WoodWeek – 12 April 2017

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Greetings from your WoodWeek news team.

In this weeks news you’ll see that the Ministry for Primary Industries is predicting further growth in our log exports to China. That’s great if it happens, but the increase would see greater reliance on that single market for a major part of our forestry trade. While prices are strong, everything can change when prices weaken.

Meanwhile, in Canada, their BC government is investing $7.7 million to promote West Coast lumber in markets around the world as trouble with its chief trading partner looms. Premier Christy Clark announced the fresh funding at an annual forest industry convention in Vancouver last week. Clark said, “By growing international demand, we are decreasing our reliance on a single market, creating more opportunity, and supporting the tens of thousands of British Columbians who rely on forestry.” BC’s lumber industry accounted for about 35 per cent of the province’s total exports last year—with much of that wood heading to the US.

Then, again in BC, their politicians, through public ownership of forestlands, have more skin in the game than the mainly privately held resource here in New Zealand.

Looking to forest planting, an MPI survey of all 28 commercial forest nurseries in New Zealand shows stock sales in 2016 for planting this year were 52.2 million seedlings, compared with 49.5 million the year before.

Just days after the NZ Forest Owners Association finished a roadshow on this very topic, a global forestry conference running in India last week heard from several international sustainability experts on the important role that forests play in protecting many other values than just monetary ones.

And finally, New Forests, on behalf of its Tropical Asia Forest Fund (TAFF), has completed the acquisition of a majority shareholding in one of the largest hardwood plantation estates in Laos.

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Seedling survey results positive for planting

More seedlings bodes well for 2017 planting season - A rise in the number of timber tree seedlings being produced indicates a recent decline in plantation forest replanting may be reversing.

An MPI survey of all 28 commercial forest nurseries in New Zealand shows stock sales in 2016 for planting this year were 52.2 million seedlings, compared with 49.5 million the year before.

Forest Owners Association Chief Executive David Rhodes says the increase in seedling sales is a positive sign the industry is gearing up for increased production, even if the trees planted now will not be harvested for about another 30 years.

“Improved log prices over the past year will be one factor. Another is the carbon credit value for planting trees under the Emissions Trading Scheme is increasing, now we don’t have those bogus Eastern European credits in the market.”

“One important trend is the gradual increase in the number of timber woodlots on farmland. Farmers appear to be seeing the countercyclical value in having profitable timber plantations growing on their properties to balance low meat and wool prices. They may also have a long-term eye to carbon offsets from their trees, if agriculture was ever brought into the ETS,” Rhodes says.

Production from New Zealand forests will increase over the next five or so years, due to extensive plantings in the past, which peaked at a growth of nearly 100,000 new hectares planted in 1994. But some recent years have seen a reduction in New Zealand’s total plantation forest area.

The MPI survey has revealed other plantation forestry trends, including an increase in the use of Pinus radiata. Ninety percent of current plantation trees are Pinus radiata, with Douglas Fir the next most important species, especially in the South Island. The Pinus radiata dominance appears to be increasing. The survey indicates nearly 94 percent of 2016 seedling sales were Pinus radiata.

Foresters are also taking advantage of the genetic developments in Pinus radiata, with 72 percent of seedling sales comprising Growth and Form 19 trees or better. This is higher than the 69 percent in 2015.

New Zealand Farm Forestry Association incoming President Neil Cullen is also heartened by the increased sales of plantation forest seedlings reported for 2016.

“It doesn’t look like a one-off. The indication from nearly all responding nurseries is that sales for 2017 are going to be the same or better,” Cullen says.

“However, the new planting rate is still too low. I don’t expect a big increase until the government provides incentives to deliver policies of national importance through more planting, in particular for improved water quality and to off-set greenhouse gas emissions.”

Cullen says of special interest in the nursery survey is the reported sale of 9.8 million manuka seedlings, enough to stock 6300 ha. This, he says, is a reflection of the current high demand for manuka honey.

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Name change for Future Forests Research

Forest Growers Research Ltd (FGR) will now be the entity for managing all collaborative forest growing research activities on behalf of New Zealand forest growers. Whilst the Forest Growers Levy Trust is the dominant industry investor in the research programmes, the government and individual companies remain as significant investors in the various research programmes managed by FGR.

