WoodWeek 5 June 2019
Underlying this is no doubt the continued firm export and domestic log markets being underpinned by log export demand in our single biggest market. Today’s figures from Champion Freight show total log export values to China year-on-year to the end of April were up 20 percent year-on-year contributing to overall log exports growing 18 percent across all markets. To the end of April, China shipments month-on-month are up 15 percent and overall log exports up 26 percent.
Looking to our next big industry conference in Rotorua - HarvestTECH 2019 - we are still operating a wait list for people wanting to register. Go to the website and fill in your information: as we get cancellations, you may be able to get in. Make sure you hear back from us with your confirmation before booking flights and accommodation so you don't get disappointed.
In case you missed the drama and finger-pointing that accompanied last week's Budget announcements, here are some key points relating to forestry's potential improvements in our 'wellbeing' from the Budget. Over NZ$49 million has been allocated to help transform the forestry sector. Combined with existing funding, this equates to an investment of NZ$58 million in Te Uru Rakau.
Finally, our forest industry has now achieved almost national coverage with annual industry awards nights. These functions are run by regional wood councils, recognising extraordinary individuals and teams for their efforts to improve training and skill levels. It’s been a gradual process, and a big thanks to regional business leaders for their efforts. Moving into their fourth year, industry leaders in Northland’s forestry industry are inviting everyone who can to step up once again and celebrate those who contribute to our vibrant sector.
Spokesperson for the Northland group, Andrew Widdowson says “We’ve allocated a two-month window so you can get your nominations lodged well before the 1 August deadline. There are too many great people out there to ignore in this process and it’s quite acceptable to nominate yourself and your company.”
This week we have for you:
Prices jump for forests on farmsGovernment incentives see forestry farm prices increase - The median price of forestry farms across New Zealand has increased by 45% over the last year from $6,487 per hectare to $9,394 per hectare according to the Real Estate Institute of New Zealand (REINZ) source of the most complete and accurate real estate data in New Zealand.
This increase may be largely the result of the Government incentives to plant trees making forestry land more desirable and leading to increased sales of sheep and beef farms. Interestingly, the North Island is seeing a greater impact on forestry prices than the South Island.
Bindi Norwell, Chief Executive at REINZ says: “Over the last few months there has been a growing voice from the rural community that the Government’s incentives towards planting trees are favouring forestry sales and leading to increasing sales of beef and sheep farms. With the price of forestry farms across New Zealand increasing by 45% when compared to the same time last year, the data tends to suggest that the rural community is correct in its assertions.
“The North Island has seen a greater impact on forestry prices than the South Island, with prices rising by 95% in the North Island yet actually falling in the South Island by 4% year-on- year,” continues Norwell.
The incentives may also be the reason for a reduction in farm sales. The number of farms sold across New Zealand fall by 29% when compared to the same time last year, however, the South Island has seen a greater impact than the North Island with falls of 32% and 26% respectively.
“Unsurprisingly, the number of forestry farms sold over the past year has fallen too, as investors are seeing forestry farms as a highly sought-after investment. Those investors are holding on to their farms which is also contributing to the price rises,” points out Norwell.
“Feedback from farmers and rural salespeople around the country, is increasingly one of concern with many saying that once beef or sheep farms have been converted to forestry, they will never be converted back again because of the loss of infrastructure and the high barrier to entry should re-conversion be considered in the future,” concludes Norwell.
Incentives towards forestry assets were introduced October 2018 and changes to the Overseas Investment Act that now prevent foreigners (with the exception of Australians and Singaporeans) from buying existing residential or lifestyle properties means that it may now be easier for foreigners to invest in forestry.
Champion Freight ReportLog export market graphics - This week we've got our monthly update from the Champion Freight team.
The chart shows total log export values to China year-on-year to the end of April were up 20 percent year-on-year contributing to overall log exports growing 18 percent across all markets.
To the end of April, China shipments month-on-month are up 15 percent and overall log exports up 26 percent.
Te Uru Rakau ScholarshipsTe Uru Rakau opens second round of Forestry Scholarships - Applications have opened for the second round of Te Uru Rakau’s Nga Karahipi Uru Rakau scholarships.
The scholarships provide $8,000 a year to Maori and female students enrolling in either a Bachelor of Forestry Science or Bachelor of Engineering (Hons) in Forest Engineering at the University of Canterbury.
Scholarship recipients also receive a paid internship with Te Uru Rakau or other forestry employers.
“We developed the scholarships to encourage young and talented individuals into New Zealand’s growing forestry industry. In awarding our inaugural scholarships in 2018, we were delighted with the high calibre of applications we received and as a result of this, we ended up awarding double the number of scholarships planned last year,” says Julie Collins, Head of Te Uru Rakau.
“This year we have a further six scholarships to award, and I strongly encourage anyone with a passion for forestry, who meets our criteria, to apply.”
