WoodWeek – 2 February 2022

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Welcome to your wood news source. We begin with comments from the latest MPI SOPI report on forestry. In China, slowing credit growth is expected to weigh on the construction output, particularly the housing construction sector. The property market is the single-largest driver of China’s economy. The slowdown in property market lending growth negatively impacts short-term construction activity and demand for logs.

The downturn in the property market is forecast to be offset by increased infrastructure investment by the Chinese Government. This will likely boost Chinese construction activity and, as a result, demand for logs in the medium- term.

Looking to NZ forest harvest volumes, this was up for the year to 30 June 2021 reached an all-time high of 37.6 million cubic metres, up 18 percent compared with last year.

Ever had to explain why log exports are vital to a layperson? Have you ever been bailed up in a social situation by someone outside our industry laying blame on log exports for framing shortages and prices, simply because they don’t understand how forestry works? We’ve got some gems to help you make it simple to explain things, should it happen to you one day. Moving to the lower North Island, after reporting a five- year spend of nearly $1.5 million on repairing roads damaged by logging trucks, a Taranaki council is looking to charge forestry owners more to save ratepayers footing the bill. This plan may soon to be challenged by local owners.

In late-breaking news, we've got a robust debate about the Overseas Investment Act as it relates for forestry. Clearly the Forest Owners Association and Federated Farmers see it differently, so over to you to see what you think. It could be the Feds haven't been reading the fine print.

Just before we finish with a joke today, as we know many of you are right up with new technology, we thought you'd like to be first to know this. It looks like the pizza people have got the jump on everyone as pizzas, of all things are set to be coming your way from outer space (well above your neighbourhood anyway) very soon. It's a bird, no, a plane, no, a pizza!?!! "Nah, send it back, it's cold ..."

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MPI: Situation and Outlook for Forestry

The latest Ministry of Primary Industries market report includes this forward from Damien O'Connor, Minister of Agriculture:
It’s my pleasure to present the December 2021 update of the Situation and Outlook for Primary Industries (SOPI). This SOPI shows the results of the enormous efforts of our food and fibre sector to meet the demand for New Zealand’s products.

We’re expecting total export revenue for our food and fibre exports to reach a record $50.8 billion in the year to 30 June 2022, representing a net increase of 6 percent from the previous year. This is an impressive result, particularly as we navigate the challenges from COVID-19.

As you’ll see, we are expecting growth in most sectors. For example, export revenue for dairy, meat, horticulture and forestry are looking bright, and our seafood exports have bounced back.

SOPI Summary: Forestry export revenue is forecast to increase 3 percent to $6.7 billion for the year to 30 June 2022. Growth in the Chinese construction industry and the US housing market are showing signs of a slowdown, reducing log demand this year. The Chinese and US Governments' targeted measures to boost their economies and infrastructure development are projected to support demand for our major forestry products in the medium-term. In addition, domestic timber demand is expected to remain strong due to robust housing demand.

Residential construction investment in the US is likely to cool. However, the medium-term demand for sawn timber is expected to rise driven by a rebound in non-residential building, which is underpinned by a fiscal infrastructure spending spree.

In China, slowing credit growth is expected to weigh on the construction output, particularly the housing construction sector. The property market is the single-largest driver of China’s economy. The slowdown in property market lending growth negatively impacts short-term construction activity and demand for logs.

The downturn in the property market is forecast to be offset by increased infrastructure investment by the Chinese Government. This will likely boost Chinese construction activity and, as a result, demand for logs in the medium-term.

In New Zealand, rising interest rates and stricter loan-to- value ratio regulations are projected to dampen domestic demand for wood products.

Harvest volumes for the year to 30 June 2021 reached an all-time high of 37.6 million cubic metres, up 18 percent compared with last year due to robust demand and high prices (Figure 16). We are forecasting harvest volumes to slightly reduce for the coming year as demand eases.

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Source: Ministry for Primary Industries

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If a tree falls in the forest ... should it be exported?

(Opinion Forest360) Ever had to explain the facts of ... log exports? Here is a great explainer: Exporting primary products from New Zealand has long been celebrated and underpinning of our economy and way of life. We all hail increased dairy and meat exports, are more than happy that the best fruit and crayfish go offshore but throw our toys out of the cot about log exports. Most elections will see some ill- informed politician standing in front of a wharf full of logs pontificating about supporting our local industry and keeping the logs in NZ. Builders and home handypersons are pointing the finger squarely at forest owners for increased lumber prices and supply issues assuming that issues are caused by the exporting of logs rather than supplying local mills.

