WoodWeek – 25 September 2019

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Greetings from us at WoodWeek. In good wood news this week we've got some regular updates and some classics for you.

Data from the September update of the Ministry for Primary Industries Situation and Outlook publication shows log export prices have dropped 20 percent from February to July, including 17 percent just from May to July (Free on board basis, Figure 3). This was caused by several supply-based factors, including a build-up of softwood inventories in China following very high log export volumes from New Zealand. At the same time, supply of logs and sawn timber increased from Europe and Russia.

Now that prices are much lower, harvest volumes are expected to fall by around 5 percent from the previous year, as smaller forest owners (who currently represent around 40 percent of harvestable volumes) delay harvesting. As a result, log export volumes are expected to fall 9.2 percent in the year ending June 2020.

Coming to Melbourne and Rotorua in November, our popular FIEA ForestTECH 2019 conference series is the annual gathering place for resource managers, remote sensing, GIS analysts, mapping specialists, inventory foresters and technology providers. This week we have some presenter previews for you. We also have a timely reminder that early bird registrations close next week.

With the forest awards ceremony season in full swing this week we look to Northland where a woman considered the backbone of her company, a camp mum to her crew and a team member who will step into any position was crowned the Northland Forestry Skilled Professional of the Year last Friday night.

In South Australia earlier this week the Green Triangle Forest Industries Hub (GTFIH) launched a $1 billion sustainable growth plan in which an extra 200 million trees will be planted by 2030, sequestering 3.6 million tonnes of carbon dioxide every year.

The Hub's Action Agenda outlines how the industry will increase its economic output by more than 65% to meet projected local and global demand for wood and fibre products, making it a $2.5 billion industry for the region.

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Log market movements monitored

Industry adjustment to the new log pricing levels is continuing to take place. As with all adjustments this affects businesses and individuals in very different ways depending on their individual financial circumstances and the part of the sector they are operating in.

Last month, the Forest Industry Contractors Association sent out to its membership a survey to answer some pertinent questions around the log price downturn and the effect on contractors’ businesses. This indicated a significant effect in the workplace with a mix of business as usual, reduced hours and capped production. The market has shown resilience to further price reduction and prices have improved slightly, which mirrors the pattern seen after previous market corrections.

Despite this, no-one can predict with any degree of certainty where prices might go from here, and how long current conditions could prevail.

Scion also conducted a log price survey recently. This showed a relatively high variance in industry price predictions and emphasises the difficulty of assessing the range of different factors currently having an influence, including the US-China trade war.

Most respondents expect a continued strengthening into next year but not to the levels achieved in 2018. Volumes have responded to the price reduction and the same survey respondents are predicting a slight volume decrease in the next 3 months, but to return to August 2019 volumes in 6 months.

The associations for forest owners and forest contractors are continuing to monitor the situation here and offshore, and to share information. As part of this FICA will run another survey at the end of the month to ascertain the degree of change and use this information to report back to government and support the industry if the situation worsens.

For now, though, we appear to have moved beyond the bottom of the market.

Source: NZ Forest Industry Council

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Forest industry situation and outlook

Data from the MPI Situation and Outlook September update shows log export prices have dropped 20 percent from February to July, including 17 percent just from May to July (Free on board basis, Figure 3). This was caused by several supply-based factors, including a build-up of softwood inventories in China following very high log export volumes from New Zealand. At the same time, supply of logs and sawn timber increased from Europe and Russia.

China’s manufacturing sectors, including furniture, are showing signs of falling demand, but this is not likely to have a direct impact on demand for New Zealand logs. Importantly, Chinese demand in the construction sector, where most of New Zealand’s logs are used, does not show any significant reduction so far as a result of the US-China trade dispute.

Given the current oversupply at Chinese ports, log prices are expected to remain at lower levels over the next several months while high log inventories at Chinese ports gradually dissipate. Harvest volumes in New Zealand have been extremely high in response to previously elevated log prices, with some small woodlots being harvested early to capitalise on strong returns.

Now that prices are much lower, harvest volumes are expected to fall by around 5 percent from the previous year, as smaller forest owners (who currently represent around 40 percent of harvestable volumes) delay harvesting. As a result, log export volumes are expected to fall 9.2 percent in the year ending June 2020.

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Source: Ministry of Primary Industries

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Northland awards forest industry achievers

Female Forester Toasted 2019 Champ - A woman considered the backbone of her company, a camp mum to her crew and a team member who will step into any position was crowned the Northland Forestry Skilled Professional of the Year last Friday night.