Research funding agreements between FFR and service providers will not change as there is no change to the underlying legal entity. The intention is that research funding agreements between Forest Owners Association and research providers will be assigned to FGR and they will be contacting research partners directly seeking their consent to the assignment of these agreements.


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Situation Outlook for Primary Industries

New Zealand’s primary industry exports are forecast to increase 1.4 percent to $37.5 billion for the year ending June 2017, up $0.8 billion from our December forecast1. Dairy export volumes were much stronger over the December quarter than we had previously forecast.

Strong global prices for forestry and dairy products, combined with rising horticulture production volumes, more than offset falling beef and lamb exports due to lower stock numbers in our latest forecast.

We expect dairy prices to continue to remain relatively stable (at higher levels than in the previous year) over the remainder of the season, buoyed by lower production coming out of the Southern Hemisphere. In addition, record forestry harvest volumes are expected to drive an increase in log exports, particularly for use in the Chinese housing market.



Forestry: +5.8%

Rising log exports are behind a forecast 5.8 percent increase in forestry export revenue (to $5.4 billion) for the year ending June 2017. Strong Chinese demand for logs, due to an expanding housing market, combined with low shipping costs have driven harvesting to record levels. Wood is expected to be plentiful over the next ve years due to high planting rates in the 1990s.



Download the full SOPI Report here

Source: Ministry for Primary Industries

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Forestry exports forecast to rise

Dairy, forestry and horticulture predicted to lift export returns this year: The latest Ministry for Primary Industries Situation and Outlook report says primary industry exports are forecast to increase 1.4 percent to $37.5b for the year ending June 2017, up $0.8 billion from the forecast in December last year.

Dairy, forestry and horticulture returns should be higher, while beef and lamb exports will fall due to lower stock numbers.

The value of dairy exports is forecast to rise to $14.5b for the year to June, following an improvement in global prices and a drop in production.

In addition, record forestry harvest volumes are expected to drive an increase in log exports to $5.4b, particularly for use in the Chinese housing market. Wood is expected to be plentiful over the next five years due to high planting rates in the 1990s.

Horticulture exports should be worth $5.2b, up from $4.98, with wine, apples and kiwifruit all showing continued growth, particularly the apple industry which has had a record harvest this year.


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Positive outlook for forestry sector: Associate Primary Industries Minister Louise Upston has welcomed new forecasts showing forestry export revenue set to rise further over the next two financial years.

The Ministry for Primary Industries’ first quarterly update of its Situation Outlook for Primary Industries shows forestry export revenue is forecast to rise 5.8 per cent to $5.4 billion for the year ending June 2017, and a further 8.8 per cent to $5.9 billion in the year to June 2018.

“Rising log exports are behind this positive forecast, with a strong demand from China due to its expanding housing market. This, combined with low shipping costs, has driven harvesting to record levels,” Ms Upston says.

“Increased building activity in Auckland and Christchurch are also driving domestic consumption of sawn timber, up 7 per cent in the year to September 2016, which is great news for the forestry sector.”

The annual harvest reached a new record in 2016, pushed up by higher log prices, with the supply of harvestable wood set to increase over the next five years.

“Forestry is our third highest export-earner and an important industry for our regions. This Government is encouraging more planting through the Afforestation Grants Scheme which has $19.5 million to establish 15,000ha of new forests between 2015 and 2020.

“Not only is the planting of new forests good for the sector, but it helps with erosion control, carbon sequestration, and the better use of marginal land,” Ms Upston says.

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Forests play immense role in bio-economy

Just days after the NZ Forest Owners Association finished a roadshow on this very topic, a global forestry conference running in India last week heard from several international sustainability experts on the important role that forests play in protecting many other values than just monetary ones.

Role of forests in bio-economy immense say experts - The third day of the Commonwealth Forestry Conference at Forest Research Institute on Wednesday saw a plenary session on “Contribution of forests towards sustainable development goals”, where experts spoke about immense role of forests in bio-economy.