To put some perspective around the issue, think of trees the same way as sheep and cows, basically they get cut up into different products for different market requirements. Your favourite restaurant in Parnell isn’t likely to serve you up a medium rare sheep bladder and the pet food factory probably doesn’t have much demand for a lamb rack. Logs are no different except, unlike the fruit and fishing industries, we keep most of our good product here for our domestic sawmills and export bladder and brains grades of logs.

One tree may have as many as 10 different log grades within one stem and generally quality and hence value diminishes the further up the tree you go. NZ sawmills cannot make money out of sawing the lower grade logs, whereas export markets such as China have much lower production costs and therefore can afford to spend more time reconstituting the lower grade logs into usable products.

To put forestry’s valuable export earnings into perspective as well as its importance in reducing emissions, it’s essential to understand how the forest industry works, its regional benefits and why log exports are a vital part of its functioning. As with the sheep and beef industry, you need a solution for the whole animal, you can’t just sell medium rare bladders to Parnell and throw the lamb rack away.

It’s easy for Joe Average to get a slanted view on log exports as our industry differs from many others in that logs are very visible on trucks, trains and in ports, timber is not. Timber is delivered to retailers dry, wrapped in plastic and transported in curtain sider trucks which are indistinguishable from those that carry cornflakes. Log exports are just part of a much more diversified set of products that just aren’t that visible to people in port cities. Locally manufactured wood products are, however, a big part of many of our daily lives whether we notice it or not. If you write on it or wipe on it, build with it or burn it, wood products from our radiata pine forests around the regions are generally taken for granted.

In addition, the use of engineered timber panels is growing rapidly in the building of multi-storey commercial buildings and apartments, prized for their carbon sequestration as well as earthquake and fire resistance.

So next time you’re listening to someone spout off about all our logs going offshore and a lack of framing timber in NZ, you can rebut their ill-informed opinion with the following fun facts:
1. The NZ supply shortage of timber is due to lack of domestic sawing and kiln drying capacity, not log exports. There is no way the entire NZ log production could be sawn locally.
2. Log exports are just one part of the log (usually the top half or less) that is produced and sold in the market.
3. Forest owners, like every other private business, have the right to sell what they own to whoever they want, they are an investment not a public good item.
4. Logs produce all kinds of products, some are solid wood which continue to store carbon over their lifetime; others of lower quality are valued by Chinese buyers for a range of uses, but mainly as formwork in the construction of high-rise buildings in China.
5. Logs are valued by manufacturers in China because of the versatility of radiata and because countries like Russia have imposed export tariffs on log exports – something that our small and vulnerable government would never consider in a market economy and out of our control in NZ.
6. Forest and wood products are a vital piece of the NZ landscape and fit well into our ways of earning a living for rural communities and respective forest owners, large and small.

Source: Marcus Musson, Director, Forest 360 and John Stulen, Director, Innovatek

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Carbon Match: Market update

(Carbon Match) NZUs push to new heights - Well unfortunately Omicron didn’t go on holiday and nor did New Zealand Units, which have again pushed to new records. You may not appreciate the comparison but this year New Zealanders will certainly feel the effects of both.

The Carbon Match trading platform has been dynamic over the last two weeks and there have been buyers aplenty. But they’ve had to pay ever-increasing asking prices - sellers still want to sit it out and “see where we get to”. Who can blame them? The price has been moving up fast.

NZUs began this year at about $68.50 - already about $30 more than the spot NZU price in early January 2021. But as more buyers have returned to market this week, we’ve seen further appreciation every day with a new high yesterday of $74.50.

Sellers are there, but they're certainly not falling over themselves and some are worried they will sell too low. For compliance buyers, this is simply frustrating. On paper, there is no fundamental shortage of NZUs in the registry, as the Government's own forecasts below show.

In fact, the above now understate supply, because the cost containment reserve was drawn on last year. As of 30 September 2021 there were just over 151 million NZUs sitting in the registry across prive accounts. But these forecasts don't paint a complete picture and ignore the very open nature of the ETS - the fact that it is not simply a compliance market.

In fact, whether you care at all about paper length depends on the strength of your conviction. A lot of capital continues to be attracted into environmental products - everybody’s interested in the space. The New Zealand market is just one small carbon market, currently unlinked. But recent reforms have credibility and the gains observed over the last two years have been noticed by investors. There is a sense that the time for meaningful carbon prices is here, as is the expectation that there will be some kind of convergence over time.