Michelle Harrison, who owns Wise on Wood with husband Nigel, was awarded the top trophy by the Regional Economic Development and Forestry Minister Shane Jones and also won the inaugural PF Olsen Woman in Forestry crown at the fourth annual NFA Northland Forestry Awards before an industry-stacked audience of nearly 500 people.

Those who have worked alongside Michelle had nothing but high praise for this very driven mother of two saying she was always willing to share her knowledge with others and a very talented and capable woman. She was considered a great role model for the industry.

Eighteen years ago, Michelle had married into as well-established logging family, working in the business before she and Nigel started their own ground based harvesting crew in late 2015. They started small with just two in crew with Michelle initially the log maker and skiddie. The company has grown now, with a crew of seven and Michelle processing more than 350 tonnes a day driving the processor.

This year the company notched a record month of in excess of 10,000 tonnes. Michelle also does the office work and the health and safety side of Wise Wood while being a mum, wife, chair of the Okaihau College board of trustees and being with school and sport activities.

She is passionate about the environment and always looking for ways the company can improve its impact on the environment and to protect wildlife within their harvest areas.

This year she was instrumental in the relocation of the protected Kauri snails she discovered while helping to prepare an area for harvest. She has also worked with kiwi during and post-harvest, taking on the responsibility of monitoring the birds during harvest. Michelle is hoping to get her kiwi handling licence this year, to be followed by her own kiwi tracking dog.

Wise on Wood has an excellent reputation for its health and safety practices, environmental awareness, producing good returns for forest owners, and all the while keeping harvest managers and staff happy.

For more details of this year's Northland forest industry awards winners see: www.northlandwoodcouncil.co.nz

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ForestTECH 2019: Profiling our speakers

Our popular FIEA ForestTECH 2019 conference series, the annual gathering of resource managers, remote sensing, GIS and mapping specialists, inventory foresters and technology providers into this part of the forestry industry, runs again in November. Full details on the programmes along with details on the four workshops being run in conjunction with this years series, can be found on the event website; ForestTECH.events.

This week we profile some of this year’s presenters and presentations.

James Saunders, Swift Geospatial Solutions, South Africa

Satellite and location-based services have come a long way in the past few years. They have rapidly become accessible, affordable and easy to manage. Along with a multitude in advances in cloud computing, the forestry industry has seen great benefit in new products which are now affordable and accessible.

By mixing satellite data with on the ground data collection through web connected mobile devices, forestry experts can now get up to the minute data of what is happening on the ground like never before. This approach to forestry management decision support data is being presented by looking at a real-world example.

Matthew Aghai, DroneSeed Co, USA

DroneSeed and its planting technology were recently covered in a previous issue.

Their business model: They are paid per acre as a service to plant tree seeds and spray to protect them. They use drone swarms to revegetate forests and rangelands post-wildfire.

Their current customers: Since 2016 they have been working for three of the five largest timber companies in the US, as well as indigenous land ownerships and non-industrial land owners. They have also signed a contract with The Nature Conservancy for rangeland restoration.

Their technology: They have three pieces of technology they bring to projects to boost survival rates of limited seed:

1. Software to manage a swarm and boost seed survival. They have built the software to manage drone swarms and mission planning in the field. They have also built it to utilise LiDAR and Multi-spectral imagery to build a 3D terrain map and identify micro-sites and terrain features to deliver their seed vessels to targeted areas where they can connect with soil.

2. Hardware to manage economics. A single drone is the world's most expensive backpack sprayer. A group of drones can carry payloads competitive with small helicopters, each carrying 57lbs of payload. They also built the on the charging trucks and hardware to allow teams to operate like NASCAR pit crews and keep drones in the air more of the day boosting unit economics.

3. Seed vessels to boost seed survival. They have worked with nursery supply chain leaders to develop several tools that fit each species or biome. This means they have four seed vessels including: pelleting, capsules, or more advanced fibre-based micro-site enhancing projectiles. They avoid a 1-size fits all and match the difficulty of edaphic conditions with considerations of seed biology to optimize survival rate per acre.

They are notable as they are leading the space: They are the first and only company FAA approved to use heavy lift swarms of up to 5 aircraft, each carrying 57lbs.

Dan Kluskiewicz, Northwest Management, Inc, USA

ALS-assisted single-tree forest inventories present a wealth of opportunity for more productive and efficient forest management. They will be presenting on a collaborative effort between NMI, Interpine and partners in the SMART Forest Solutions team to construct an accurate single-tree inventory in a 20,000 hectare study area in eastern Arizona, US.

This enables the full potential of this detailed inventory with a combination of individual-tree growth and log-merchandising for sawmill management to be exploited. They will demonstrate the predictive capability of their methods for individual-tree and stand-level forest attributes, and discuss actionable information that they and their partners used this inventory to produce.

