WoodWeek – 3 June 2020

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Greetings from your daily forest/wood news team. You may have noticed if you check the WoodWeek website anytime during the week, we’re updating our top stories as they happen. If its wood news that matters to you, we'll bring you that update during the working week for you.

Moving to the news of the week, the debate continues. What is trying to be achieved with the proposed log traders bill has credibility on both sides. Everyone with capital invested in either forests or mills can justifiably argue a credible case. They say, ‘follow the money’ when looking for the drivers behind any debate. When you put it like that, the people with the least amount invested in the forest over the last half century is the Government.

History shows that New Zealand politicians were happy to cash in our collective forestry futures by selling the forests decades ago. Their next attempted intervention was trying to grab carbon credits from private investors when they became valuable. Since then, to a man (and woman), politicians have ignored the forest sector despite its high export earnings and any growth potential. Only last year did the Minister of the day decide to throw a bit of cash at planting trees as the previous administration committed us to international climate change targets.

So, whether you agree with the forest owners or the processors, it's hard to see how a third party can resolve problems which originate with subsidised or much larger scale processors by intervening in the local commercial log market. One thing is certain though: a rushed solution is unlikely to be a good outcome.

But, before you check out this week's debate details, first register your teams for our Forest Safety & Technology webinar series using this link. We have a great group of innovative and thought-provoking safety culture and technology speakers for you this month. Thanks to our growing list of loyal sponsors and forest companies who have registered their client and staff groups already. We are very pleased with the excellent webinars sessions we've got for you on 16th & 18th June.

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Forest Safety Webinars pack powerful messages

For years the challenges in forest safety involved dangers from falling trees. Our rapid change to mechanised logging has changed the nature of forest safety risks. The physical workload still brings risks as our workday progresses or forest and weather conditions change, but the risks now include decision-making ability and response times potentially being impacted by fatigue. This year’s webinar series later this month brings a strong focus on understanding what’s really happening for our workers in this regards.

As conditions for our events changed, so to we have changed to a webinar format for the 5th running of our Forest Safety & Technology conference series. A number of key safety awareness changes make this year’s event a must-see for all forest managers and contractors.

1. Practical tools for easier conversations with workers and safety managers;
2. Greater awareness of using cultural factors to get messages across;
3. Understanding of worker fatigue issues and ways to mitigate the effects;
4. Technology for all kinds of innovative applications. A shirt that tells you you’re getting tired? Yes!

Here is our first insight from Lance Burdett on what’s really going on in your head at work:

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Fumigation Update: Log Export Markets at Risk

In 2010 regulations were introduced to reduce methyl bromide emissions to the atmosphere as part of NZ’s commitment to international agreements we are signatory to. The users of methyl bromide were given 10 years, until 28 October 2020, to find alternative fumigants or to recapture methyl bromide after the treatment. A requirement of 5ppm remaining in the headspace after fumigation was imposed. While this can be achieved for small scale and shipping container fumigations with current technologies it is not possible for log stacks and ship-hold fumigations.

After an intensive research program lead by STIMBR, an alternative fumigant, EDN, was identified, research on its effectiveness completed and an application lodged with the Environmental Protection Agency (EPA) in July 2017, for approval to use it as a fumigant for forest products. A decision has still not been made by the EPA and WorkSafe. Despite delays in these approvals MPI is proceeding with government to government negotiations for agreement to use EDN. It is now almost certain that EDN will not be available by the end of October 2020. Furthermore, resource consents will also be required at some ports.

As research has now shown that the original methyl bromide recapture target of 5ppm set in 2010 is not achievable, an application was lodged with EPA for a reassessment of specified parts of the original recapture target. This is underway but the decision making process is slow and it is increasingly unlikely that a decision will be made in time to enable methyl bromide to be used in the interim until EDN is approved and available for use.

To safeguard the export log trade, an application for a 6 month waiver has also been made to the EPA. If successful the waiver would allow methyl bromide to be used under current rules for a further 6 months. If the waiver is not granted the Indian export market, worth $250million annually will end and if approval to use EDN is not available, all deck cargo to China will need to be debarked after 28th October 2020.