“These scholarships are an investment in the future of our sector. We need to ensure we have the right skills in place to increase sustainability, productivity and value in the forestry sector in the future and these scholarships are an integral part of achieving this,” says Ms Collins.
Te Uru Rakau will award six scholarships for the 2020 academic year. The inaugural round of scholarships saw eight scholarships awarded. A further eight will be awarded, next year, for the 2021 academic year.
Budget: Some wellbeing capital for forestryIn case you missed the drama and finger-pointing that accompanied last week's Budget announcements. here are some key points relating to forestry's potential improvements in our 'wellbeing' from the Budget:
> Over NZ$49 million has been allocated to help transform the forestry sector. Combined with existing funding, this equates to an investment of NZ$58 million in Te Uru Rakau (Forestry New Zealand).
The funding will allow Te Uru Rakau to increase its regional presence to ensure foresters and landowners have the support they need and will also see the agency focus on the Government’s goal of developing a sustainable, domestic forestry workforce,” Forestry Minister Shane Jones says.
“A key part to achieving our vision for the sector will be delivering in the regions and we will see new premises built in Rotorua – the heart of the forestry sector – showcasing the use of wood in construction and accommodating Te Uru Rakau’s growth.”
> A NZ$1 billion funding boost to support a long overdue redevelopment of KiwiRail. This includes NZ$375 million for new wagons and locomotives, NZ$331 million to invest in track and other supporting infrastructure and NZ$35 million to begin the process of replacing current ferries that are nearing the end of their lives. This funding package includes NZ$300 million from the Provincial Growth Fund allocated for investment in regional rail initiatives.
> A NZ $229 million Sustainable Land Use Package that will invest in projects to protect and restore at-risk waterways and wetlands and provide support for farmers and growers to use their land more sustainably.
> NZ$107 million to ensure the economic transition required to deliver the country’s greenhouse gas emission reductions. The Budget also includes funding to implement an Emissions Trading Scheme (ETS) auctioning platform.
- A new NZ$300 million fund to help fill the 'capital gap' for New Zealand firms that expand beyond the early start-up phase
> NZ$20m over four years the fund strategic research to combat kauri dieback
Further information can be found here. Full details on the budget itself can be found on the treasury.govt.nz website.
Invercargill City Forests to be soldInvercargill City Council's holding company Holdco has decided to sell one of its subsidiary companies, Invercargill City Forests Limited.
City Forests Limited made a $733,000 after tax profit in 2018 and paid a $550,000 dividend to Holdco which is passed to the council to help offset rates.
However, Holdco general manager Andrew Cameron said the decision was made to sell City Forests Limited following clarification of Holdco's future strategy and expectations.
"These include strategic investments for the broader benefit of the community, as well as investments which produce a commercial return." Holdco wanted sustainable and consistent dividend streams into the future and the view was formed that forestry didn't fit into that criteria, he said.
It was "not purely" about the forestry company not making enough money, he said.
"Obviously businesses go up and down ... we are not suggesting it's not making money at the moment, it really is just looking at the long term forecast and projections.
"We can see it might not fit the criteria we are trying to get at with the council in the longer term."
The council wanted to know it was going to get x amount of dollars from its holding company every year, rather than nothing one year and a profit the next year.
"It's consistency ... we want investments that provide x amount of dollars every year, give or take."
Holdco chairman Brian Wood said Holdco identified that its investment in City Forests Limited was inconsistent with the strategic objectives agreed with the council.
"On that basis, Holdco has decided to divest its investment in [City Forests Limited]," Wood said.
Holdco was now working with City Forests Limited and other stakeholders to determine the best method to manage the sale process.
Story in a SNAPshot
Budget: Still murky on carbon marketsCarbon Match Weekly Market Update "Still Murky" - (31 May) The Budget did not include an explicit announcement of any change to the fixed price option. Market watchers had had an eye on Budget as a potential opportunity to change this, given that 31 May 2019, marks the surrender deadline for calendar 2018 liabilities for most emitters.
We are not drawing any conclusions either way, however, but remain rather of the view that legislation to change the ETS via an amendment to the CCRA is still forthcoming.
While Minister Shaw's announcement of 16 May outlined the substance that we might expect, we have not yet seen the Bill itself, and hence not the finer details.
What's the Worst Case? - A risk to the downside for holders of NZUs is that a $25 FPO stays in place for 2020, and possibly as far out as 2022 in the event that auctions are delayed.
The argument made by buyers might be that if they know for sure they can pay just $25 as late as May 31 2020, then at a 3% cost of capital, they'd not want to be a buyer of spot NZUs today at more than $24.20. The further out you hold that view, the less you'd be prepared to bid etc. (You can run the numbers to suit yourself obviously).
But we don't think this IS the situation in which buyers stand conclusively today. Absence of proof is not proof of absence and we remain unclear about whether $25 will hold as the level of the FPO past calendar 2019.