Meanwhile, the procurement arms of New Zealand compliance entities are acutely conscious of our tougher penalty regime and unpredictable auction clearing prices. There’s no safety net and this year is really the first in which compliance buyers are feeling this. (In May 2021, most compliance buyers held onto or secured the units they had and instead paid the fixed price option of just $35 for the very last time. In aggregate that bought another 30 million tonnes of NZUs from the Government and some additional comfort for compliance buyers.)

This year, the Government's first primary NZU auction takes place on 16 March. If current support sustains until then, it seems that the only question will be whether the cost containment reserve goes in one swoop or whether left overs remain for the following auction.

Last year some commentators made the argument that $50 (the level of the first CCR trigger price) was simply too close to then market levels; that at that level the CCR would function as an “attractor” rather than the absolute last resort that it was intended to be.

This played out and now some buyers feel that they face the same predicament once again. So, for the moment, some two months ahead of the auction and at more than $74, we are seeing strong buying interest in the secondary market.

If you're a seller with NZUs you want to monetise, have a think and put up your asking price. Sentiment may never have been stronger, but remember that NZUs are not cash in the bank.

Carbon Match - every weekday 10am-5pm, login for live pricing.

Graph Source: Ministry for Environment, May 2021 (via Carbon Match)

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NZ: NEFD forest facts released

National Exotic Forest Description (NEFD) to April 2021 published - The just released year to 1 April 2021 NEFD report records New Zealand’s plantation forest estate area is 1.74 million hectares. This is the largest the estate has been since 1.75 million hectares in 2009.

Contributing to this expansion were an additional 34,000 hectares of new planting in 2020 and a revised addition of another 52,000 hectares in calculations for that year.

New Zealand’s net stocked planted production forest covered an estimated 1.739 million hectares as at 1 April 2021. The total planted forest standing volume was estimated to be 532 million cubic metres with an average age (area weighted) of 18.3 years.

The provisional new planting estimate for the year ending 31 December 2020 is 34,000 hectares. This number may be revised in the 2022 NEFD. The previously published 2020 forest area and standing volume statistics have been revised upward by 52,000 hectares.

The decrease in area as age increases beyond 28 years indicates harvesting. Of particular note is the large area of forest between 23 to 26 years old, planted between 1995 and 1998. This forest has begun reaching harvest age.

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Overseas Investment Act: FOA and Fed Farmers exchange views

(Federated Farmers) Urgent Action Needed On The Special Forestry Test To Stop Carbon Farming Rort - Federated Farmers is calling on the government to live up to its pledge and review the Overseas Investment Act ‘special forestry test’ and be fair to sheep and beef farmers.

Multiple government policies are driving farmland being sold for pine tree carbon farming, and a multitude of changes are needed to restore balance to land use policy, Feds Meat and Wool Chair William Beetham says. "Sorting the special forestry test is straight forward and a good first step."

The Overseas Investment Act ‘benefit to New Zealand’ requirement is waived under the special forestry test when overseas investors buy farmed land for ‘forestry activities’. This policy makes it much easier for foreign investors to purchase New Zealand farms to convert to trees, and is one of many distortionary policies that are advantaging carbon farming over other land uses such as sheep and beef farming, William says.

Technically, the forestry test indicates that the planted trees eventually be logged but there is no mechanism to ensure this actually happens, nor even any rules to ensure that pruning or pest control is done.

"That’s not fair even to our responsible New Zealand foresters," William says. "The recent spike in the afforestation of sheep and beef farms is not the result of consumer driven demand, but heavy-handed and short-term Government policies designed to incentivise more trees, regardless of whether or not they are the right tree in the right place."

The price of carbon under the New Zealand Emissions Trading Scheme (ETS) has hit a record $68 per unit. Polluting industries looking to offset their greenhouse gas emissions are behind big increases in the value of land used for raising sheep and beef cattle.

"Overseas investors can simply plant pine trees, claim the credits, sell them and take the huge profits overseas, while New Zealanders carry the consequences now and into the future. Those wanting to use land to continue farming for the future prosperity of Aotearoa New Zealand are being out-bid. There is little benefit but a huge cost to future generations."

Other than when the trees are first planted for carbon credits, there’s little or no employment benefit. Rural families move out, school rolls fall, meat processing plants close, downstream industries suffer and it becomes a vicious cycle of rural downturn - never mind the loss of export earnings from meat and wool, William says.

A report commissioned by Beef+Lamb NZ from Wairarapa-based BakerAg last year found that between 2017 and 2020 some 24,956 hectares of land were approved for sale to overseas buyers under the special forestry test. More recent data shows another 40 consents were granted under the special forestry test to a foreign applicant between July 2020 and August 2021.