Source: nz.pfolsen.com

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Crunch coming for forestry policy

New Zealand wood processors face the loss of further volume in international markets and any increase in capacity looks unlikely without a policy shift in favour of greater use of timber in local commercial construction.

MPs considering rushed and flawed legislation to help improve the prospects of the sector heard time and again last week that local processing generally lacks scale. Those mills still competing in international markets are also facing increasing volumes of product from subsidised producers in China, Russia and Europe.

Paul Nicholls, chief executive of forester and pulp maker Ernslaw One, said the company would love to see more economically viable domestic processing. “But you have to have demand and you have to be able to produce a product at a price that will command that demand,” he told MPs on Tuesday.

That means producing at scale, and using the latest technology. “Sawmills either get bigger or they get extremely small – they close,” Nicholls told BusinessDesk.

One billion trees - New Zealand has embarked on a programme to plant a billion trees in the next decade to help meet the country’s emissions targets and to underpin the long-term growth of forestry – the country’s third-biggest export earner.

But two years after funds flowed for the new planting, we’re yet to catch up with a processing strategy to get more value from those trees.

In that time, cladding and mouldings maker Claymark went into receivership after a sale of the business fell through. Queensland-headquartered XLam shut its Nelson demonstration plant in favour of production at the company’s larger, newer cross-laminated timber production facility in New South Wales.

Red Stag announced a $20 million-plus investment in its own cross-laminated timber facility. China’s Guangxi Fenglin Wood Industry Group announced a feasibility project on a 400,000 cubic-metre particle board plant in Gisborne, its third attempt at a New Zealand venture in six years. Last month, Carter Holt Harvey shut its Whangarei sawmill in favour of its recently expanded operation at Kawerau and plans to cut jobs at its laminated veneer lumber plant at Marsden Point saying it can no longer compete in the Australian market.

Forestry consultant Dennis Neilson told Parliament’s environment select committee that New Zealand’s forest-growing sector is among the best in the world for technology, efficiency and supply chain management. But the performance of the processing sector had “dropped off a cliff” since the 1980s.

Lack of investment - With the exception of a handful of players, he said most mill owners had failed to invest and were increasingly uneconomic against products from newer and larger mills being built – usually with state subsidies – in countries like Russia, China, the US, Finland and Germany.

The Red Stag mill at Waipa – the largest in the Southern Hemisphere – could produce all the sawn timber required in New Zealand if it ran 24 hours a day, seven days a week as most overseas plants do, Neilson noted.

Fewer than 10 mills could probably replace the more than 50 operating now, with only about a fifth of the current workforce, he said. “Be careful what you wish for.”

At issue last week was whether a claimed shortage of logs for domestic processing was real, and whether the cost of those logs – and hence all New Zealand timber - was being inflated by subsidised purchasing from China.

In Northland, where the harvest peaked several years ago and is in decline, officials have warned that up to a third of the region’s milling capacity may be at risk during the coming decade if log exports remain at current levels. But Jeremy Waldegrave, managing director of Whangarei-based NZ Forestry, said even with the harvest decline, there is still sufficient supply for local processors.

Narrower niche - One of the challenges was the ever-tighter restrictions some mills were putting on the logs they would take, as they chased a narrower niche of products to remain viable.

That in-turn could reduce their choice of supply and the distance logs would have to be trucked. More bespoke length and grade requirements could also add to harvest costs, he said. The issues and debates are not new, but there is now the added complication of sustained high log prices since 2014 and increasing log export volumes.

Pulp and paper maker Oji Fibre Solutions would like to expand its operation at Kinleith but is concerned there won’t be sufficient fibre. Supplies of pruned logs, key for many smaller mills exporting appearance- grade wood to Australia and the US, are also projected to fall sharply from 2025, reflecting changing forest management practices 20 years ago.

China is driving that demand for logs and forest owners, including some with processing assets, acknowledge that subsidies within China may be driving the premiums being paid. But they don’t see any easy answers. The Wood Processors and Manufacturers Association is seeking some form of regulation – possibly indexing domestic log prices against a basket of international prices.