Prof John Innes, dean, faculty of forestry, University of British Columbia, Canada, stated, “Forests’ economic values are increasingly being attached to varied services like carbon sequestration, bioenergy, provision of freshwater, recreational opportunities, and urban ecology, apart from timber.

Hence, changing traditional forestry sector will need to accelerate if it is to succeed in the future. US $ 88 billion is derived from timbre forests globally.”

Speaking about the role of forests in tackling natural disaster, Anupam Joshi of World Bank, India, stated, “The life of hydro-power dams can be increased by good forests. Besides, the value of forests ecosystem should be measured in support of economic growth.”

Eva Muller, director, Food and Agriculture Organisation, Rome, said the 2030 agenda for sustainable development and sustainable development goals (SDG) would guide development policies globally during the coming one and half decades.

“Forests, which harbour 80% of terrestrial biodiversity, provide both sustenance needs and diversified economic opportunity at a significant scale and play a key role in climate change mitigation and adaptation.” she said. Muller also provided concrete evidence of the multiple contributions of forests and forestry to the SDG and pointed out some of the challenges with strategies to strengthen the role of forestry in achieving SDG.

During the conference experts expressed their concerns over inadequate research work in the forestry sector and climate change in most of the countries.

“Without proper scientific studies backed by data, the future planning and implementation in the environment is going to suffer,” they said, while stressing on connecting communities with the forestry sector.

Innes said, “Except the US, Australia, France, Germany and Sweden, other countries are not much interested in research work on environment, including forestry. Money is also not flowing to the education institutions working on these subjects. As Oxford University is no longer associated with Commonwealth, education and research on forest management is declining.”

Rob de Fegely, national president of Institute of Foresters of Australia, expressed concern over steady decline in forestry research work in Australia as well. “We are paying too much importance to our political masters than people in communities. We need to communicate more with communities and exchange ideas with them,” he said.

Sir Harry Studholme, chairman, Forestry Commission England/Scotland, said, “It is difficult to make politicians understand forestry; governments don’t listen about forest conservation, which creates conflict. Foresters and forest experts too live in delusion and fail to explain well to governments, though they worry about communities dependent on forests and depletion of funds.”

More >>

Source: Times of India

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ANZ Commodity Price Index

The headline ANZ Commodity Price index eked out a small 0.4% m/m gain in March. Compared with March last year, international prices are up 23%. Importantly for exporters, a 2.9% fall in the NZD TWI during March lifted local returns by 3.4% m/m. Compared with the same time last year local prices are 16.5% higher.

In March there were a number of contrasting trends at the sector level, and even within the categories that make up each sector. Within the headline index, dairy (-1.8%) and seafood (-3.4%) prices both declined, but movements for specific products within each varied significantly. Meat and fibre prices experienced the biggest gain (+3.8%), followed by aluminium (+2.7%) and forestry (+1.2%). Horticultural prices were unchanged. In aggregate, the non-dairy component of the index rose 1.8% m/m and has gained 5.0% since the start of 2017.

The variable nature of price movements during the month highlights the fact that many products are currently trading on their own individual supply-demand fundamentals rather than in a synchronised fashion. This implies macroeconomic drivers (USD movements, reflation expectations, oil prices, China’s economic growth etc) are having a reduced say at present.

In terms of sector specifics:
  • Dairy prices slipped 1.8% m/m in March, but remain nearly 48% higher than last year. Price falls for milk powder products lead the decline (SMP -8%, WMP -5.1%). This was due to increased New Zealand supply as late-summer/early-autumn pasture conditions improved milk flows and eliminated the risk of an early finish to the season for North Island farmers. Cheese prices also declined (-3.6%). But in stark contrast, butter (+9.2%) and casein (+11.7%) prices both rose significantly. End-demand for butter remains strong in Asia as foodservice sales grow strongly (i.e. bakery goods) and low Australian milk flows have led to shortages in this market. Casein prices appear to have played some catch-up to the gains seen in cheese prices since late 2016.

