreement Tenco is interested to develop something with you.
Please contact: Josh.Bannan@tenco.co.nz
Work: +64 7 357 5356 Mobile: +64 21 921 595 www.tenco.co.nz
Trees are the answer. This slogan was first advocated by Dr Patrick Moore, one the original founders of Greenpeace. Patrick is now head of Greenspirit, a Canadian pro- forestry environmental organisation. The slogan has now been adopted by the Society of American Foresters.
In 1965 I was appointed as a scientist to a new Forest Research Institute group the Economics of Silviculture. We had the research objective of improving the profitability of plantations, especially plantations of radiata pine. A management principle slowly emerged − what a forest manager did, or did not do, at the time of planting or within the first few years, very largely determined the size and quality of trees finally harvested. An important implication is that, when making decisions about early stand treatment, today’s market is almost irrelevant. The only market that really matters is that which exists on the day the trees are harvested.
In the early 1970s there was a small planting boom. However, New Zealand already had sufficient plantations by around 1940, provided that harvested stands were replanted, to provide for the nation’s wood needs for at least the next century. Essentially the wood from every hectare planted since 1940 was for export. I did my doctorate in the early 1970s on the question of what would be the possible markets for our plantation wood in the year 2000 when forests planted and tended in the early 1970s would be harvested. Fortunately, I resisted the temptation to predict a future wood shortage. Instead, my projection was based on the same reasoning as to why I was looking at the year 2000 in the first place. I eventually realised that the predetermination principle we had found for radiata pine applied to all trees − it probably applies to all biological systems. As almost all the world’s trees are slower growing than ours, then almost all the trees that New Zealand would have to compete with in export markets were already in existence. Their wood quality had already been determined even though they were probably unaware of this. My 1975 thesis was mostly an in-depth analysis of the world’s forest resource and what would be its future wood quality. My analysis suggested that most of the world’s exploitable virgin indigenous forest would have gone by the year 2000. The forest that had regenerated, or had been planted, would produce high quality framing timber but almost no clearwood. Our radiata pine would only produce a marginal quality framing timber but, when producing clear wood, radiata pine ranked with the world’s best conifers. The biggest challenge was how to convince growers to prune and thin at the right time when there was no market for pruned logs, and no market could exist until trees that had been timely pruned were harvested – a classic Catch 22 dilemma.
By the year 2000 it looked as if my 1975 projections were on target. However, since 2000 the global forestry scene has been a catastrophe. Here are a few examples. In New Zealand the average price in the last quarter of 2009 for radiata pine P1 logs, the best quality pruned logs, was only 55 per cent of the inflation adjusted price in the third quarter of year 2000 − a price of $173 a unit, inflation adjusted, becomes $220. In the fourth quarter of 2009 the average price for P1 logs was only $121 a unit. I almost cannot believe that this could have happened. But this disaster in forestry is not limited to New Zealand, it is a worldwide phenomenon. In North America the industrial conifer wood production in 2009 was only 57 per cent of that in the year 2005. The annual production of 74 billion board feet had fallen to only 42 billion board feet in 2009. The international price of wood again also declined. Using a North American example again the United States composite lumber price reached a high in August 2004 of US$474 per 1,000 board feet. Since then the price has steadily declined. It reached a low of US$190 per 1,000 board feet in January 2009 when the 2004 price, adjusted for US inflation, was $534. The low 2009 price was therefore only 36 per cent of the price for the same grade in 2004. The price has since improved slightly – in September 2009 it was US$240 per 1,000 board feet. I am sorry to have used variable time periods and units but I have quoted directly from publications that have chosen periods of greatest difference.
Renewable and sustainable
Why has the world market for wood so dramatically collapsed, especially when we know that wood is the world’s only renewable and sustainable raw material? Wood is very versatile and requires little external energy for its manufacture. It is impossible to name a more environmentally friendly alternative. Other than carbon sequestration, the contribution that wood could make is almost totally ignored. Similarly ignored are the other benefits of forests such as its soil stability and water holding ability. I recently gave a presentation to a visiting group from one of the Timber Investment Management Organisations (TIMO) that have invested in our plantations. I began with what I thought was an excellent opening statement ‘Plantation forestry is the most capital intensive industry in the world’. I was to go on to say that profit was therefore very important to forestry investors. Then what happened was what every public speaker dreads most − their opening statement being challenged. The head of the TIMO delegation interrupted me. ‘That’s not quite right you know, managed indigenous forests are more capital intensive’. Of course he was correct but few countries, if any, use the compounded future growing costs to determine royalties when harvesting indigenous forests. Wood from these forests is either free or made available at token royalties.