Red Stag chief executive Marty Verry said subsidies and the distorted log price are a serious problem. Already, mouldings made from New Zealand pine in China are coming to back New Zealand, Australia and other markets cheaper than firms here can compete with.

Indexing log prices seems overly complex. He favours countervailing duties if dumping can be proven, but that wouldn’t be easy. “We’ve got no visibility on stuff that is going on over there subsidy-wise,” he told BusinessDesk.

State support common overseas - Neilson told the committee that almost all countries subsidise their sawmills in some way and China is not unusual. But he said most Chinese mills can convert close to 70 percent of a raw log into timber, compared with 57 percent to 63 percent for New Zealand mills. Many veneer mills there can also peel much smaller logs than New Zealand mills will accept.

“Both of these Chinese efficiencies result in Chinese processors of New Zealand radiata pine being able to pay much more for their logs than New Zealand processors can afford to pay. It is simply a matter of economics.”

The need to increase the scale of local processors, and to develop new product lines, has long been recognised in the sector.

Carter Holt commissioned its LVL plant at Marsden Point in 2001 to take advantage of the wood flow coming on stream in Northland. Three years later it was looking to add an 800,000 cubic-metre a year sawmill to create a “monster” site.

The latter didn’t proceed but in 2003 the Verrys bought the Waipa mill near Rotorua and 14 years and $140 million later marked its expansion to an annual processing capacity of a million cubic metres of wood.

How to lift export returns? - In 2013 the "Woodscape" report, commissioned by the Wood Council, had argued annual export earnings from forestry could be boosted to $12 billion by 2022 - double the $6 billion expected by then – by increasing the scale of individual processors and targeting higher-value uses for the industrial logs – A and K grades – that dominate the country’s log exports.

It saw good potential returns from products like plywood, LVL and cross-laminated timber, as well as wood pellets and biofuels. Cross-laminated timber – used to make solid-wood wall panels, roofing and floors – was one of the fastest growing technologies globally at the time.

Forest Economic Advisors, in a November report to New Zealand Trade and Enterprise, made similar findings.

It noted that any firms looking to invest in new capacity for engineered products like LVL and CLT would have to be globally competitive to compete against potential imports from Europe and Australia.

New ply, particleboard or fibre board investment was possible, but would probably require an investor with existing distribution offshore. Getting access to affordable fibre could also be a challenge. Expansion of existing plants seemed more likely.

A new laminated beam product developed by Wood Engineering Technology in Gisborne could also meet the higher structural standards for timber in Australia, where New Zealand exports have been declining against increasing volumes from Europe, the report noted.

A new environment - But the world has changed radically since November, with a big near-term contraction expected in home building on both sides of the Tasman.

Red Stag’s Verry said home-building here may be down to 40 percent of pre-covid levels by mid-2021 – similar to the trough after the global financial crisis. That’s increased the case for a zero-carbon construction procurement policy for government buildings.

Verry said favouring wood in public buildings – a Labour pledge going into the 2017 election - would improve developer understanding of products like cross-laminated timber while locking in long-term benefits through emissions reduction.

Cross-laminated timber is “the big opportunity.” It can reduce steel and concrete use in apartments, offices and commercial buildings, and also lends itself to off-site fabrication, speeding construction.

Verry said the government’s rebuild efforts will have an infrastructure focus and will protect jobs in the steel and concrete sector. Encouraging more investment in CLT – potentially $35 million plus land for a new plant – has the ability to create additional new jobs in timber and construction.

But, in the current environment, he said it will take a policy initiative by government to drive that shift and the investment needed.

“That’s what would provide the step-change to help the industry get into that sector,” he said. “If it's incremental, especially going into a recession, we’re not going to get any investment.”

Source: BusinessDesk

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Policy possibility: Processing expansion halt?

Forest regulations put Ernslaw One expansion projects on hold - Forest owner Ernslaw One says the government’s planned regulation of the industry may stall four projects it is considering to expand the firm’s processing capacity.

The potential powers the government is seeking – to intervene in the log sales and contracts of forest owners – are “absurd” and go against any sensible business practices, chief executive Paul Nicholls told Parliament’s environment select committee last week.