  • Meat and fibre prices were the star performer in the month, lifting 3.8% m/m. In local price terms they rose 6.5% m/m. Within the sector, wool prices bounced 8.6% as bargain hunter emerged and supply was withheld at auction because prices were below the cost of production. The next biggest gain was for lamb prices (+5.8%) as tight Australasian supply spurred inter-market competition for key cuts. This plus domestic procurement premiums are set to continue to support solid farm-gate returns. International beef prices (+1.9%) pushed higher too, helped by robust demand in the US and tight Australasian supply. Skin prices continued to disappoint (-1.8% m/m) due to changed fashion trends and the knock-on effects from wool prices.

  • Aluminium prices continued their upward trend, with a 2.7% m/m lift in March. A series of supply-side issues for the base metal complex, a reduction in inefficient Chinese capacity and continued exuberance about global demand are supporting price gains.

  • Forestry prices eked out a small gain of 1.2% m/m led by log and wood pulp prices. Chinese demand remains buoyant, driven by more infrastructure/housing activity, reduced harvesting of the nation’s own native forests and steady competitive pressure from the likes of Russia. Competition with the local market also remains a supportive factor for sawn timber prices.

  • Horticulture prices were unchanged in March, but early-season sale indicators for both kiwifruit and pipfruit have been positive. Zespri announced very strong price indications for both the 2017 Green ($5.15-$6.15/tray) and Gold ($8.75-$9.75/tray) crops. This means increased revenue is guaranteed for Gold growers, and Green could lift too if the upper end of the price range is achieved (as average yields will be lower). More new club apple varieties coming into production and high soluble solids should support average pipfruit pricing and total sector revenue from the 2017 crop.

  • Seafood prices were the underperformer in March, falling 3.4% m/m. However, the decline was entirely due to lower rock lobster prices, which dropped 15.4% m/m and are down 20% in the last two months. The main reason appears to be seasonality, with prices coming off from the peak demand period of Chinese New Year celebrations. There are also reportedly some changes occurring to the distribution channel, with a move to e-commerce reorganising the supply chain. The remainder of the seafood complex was largely unchanged.




Source: ANZ

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New Forests invests in hardwood in Laos

New Forests Completes Investment in Hardwood Plantation in Laos - Asian investment business has now expanded across Indonesia, Malaysia, and Laos.

New Forests, on behalf of its Tropical Asia Forest Fund (TAFF), has completed the acquisition of a majority shareholding in one of the largest hardwood plantation estates in Laos. TAFF’s portfolio now comprises investments with diversified timber species and market exposures across plantation companies in Malaysia, Indonesia, and Laos. TAFF includes capital commitments from nine investors and is the only institutional forestry fund dedicated to investing in sustainably managed timber plantations in Southeast Asia.

TAFF’s latest acquisition is an 85% interest in a mature plantation estate that will be known as Mekong Timber Plantations. New Forests intends to develop the plantation as a high-quality timber asset serving regional markets for certified plantation hardwood. The purchase further supports TAFF’s investment thesis of acquiring significant interests in plantation timber companies and investing to transition these assets toward higher value end markets and to service the growing demand for certified, sustainable timber in Asian markets. The fund’s investments include eucalyptus and acacia plantations as well as a rubber plantation that will produce both latex and timber products.

Mekong Timber Plantations will manage 22,000 hectares of leased area mainly in Bolikhamxay and Khammouane provinces of Laos. TAFF also has equity interests in Acacia Forest Industries Sdn Bhd of Sabah, Malaysia and PT Hutan Ketapang Industri of West Kalimantan, Indonesia. In total, the fund has invested in more than 150,000 hectares of concessions, leases, and gazetted land, currently including around 45,000 net planted hectares.

“New Forests has steadily expanded the portfolio of investments we manage across Southeast Asia through the activities of the TAFF,” said CEO David Brand. “The fund has proven that there is an opportunity for institutional investors to contribute to the shift of Asia’s forest sector to long-term, sustainable management. With a patient and disciplined approach to acquisitions, good forestry investments are available throughout the region. We also believe there is great opportunity to improve silviculture, increase growth rates, and develop markets linked with the growing demand for wood products in Asia.”

New Forests launched the Tropical Asia Forest Fund to bring its timberland investment expertise to emerging markets in Asia. The company has established a dedicated, local team to develop and manage investment opportunities. Today the TAFF team includes six investment professionals based in Singapore with expertise across private equity, forestry investment, forest resource management, and environmental and social management.