Playing field not level
New Zealand plantation owners expect a stumpage that covers the compounded costs of growing the wood. Most of the world’s industrial wood still comes from indigenous forests. The FAO estimates that about 65 per cent of the world’s industrial wood comes from non-plantation sources, virgin or managed indigenous forests. If we consider just the supply of sawlogs my estimate is that about 85 per cent still comes from non-plantation sources. When it comes to wood exports, we are not competing on a level playing field. Evidence of just how unlevel the playing field has become is illustrated by a breakdown of logging costs of Siberian logs exported to China supplied by David Janett of Forest Management Limited. In the detailed cost analysis there is no charge for stumpage or royalties. Standing trees were being supplied at no cost and nothing was being collected to cover future costs. Is it any wonder that Russia is now proposing a log export tax? The global market is awash with subsidised low value but generally high quality wood. This is a position that cannot last, but how long can it continue – 5, 10, 20 years? My estimate is certainly less than 20 years, maybe 10 years, possibly even 5 years. There are two other factors that have contributed to the demise of wood.
First is the environmental movement. A greater public awareness of the environment probably began with the 1962 publication of Rachel Carson’s Silent Spring. At first I was delighted. Foresters were the original conservationists. In the late 19th and early 20th centuries these foresters, and long before conservation became fashionable, raised awareness of the need to conserve and manage forests. Most Forest Services began in the first two decades of the 20th century. But what happened was a disaster. The good work of the early foresters in conserving and managing forests has rarely, if ever, been recognised. The modern environmental movement had to find a target to increase its status as well as attract funding. The forestry sector, especially tree harvesting, was presented as forest destroyers. We have British Columbia being labelled as the ‘Brazil of the North’ with plantations being claimed to be biological desserts. Both claims are blatantly untrue. Forest services could not be trusted, and in many cases they were discredited or, even worse, disestablished. Instead of moving to other targets such as agriculture, which almost invariably was established on permanently trashed indigenous forest land, environmental organisations made even greater demands for more concessions. In New Zealand the last Labour government stopped the very responsible sustainable indigenous management on the West Coast. Prime Minister Helen Clark and Minister of Forests Pete Hodgson did not even visit the operation. We expect the rest of the world to responsibly manage their indigenous forests yet we abandoned our most successful example.
Carbon credit effect
But is not the Green Party now supporting forestry? Well, yes and no. The recent article in Tree Grower by their forestry spokesperson Catherine Delahunty was most enthusiastic about the potential of forests to sequester carbon. But the article said almost nothing about the other, and probably far more significant, forestry benefits. Would forest investors be interested in investing in trees just for their carbon sequestration credits? Very few I suspect, especially as the buyer of any carbon credits would want to exercise management rights especially over stocking rates and time of final harvesting.
The second factor involves the actions of the forestry sector. These have not always been helpful. Instead of co-operating, nations have too often exploited the misfortunes of others. A wood market developed by one company is undercut by another offering a lower cost product – the only real winner being the wood buyer. I am especially critical of how the forest industry handled the demand for certified wood. Fearing protests by environmental activists large northern hemisphere outlets, such as Home Depot and B & Q, demanded that wood products come only from sustainable certified forests. Why did the forestry sector not make the requirement for sustainable certified wood conditional that the same requirements of environmental friendliness and sustainability be required for all wood’s competitors?
Trees are the answer
Events of this last decade have been most depressing. We might have expected that the environmental advantages offered by forestry and wood to be better understood by those who regard themselves as environmentalists, by the politicians and by the public. All tree growers however should take comfort in the knowledge that the present nightmare cannot last. We cannot predict when, but it will eventually happen. When it does – trees will be the answer.