The Treasury's Own View - Digging through the details of the supplementary estimates of appropriations for Vote Environment section of the Budget we note that appropriations have been increased in relation to the allocation of NZUs to certain sectors of the economy and also in recognition of an expense associated with the sale of New Zealand Units at FPO.
For the former, the Treasury notes that the increase is "due to an increase in the upper limit of the appropriation from $25 per unit to $30 per unit to accommodate the uncertainty in the market price of New Zealand units".
It's not clear where this estimate comes from, or exactly how the numbers have been calculated - with any estimates that go into the Budget there is the problem of both estimating volumes and prices, but here at least we do see evidence that the Government itself envisages at least the possibility that a market price of up to $30 could be a possibility in the timeframe to which this Budget relates - namely 2019.
Our thoughts? We are still yet to see the full picture in relation to potential ETS changes and other than the specific initiatives outlined in the Budget in relation to forestry, the cost of advice and the resources required to establish the Independent Climate Commission, we are where we were earlier this week.... in the Great Unknown.
Perhaps the market is of a similar view. While bids have edged back slightly, NZUs on Carbon Match are still best bid at $24.70. Likewise we have good volume offered between $24.90 and $25 for those brave enough to make a move there.
Carbon Match - every weekday from 1-5pm.
Inspiring H&S leader wins national awardIndustry safety leaders rewarded for their work - Sixteen awards were presented at a gala dinner at SKYCITY Convention Centre in Auckland last week, where an audience of 600 celebrated a variety of successful health and safety initiatives and the people behind them.
The awards, which began in 2005, are organised by Safeguard magazine and proudly supported by WorkSafe New Zealand. The awards are judged by a panel which includes representatives from WorkSafe, NZ Council of Trade Unions, Safeguard, and an industry health and safety practitioner.
Dr Hillary Bennett received the Countdown Lifetime Achievement Award in recognition of her work in safety culture assessment and growth, and for her work in measuring and changing how chief executives and other leaders think about health and safety.
Hillary's work in the forest industry was a vital driver and key part of the changes which eventually brought resources together for industry leaders to form our own SafeTree H&S group. She also worked closely with contractor leaders in forest harvesting to change attitudes with the men and women on the forest floor. She continues to be a strong contributor to our FIEA Forest Industry Safety & Technology conferences. The next events are planned for May 2020 in both Rotorua and Melbourne.
Nominations open for Northland AwardsMoving into the fourth year with the Northland Forestry Awards, the Northland forestry industry can step up once again and celebrate those that contribute to a vibrant sector contributing to the regions GDP. Recognising those with extraordinary commitment, a high standard of work competency and a credible work culture is vital for the region. This initiative brings our industry together to celebrate success and encourage those on the cusp of their careers to continue training and development and to reward our industry heros.
The awards have been moved to Friday September 20 and Jackie Clarke; singer & celebrity will be mistress of ceremonies for the night at the ASB Kensington Stadium, Whangarei. There is an expectation to sell-out once again to a crowd of over 500. Northland Forestry Health & Safety Group encourage the industry to get nominations in sooner than later. “We have allocated a two- month window to get your nominations lodged as they close 1 August”, says group spokesperson Andrew Widdowson. “There are too many great people out there to ignore in this process and it’s quite acceptable to nominate yourself and your company too,” he confirmed.
New to this year’s line-up of categories is Woman in Forestry celebrating the diversity of our growing workforce and the great workmanship that females are bringing to a typically male dominated workplace. P F Olsen put their hand up to sponsor this category as they certainly recognise the contribution and increase in females in the industry today.
Nominations are now open and can be completed online. See: www.northlandwoodcouncil.co.nz for details.
Buy and Sell
... and finally ... time for some MTB fun
Stop me if you've seen this one ... if the music doesn't make you smile, this guy's MTB riding
or as on observer put it:
There's 3 types of bike videos:
The ones that make you say "I wish I could ride like that"
The ones that make you say "I wish I could ride there"
And the ones that just put a smile on your face ...
Or for some slightly drier humour:
BEST NEWSPAPER HEADLINES OF THE YEAR
1. Something Went Wrong in Jet Crash, Experts Say
2. Include Your Children When Baking Cookies
3. Police Begin Campaign to Run Down Jaywalkers
4. Drunks Get Nine Months in Violin Case
5. Iraqi Head Seeks Arms
7. Prostitutes Appeal to Pope
8. Panda Mating Fails; Veterinarian Takes Over
9. British Left Waffles on Falkland Islands
10. Teacher Strikes Idle Kids
11. Clinton Wins Budget; More Lies Ahead
12. Plane Too Close to Ground, Crash Probe Told
13. Union Members Refuse to Work After Death
14. Juvenile Court to Try Shooting Defendant
15. Stolen Painting Found by Tree
16. Local High School Dropouts Cut in Half
17. War Dims Hope for Peace
18. If Strike Isn't Settled Quickly, It May Last a While
That's all for this week's wood news.
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