The lack of detail in the bill and the open-ended scope of the proposed regulations, means any consideration of expansion at the firm’s pulp and timber operations near Tangiwai will be “on-hold” until the company has a good handle on the impacts of the scheme. By officials’ own admission, that detail may be two years away, he said.

Nicholls told BusinessDesk he would now struggle to recommend the projects, which could potentially lift the capacity of the combined Tangiwai operations over five years from about 660,000 cubic metres a year now to a million cubic metres a year.

“We will put all of those on hold until we fully understand how this bill could be implemented,” he told the committee. “Honestly - if the government wants this level of control of how logs are grown and sold in New Zealand then they should buy the forests and manage it themselves.”

Submitter after submitter have told the committee the consultation on the Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill has been farcical and its rushed implementation under Budget urgency an abuse of process.

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Carbon match market update

ETS Announcements - The Emissions Trading Reform Bill had its second reading later yesterday. After more than five years of work by officials, today has been big on anouncements for the ETS.

They include the setting of a provisional emissions budget, the NZ ETS cap, and price control settings.

Of critical note to buyers and sellers of NZUs, it has also been announced that the fixed price option is to be formally extended to cover 2020 activities but increased to $35.

The availability of the fixed price option will also potentially overlap the beginning of auctions, depending on their timing - targeted still to be early next year.

Note that the $35 is a backstop - designed to provide certainty to business - rather than a target. Note also that the original proposal of a $20 auction reserve price floor remains intact, although the floor is proposed to increase by inflation each year (as will the trigger for the cost containment reserve, which is to be set at $50 in 2021).

As we have pointed out before, that is some way below the current level at which the Government has been able to be a seller of NZUs - namely the fixed price of $25.

A large volume of detail and supporting documents have also been released today and we will be reverting once we have had chance to go through carefully.

We note also that the Emissions Trading Reform Amendment Bill (and the relevant SOP that would enable some of the changes announced) still need to progress as planned.

In the meantime the best place to start for more information is here.

Source: Lizzie Chambers, Carbon Match

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New President for John Deere

John Stone is the new president of John Deere Worldwide Construction and Forestry and Power Systems. Deere & Company has announced that its board of directors has elected John Stone, 50, to the position of president of Worldwide Construction & Forestry and Power Systems. Stone will begin his new role on July 1.

He will be responsible for the overall management and performance of the company’s construction and forestry operations throughout the world, as well as the Wirtgen organization. As well, Stone will have responsibility for the engine, drivetrain and electronic-component businesses.

“John’s record of success and proven leadership skills make him highly qualified for this critical role,” said John C. May, John Deere’s chairman and chief executive officer. “His firm grasp of the vital importance of technology will be of great benefit as he assumes leadership of our construction equipment operations.”

Stone joined John Deere in 2002. He has managed the company’s global utility tractor product line and headed corporate strategy. Since 2016, he has served as senior vice president of the Intelligent Solutions Group. In that role, Stone has led the company’s successful efforts to develop precision technologies that are bringing value and productivity to customers.

Stone was instrumental in the opening of John Deere Labs, a San Francisco-based research unit focused on breakthrough technologies such as machine learning and robotics. Also, under his leadership, Deere in 2017 acquired Blue River Technology, a company that develops computer vision and machine learning capabilities for agriculture.

Stone succeeds James M. Field, 57, who will assume a new role as senior advisor to the Office of the Chairman, effective July 1.

Source: equipmentjournal.com

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Building with NZ wood a boon for jobs

Build with wood – a boon for jobs and the environment (Opinion): A response to the impact of Covid-19 for many of us is to challenge the business-as-usual paradigms we have operated under for years.

As business leaders we can use this period of uncertainty as the catalyst to implement the opportunities in-waiting.

New Zealand is facing a jobs crisis and the world is in the midst of a climate crisis. Now is the time for the government to enact new policy to make a significant contribution towards fixing both issues.

Carbon - Growing trees capture and store carbon from the atmosphere.

Jobs - New Zealand has more than 1.7 million hectares of plantation forests capable of supplying the ideal raw material for constructing buildings.