Andrew Kemsley, Forestry Corporation NSW, Australia

After having undergone a Remote Pilots Licence course and been issued a UAV - now what? More and more companies are issuing UAVs with often little direction given to the recipients. Hear from a forester's down to earth experiences, inspiring you to utilise this technology more often in day to day forest use. As he shares his tips obtained through trial and error you will walk away with the bare bones essentials for better navigating the forest environment and the range of tools to assist better forest management.

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Is tech change really accelerating?

Accelerating or decelerating? Just about all the media commentary about the future of work says that tech change is accelerating, like this example, originally published in the Listener. But what does the data tell us?

It’s now six years since Frey & Osborne’s claim that 47% of total US employment was at risk of automation over the following 10–20 years. Replicating their methodology for New Zealand, the NZIER and Chartered Accountants Australia and New Zealand estimated that 46% of New Zealand jobs were at risk. If they were right, we’d expect to see some strong signs of job displacement in the data by now. So, I went looking… and didn’t find much. Or more accurately, what I did find is directly contradictory to a “technological disruption of the labour market” story.

There’s no single measure of the rate of tech change but if that rate is accelerating, we’d see the impact on firms, the economy and the labour market. Acceleration would show up in many statistics, including:

• Job displacement – higher rates of job displacement and more frequent exits from the labour market
• Job churn – higher rates of both job creation and destruction
• Job switching – more people changing jobs
• Firm dynamism – higher rates of firm creation and destruction
• Productivity – higher rates of productivity growth

We might also expect to see changes in types of work arrangements, especially if tech change was changing business models and ways of working. Many have forecast an increase in casual, part-time, short-term and other “precarious” forms of employment.

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Carbon Match market update

Market Update: NZUs ease back - NZUs were sold back down to the $24.80 level last week on fairly limited volume and are best bid $24.75 and offered at $24.85 as of writing.

We are not seeing enormous interest from natural sellers, but one view is that at the current point of time, it doesn't really matter as you effectively have the New Zealand government also sitting there on the offer - with supply at $25 limited only by the aggregate compliance liability of ETS participants.

What the most recent stats show is that nearly 17 million tonnes at the fixed price of $25 were bought from the Government in the run up to last May's surrender. That added an extra $420 million into the Government coffers and perhaps there is a decision to be made about how that is used if the same happens again next year, which would seem entirely possible.

Tensions on the rise? - Since the current Government came in, forestry NZU holders have been through a relatively ebullient period. They've observed considerable work towards the development of an independent Climate Commission, the prioritisation of the Zero Carbon bill and the One Billion Trees programme. Work to fix the ETS is underway and all of this is testament to increased political ambition under the current Government. We would argue that this has certainly lent some degree of support to prices.

But NZU holders may want to exercise caution. 2020 is another election year. The politicking around the Zero Carbon bill is not over and tensions between land owners are running high. Farming communities are increasingly concerned about the impacts of afforestation on pastoral farm land. Likewise the issue of how to treat agricultural emissions remains extremely difficult and politicised. There's more flack in the pipeline yet for the ETS.

In mid July the interim Climate Change Committee released their inquiry into Agriculture and recommended that the best way to reduce livestock emissions is to price them through a farm-level levy/rebate scheme integrated with the ETS.

But getting the farm-level system up and running will take time - perhaps 5 years - so as an interim measure the Committee recommended that agricultural emissions be priced at the processor level from 2020 as "continued delay is not an option."

On that view, there is considerable pushback. Witness today's open letter to PM Jacinda Ardern from DairyNZ, Beef+Lamb and the Meat Industry Association, requesting her support for their counter proposal: "He Waka Eke Noa" - the Primary Sector Climate Change Commitment - is a 5-year programme of action aiming to equip farmers and growers with the knowledge and tools they need to deliver on-farm emissions reductions. It sets out a series of milestones to be achieved by 2025, at which point an on-farm emissions pricing mechanism could be introduced.

"This is an innovative and world-leading statement from the primary sector. We believe this will be more effective than taxing the sector via a levy on processors through the Emissions Trading Scheme".

Certainly the document contains a good plan for how to better enable individual farmers. Ultimately we want better information and more precision farming so that landowners can be even better placed to manage their specific land and resources.

But Captain Cook would have got nowhere if he'd sat around waiting for GPS. And thanks to Winston Peters the proposal to include agriculture is a very modest one, with just 5% of agricultural emissions on the table.