Managing Director for New Forests Asia, Geoffrey Seeto, commented, “Southeast Asia is a new market for forestry investors, but it is at the centre of the rising Asian demand for responsibly produced timber. Our approach has been to progressively work through a pipeline of quality deals developed through our regional network and local presence. We have demonstrated an ability to complete complex transactions and provide beneficial outcomes to our business partners. We continue to see attractive opportunities and look forward to continuing our investment program in the region.”

Brand added, “Since we launched TAFF, interest in sustainable investments has grown dramatically, and we believe the TAFF portfolio will demonstrate the ability to generate appropriate risk-adjusted returns from forestry in Southeast Asia while also delivering on objectives like biodiversity conservation, climate change mitigation, and shared prosperity.”

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First WA Business Adopts FOLS

Wilson’s Moving its Operators to the Skills Verification Program

Wilson’s Harvesting & Haulage is the first Western Australian business to adopt the FOLS Skills Verification Program.

Based in Yornup, Western Australia, Wilson’s is a large harvesting and haulage, infield chipping and biomass company, with 110 employees.

Wilson’s Director, Ian Wilson said the decision to adopt FOLS came at a time when the business was looking for a way to verify and demonstrate the skills of their operators.

“We saw an article in Australian Forest and Timber News about HVP Plantations adopting FOLS in Victoria. After some investigation and talking with ForestWorks we decided FOLS would be a really useful tool for managing the skills and training of our operators.”

“We see the benefits of FOLS as two-fold – we see it as a tool to verify operators’ skills, which will be useful when tendering for contracts; it is also valuable for identifying any skills gaps in the business and helping us to forward plan.”

“With FOLS we can now easily demonstrate our capabilities to Forest Managers when tendering for work.”

“Although FOLS is not widely used in Western Australia yet, there are many Forest Managers that are familiar with the program as they operate in other states. These Forest Managers understand FOLS to be a credible system for demonstrating the skills and capabilities of a workforce,” said Ian.

Wilson’s is also a member of the Australian Forest Contractors Association (AFCA). AFCA became advocates of the FOLS Skills Verification Program in July last year, after signing an agreement with ForestWorks to provide AFCA members and their operators with discounted FOLS fees.

Stacey Gardiner, AFCA General Manager, said FOLS provides organisations with the opportunity to demonstrate their professionalism.

“FOLS provides forestry managers with the confidence that the business they have engaged has adequately skilled people to do the job, which is becoming increasingly important particularly for those involved in FSC and AFS and chain of responsibility,” said Stacey.

Diana Lloyd, ForestWorks General Manager, said FOLS offers businesses a streamlined system to manage the skills of employees and improve safety in the workplace.

“FOLS verifies the currency of an operator’s skills and that they have undertaken the required nationally recognised training,” said Diana. FOLS is a national industry-led program, managed by ForestWorks. For more information about the FOLS Skills Verification Program, visit fols.forestworks.com.au

Photo: Ian Wilson, Director of Wilson’s Harvesting & Haulage, shaking hands with Eric Kowald, Truck Driver for Wilson’s Harvesting & Haulage, who just received his FOLS.

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... and finally ... Easter jokes ... new and old!

It's just about Easter - time for some old favourites:

A parishioner was in front of me coming out of church one day, and the preacher was standing at the door as he always is to shake hands.
He grabbed the parishioner by the hand and pulled him aside.
The Pastor said to him, "You need to join the Army of the Lord!"
The parishioner replied, "I'm already in the Army of the Lord, Pastor."
Pastor questioned, "How come I don't see you except at Christmas and Easter?"
He whispered back, "I'm in the secret service."

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A farmer plays a prank on Easter Sunday. After the egg hunt, he sneaks into the chicken coop and replaces every white egg with a brightly colored one.

Minutes later, the rooster walks in. He spots the colored eggs, then storms out and beats up the peacock.



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That's all for our mid-week wood news roundup.

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John Stulen
Editor
PO Box 1230
Building X91, Scion Campus, 99 Sala Street
Rotorua, New Zealand
Tel: +64 27 275 8011
Web: www.woodweek.com

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