The volume of timber available means that all the domestic demand can be met internally – no imports required. This raw material can be manufactured into finished timber building materials entirely in New Zealand. This means that New Zealanders would do all the work from planting the seedling right through to having the finished product ready for installation.

When wood products manufacturing is taken right through to the final stage from raw log to finished product, a high number New Zealanders are employed.

At my company, Taranakipine, we have 35 staff at the primary processing end of our production turning the log into kiln-dried sawn timber. To take this sawn timber through to our wide range of fingerjointed and laminated building products, we employ another 100 staff.

The employment ratio at the finishing end of our manufacturing is exponential.

If we use more New Zealand manufactured timber products in construction rather than imported building materials, then wood processors like Taranakipine would employ more New Zealanders. At the very least we would retain more staff during the forthcoming recession.

Our government has shown its capability in reacting to a major health issue facing our country. It now has the opportunity to create jobs, as well as lock in carbon from the atmosphere, by implementing a “build with wood policy” for all new government buildings and renovations.

We as New Zealanders can follow this lead and do the same for our own projects. It is this simple; it is this effective; it is proven.

Source: Tom Boon, CEO of Taranakipine & Woodspan Ltd

Source: Taranaki Daily News

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Te Uru Rakau Scholarships

Applications open for 2021 forestry scholarships -Applications have opened for 2021 Nga Karahipi Uru Rakau – Forestry Scholarships, which will support more Maori and women to pursue careers in forestry science, says Forestry Minister Shane Jones.

“I’m delighted Te Uru Rakau is offering Nga Karahipi Uru Rakau – Forestry Scholarships for the third year running. These scholarships are increasing diversity in the forestry sector,” Shane Jones said.

According to the recently released Forestry and Wood Processing Workforce Action Plan, Māori make up only 22 per cent of the forestry workforce, while only 17 per cent of this workforce is female. The Forestry Scholarships help address this imbalance. Whether these graduates become forestry scientists, forest engineers or pursue the range of other careers in forestry, the scholarships are making the sector more diverse.

Eight scholarship recipients will receive $8000 per year for four years to help with tuition and living costs while studying forestry science degrees at the University of Canterbury – either a Bachelor of Forestry Science or Bachelor of Engineering with Honours, majoring in Forestry Engineering. Scholars will also gain experience through paid annual summer internships in the forestry sector.

“Aotearoa’s forestry industry is world-leading when it comes to research and technology. Nga Karahipi Uru Rakau – Forestry Scholarships are helping grow the next generation of forestry professionals and scientists,” Shane Jones said.

“Forestry science will play a key role over the next few years as New Zealand recovers from the impacts of COVID-19. We need forestry professionals and scientists so we can keep our forestry industry at the cutting-edge, producing wood products that are highly sought around the world. “This will translate to more employment opportunities and economic benefits for forestry communities around New Zealand.”

More information can be found on the Te Uru Rakau website.

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IRD: Native forests income tax changes

FORESTS (PAYMENT OF MONEY) ORDER 2020 - A payment to landowners for permanently protecting native forest with high conservation values on their land can be exempted from income tax if the appropriate Order in Council is made.

An Order in Council, made under the Forests Amendment Act 2004 (see Tax Information Bulletin Vol 16, No 8, p19), grants an income tax exemption in relation to payments made by the Nature Heritage Fund to the owner of blocks of land in the Rowallan Survey District and Alton Survey District. The payments, made over the course of October 2016 to November 2019, were in exchange for the owner entering into a conservation covenant over the blocks of land.

The Order in Council, which came into effect on 23 April 2020, is part of the Government’s SILNA (South Island Landless Natives Act 1906) Policy Package announced in 2002.

Forests (Payment of Money) Order 2020 (2020/46)

Addendum to Tax Information Bulletin Vol 32 No 4 - Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020

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Japanese buyer for UDC

Japan’s Shinsei Bank to buy UDC for $762m - Back in the day UDC's logo shouted, "New Zealand's finance company". Then ANZ bought it. It then seemed set to go into Chinese hands until the deal fell through.

Japanese financier Shinsei Bank is trying its hand at buying ANZ Bank New Zealand’s UDC Finance unit almost two-and-a-half years after China’s HNA Group was blocked by the Overseas Investment Office.