With a 95% level of free allocation and a carbon price of $25, the Government has calculated that the average dairy farm would only incur a cost of $0.01c per kg of milk solids. Similarly, the average cost on beef production is estimated at $0.01c per kg of beef, $0.03c per kg of sheep meat, and $0.04c per kg of venison.

These numbers hardly seem significant, although we acknowledge that it is the risk of creeping carbon costs which strikes fear into the hearts of many farming communities, who are already contending with a raft of other challenges to their environmental stewardship including new freshwater proposals.

It's a tough call, but having made our commitments under the Paris accord, the danger of continuing to give agriculture its free pass until 2025, is that discontent spills over to other sectors - the sectors which, as a result, will be required to do even more of the heavy lifting.

Carbon Match - every weekday from 1-5pm.

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Australia: Green Triangle launches action plan

Planning for Planting and Processing: Green Triangle Forest Industries Hub launches Action Agenda for South Australia and Western Victoria.

Earlier this week the Green Triangle Forest Industries Hub (GTFIH) launched a $1 billion sustainable growth plan in which an extra 200 million trees will be planted by 2030, sequestering 3.6 million tonnes of carbon dioxide every year.

The plan means the GTFIH will contribute 20% of the national growth target outlined in the Federal Government’s Forests for Future initiative.

The new ‘Green Triangle Forestry Industries Hub Action Agenda’ outlines how the industry will increase its economic output by more than 65% to meet projected local and global demand for wood and fibre products, making it a $2.5 billion industry for the region.

It will also support the Green Triangle with a focus on developing skills for the future ensuring a sustainable local wood fibre supply for construction of homes, furniture and household products, and contribute to South Australia’s and Victoria’s s economy and exports.

The plan was launched yesterday in Mount Gambier, in the heart of the Green Triangle region, by the nine companies which comprise the GTFIH before nearly 100 local, state and federal stakeholders.

GTFIH Chair Linda Sewell said the plan demonstrated the long-term social, environmental and economic commitment of each of the Hub members to the industry and the Green Triangle. “The Action Agenda is the Hub’s 10-year plan for growing future opportunities for the region, which will contribute to the longer term prosperity of Green Triangle communities,” Ms Sewell said.

“Our industry supports more than 7000 people in the Green Triangle Region by providing a sustainably-produced timber source, fulfilling the needs of people for a whole range of products essential to our daily lives.

“As stewards of our industry, we want to build on the successes of the past decade and create a significant fibre bowl.. The industry has gone from strength to strength, continuing to support local communities and providing stable, long-term employment.”

Ian McDonnell, Deputy Chair of the Green Triangle Forest Industries Hub said the Hub will work collaboratively with governments, communities and landholders on implementing the Action Agenda and members will invest up to $300 million in local processing and manufacturing equipment upgrades to boost efficiency.

“The Hub is planning for growth. Without action, we will not be able to meet future demand for timber products and there will be an overall reduction in Australia’s national plantation estate, which will negatively impact the industry and communities that rely on it,” he said.

“This supply constraint has been identified in the Federal Government’s plan, which is calling for one billion trees to be planted across Australia to meet demand and support jobs. We’re excited that our 200 million tree goal is a significant 20 percent of the national target.”

The Action Agenda encompasses four core areas of activity which include a commitment to local processing, training and skill development for local people, genuine community engagement and a focus on sustainable initiatives to support future generations.

The Action Agenda is an industry-led vision for growth over the next 10 years. Ms Sewell said the Hub is committed to consulting with stakeholders including the local community, government and other interested parties, to ensure that their needs and interests are addressed through the work of the GTFIH.

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Steady growth for Port Nelson

Continued growth in cargo volume has contributed to Port Nelson delivering an operating profit of $30.5 million for the 2018/2019 financial year. This is an increase of $3.4 million compared to the $27.1 million reported in 2018. Net Profit After Tax, including a $2.6 million increase in the valuation of investment property, was $15.3 million.

In consideration of the steady growth of the region’s exports through the port and the promising returns on investments, Port Nelson’s Chair, Phil Lough, announced an additional $800,000 dividend payment would be made to shareholders, this is on top of the full-year declared dividend of $5.5 million.

Cargo volume was up on the last financial year to 3.6 million tonnes buoyed by a growth in log volumes driven by increased Chinese demand and the early harvesting of wood instigated by the forest fires earlier in the year. Container throughput was marginally down compared to last year. This was due to a change in shipping services resulting in fewer empty containers transhipped through Nelson. However, the weekly Pacifica coastal service has introduced a larger vessel to absorb transhipment export volumes. Container visits for Maersk’s Northern Star service and CMA CGM’s PAD service returned to the region for the peak pip fruit season through winter. Exporter utilisation of all shipping services was strong.