The $762 million sale price is $100 million more than HNA offered in January 2017, although UDC's net assets rose 50 percent between Sept. 30, 2016 and March 31 this year from $424 million to $637 million.

The price-to-book ratio of Shinsei's offer is 1.2 times versus the Chinese firm’s 1.6 times. Shinsei’s offer is a $125 million premium to UDC’s net assets, compared to the $235 million premium three years ago.

The deal is subject to regulatory approval and is expected to be completed this calendar year. ANZ has been trying to shed New Zealand’s biggest finance company for several years, and had a ready buyer in Chinese conglomerate HNA. That deal was scuttled by the OIO, which couldn’t work out who the relevant overseas person was from the information provided about ownership and control. At the time, HNA was under increased scrutiny after a debt-fuelled US$40 billion acquisition spree and it’s since been selling assets to meet repay those loans.

Capital freed up - ANZ said the sale will free up $2 billion of funding the bank has provided the finance company. New Zealand chief executive Antonia Watson said Shinsei intends to preserve the existing operations and keep UDC staff.

“The sale will also mean UDC will continue to operate as an independent finance company and enhance competition in the asset finance market,” she said in a statement.

Shinsei chief Hideyuki Kudo said the acquisition was in line with the firm’s growth strategy and UDC would be a major asset for the group. “In the covid-19 ‘new normal’, we are confident that UDC, as part of Shinsei Bank Group, will continue to grow and contribute to the development of the New Zealand economy and help people and businesses in New Zealand with their financial needs,” he said.

UDC had net loans of $3.44 billion at March 31 and reported a first-half profit of $24.5 million in the six months through March. ANZ New Zealand said it will report a net loss of $73 million on the sale, after the release of goodwill.

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... almost finally ... jetski or motorcycle?

Gibbs amphibians' biski fuses a motorcycle with a jetski

Designed to smoothly transition from the land to water, the ‘biski’ is an amphibious motorcycle that changes function at the push of a button. With almost no delay it converts to jet-skis, retracting wheels out of the way and switching to jet propulsion. The switch from ‘road’ mode to ‘water’ mode is done in less than five seconds, so riders barely lose momentum as they ride in or out of the water.

Created by New Zealand-based entrepreneur Alan Gibbs, his company has distinguished itself by creating amphibious vehicles that can reach high speeds on both land and water alike. The machine weighs 500 lbs and features a 55 hp twin-cylinder petrol engine that is capable of speeds of 129 km/h (80 mph) on the roads, and can travel across water at 59 km/h (37 mph). The ‘biski’ weighs 500 lbs and has a 55hp twin cylinder petrol engine, and it also features lights suitable for both road and marine navigation. A video released by the company shows the amphibious bike been driven along a winding road, before the rider reaches the edge of a river. It is driven straight into the water and is shooting off along the water within a matter of seconds.

Check it out! >>

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Buy and Sell

... and finally ... Don't try this at home ... or anywhere!

Take a peek at this! It's a look at the Onbashira Festival in Suwa, Nagano, Japan. Held once every 6-7 years, this festival celebrates the bringing of huge logs from Mt. Yatsugatake to the shrine. Kiotoshi or "Log Fall" is where Suwa citizens ride down steep hills on the log. Some logs can weigh up to 10 tonnes!

The Onbashira festival is celebrated over several months. There are several sections of the festival, and each section is celebrated twice: once for the Upper shrine, and once for the Lower shrine.

Yamadashi is the first section of Onbashira, where the fir trees are removed from the mountain and brought into town. Participants must brave steep slopes, rivers and narrow streets in order to pull the new pillars to their resting place. Because the downhill sections of the course (called Kiotoshi, pictured below) are so thrilling, this is the most popular time to view Onbashira.

Records show that the Onbashira festival has been celebrated for over 1200 years. The Shinto shrine for which it is performed, Suwa Taisha, is one of the oldest Shinto shrines in Japan.

Click here to see more of this legendary craziness!

Thanks for keeping up with the latest wood news with us!
Have a safe and productive week.

John Stulen, Editor

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