Apple exports remained consistent with previous year’s volumes however drought conditions impacted crops causing these to remain below expected growth forecasts for the financial year. Overseas demand for premium New Zealand wine continues to stay healthy, and the resulting growth in dry goods imports and wine exports through Port Nelson, in turn, enabled the expansion of QuayConnect, the Port's third-party logistics wine distribution and storage business.

With sustained export log growth, Port Nelson is working to make more efficient use of existing log storage yards including the recently reclaimed Calwell Slipway area, the Graham Street plot and further investigation into other opportunities.

Ahead of receiving larger vessels, Port Nelson continued to make significant investments including the new Huria Matenga II, a Damen 2411 tug with 70-tonne bollard pull capacity, the $20million redevelopment of Main Wharf North, recently awarded to contractor McDonnell Dowell, and innovative technologies to improve port safety and operational sustainability and productivity.

Mr Lough commented that the Port continues to deliver on its strategic objectives growing from strength to strength. The 2019 financial performance was further evidence of the Port understanding the regions and its users' requirements and ensuring that these were being supported. However, Mr Lough is cautiously optimistic about the next few years as export log prices have cooled recently, shipping lines continuously seek to gain efficiencies, and the labour market remains tight.

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Cultural values important to forest stakeholders

Maori and non- Maori value different aspects of plantation forestry, which owners should bear in mind if they want to maximise their social licence to operate, a new study shows.

In a paper published in in the international journal PLoS ONE, titled “Stakeholder valuation of soil ecosystem services from New Zealand’s planted forests”, the authors say understanding these values should also help in developing an assessment and monitoring tool for soil health in New Zealand’s planted forests.

Scientists from the Bio-Protection Research Centre and Scion surveyed 145 forest stakeholders from seven groups to find out what forest soil ecosystem services they valued most.

The seven groups were: forest owners, forest managers, land owners, land managers, wood processors, recreational forest users, and others with a vested interest in forest soils. Respondents were also asked if they identified as Maori or represented a Maori group or organisation.

Overall, achieving sustainable production (the soil’s ability to sustain forest growth over multiple plantings) was the highest-ranked ecosystem service, followed by ecosystem resilience, clean water, and maximising forest production.

All survey participants said maintaing sustainable production was most important. But Maori placed greater importance on forest ecosystem resilience, provenance and kaitiakitanga, water quality, and harvesting food and medicines from the forest.

“It is important that cultural views are understood and integrated into future soil health testing schemes to reflect the needs of all stakeholders,” the authors say.

“In addition to providing ecosystem services for the country as a whole, planted forests in New Zealand also have a strong cultural value for Maori,” the authors write. “By formally accepting and integrating indigenous knowledge and values into soil health monitoring, we will be better positioned to inform land use decisions that affect indigenous and/or local communities.”

“Forests make up approximately 10% of the total asset base supporting the Maori economy, and there are projections that Maori may eventually own or control greater than 40% of New Zealand’s planted forests,” the authors say. “Therefore this group needs to be well represented in decision-making that affects the forestry industry.”

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... almost finally ... letter to my boss

Letter to my boss

I have enjoyed working here these past several years. You have paid me very well and given me benefits beyond belief.

Have 3-4 months off per year and a pension plan that will pay my salary till the day I die and then pay my estate one year 's salary death bonus and then continue to pay my spouse my salary with increases until she or he dies along with a health plan that most people can only dream of having. Despite this, I plan to take the next 12-18 months to find a new position.

During this time, I will show up for work when it is convenient for me. In addition, I fully expect to draw my full salary and all the other perks associated with my current job. Oh yes, if my search for this new job proves fruitless, I will be coming back with no loss in pay or status. Before you say anything, remember that you have no choice in this matter. I can, and I will do this.


Every Member of Parliament running for re-election

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Buy and Sell

... and finally ... Classic television advertisements

Classic cinema, TV and Radio ads from the 1920s to 2000s - Advertising is part of our collective culture as New Zealanders. Each generation has ads that linger in the subconscious – which ad is it for you?

ASB’s Goldstein? Spot the Dog? Go Well with Shell? Ches and Dale from down on the farm? The catchy Rinso jingle ... or Barry Crump's wild rides with Scotty in the ute? With their compactness and reliance upon repetition, advertisements distil the values and stereotypes of a time and place down to their very essence.

To save your valuable time, we've picked a pearler for you - Barry Crump taking young Scotty for a ride offroad:

See it here >>

That's all for this week's wood news.

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John Stulen
Innovatek Limited
PO Box 1230
Rotorua, New Zealand
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Web: www.woodweek.com

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