"Federated Farmers is certainly not arguing against planting trees to sequester greenhouse gas emissions. But we need to be strategic about it, and consider the long-term picture not just short-term mindless profit," William says. "Feds is advocating for the restoration of policy settings that are agnostic toward land use and allow overseas investment through a smooth efficient system that benefits our nation."

Forest Owners respond:

Forest Owners Challenge Federated Farmers To Prove Misleading Carbon Farming Claims - The Forest Owners Association is telling Federated Farmers that it needs to educate itself about how the Overseas Investment Act works before making any more false claims about non- existent overseas investment in carbon farming.

Carbon farming is where trees are not intended to be harvested and the only income is from carbon credits. An unknown area of carbon farming has been planted by New Zealand landowners, with a number of farmers most likely planning on such ‘plant and leave’ forests on the more remote, steep and unproductive parts of their farms.

Federated Farmers has called on the government to change the rules of the special forestry test for overseas forest investment, claiming that overseas investors are carbon farming and taking farmland out of production.

Forest Owners Association President Phil Taylor says this can’t be true because any overseas investor using the special forestry test to obtain Overseas Investment Office consent is banned from carbon farming. “The rules are quite clear. If you are an overseas investor, you can only plant with the intention of harvesting.”

“There are plenty of powers in the National Environmental Standards for Plantation Forestry, which is under the RMA, and the Overseas Investment Act, for monitoring and ensuring compliance, directly and through the compulsory registration and monitoring of the forests by regional authorities.”

“The rules include boundary and river setbacks for planting and land preparation. The owners have to invest at the outset in means to produce timber and the regulations enforce that all the way through the planting, growing and harvest cycle, Phil Taylor says. “Federated Farmers is claiming there is no mechanism to ensure this happens. But it has failed to name a single example of non- compliance.”

“Nor has it been able to identify one single oversees investor who has been given approval to buy New Zealand owned farmland to plant carbon only forests.”

Phil Taylor says a statement by Federated Farmers’ Meat & Wood Chair expressed concern that there are no rules to make forest owners prune their trees.

“That either shows how misinformed Feds are, or that the farmer organisation alarmingly now wants the government to make such laws.”

“It’s a commercial decision every forest owner has made on the grade of timber they want to produce. Currently 61 percent of all forests are unpruned – including in the more than 300,000 hectares of production forests on hill country farms.”

“I’m astonished that Federated Farmers, of all organisations, is suggesting the government force farmers to prune their trees. It would be the same as if the government instructed all sheep farmers to only run cattle.”

“The Climate Change Commission has recommended to the government that 380,000 hectares of production forest be planted by 2035 to meet New Zealand’s greenhouse gas reduction targets.”

“But Federated Farmers’ campaign would restrict all plantation forestry, and so there is a real risk that the planting rate will fall short.”

“That in turn would mean an even larger national bill for buying credits overseas, greater fast-track emissions reductions required elsewhere in the New Zealand economy, less profitable farming with lower timber income, and further reduction of livestock numbers.”

Phil Taylor says the FOA is not involved with, nor promoting, carbon farming. “Carbon farming on land which can be used to produce timber or livestock doesn’t make sense. Carbon farming employs very few people. The practice presents fire, pest and disease risks."

“We’d much rather be talking with Federated Farmers about our mutual concerns about real carbon farming, and how we can integrate production forestry into farming operations, than having to put the Feds right on situations where there is no carbon farming at all.”

Source: Scoop

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SnapStat - Te Uru Rākau Scorecard

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Forest teams embrace new technology

PF Olsen pride themselves on their reputation for delivering a wide range of professional forestry services to a diverse range of clients. They assist forest owners to manage investment risks, establish, grow, and protect high quality forests and finally maximise the recovery of value from forest harvest operations.

Assura worked with PF Olsen to deliver a Health & Safety system able to cater to their remote and challenging workplaces and have seen its use expand beyond this initial scope.

PF Olsen IT manager Peter Riddell says,, “The selection requirements for a solution to support our Health and Safety and legislative compliance needs were focused on the usability of the solution and the ability for our internal team to develop forms and workflows to suit. Assura Health and Safety was a standout in this requirement.

The capability to develop the forms and workflows in-house has provided us with the opportunity to use the platform to reduce the administrative overhead for our operations people.

We are expanding the solution functionality to incorporate the electronic capture of data whilst in the field. Once captured, the quality offline functionality activates, and the data captured is fed back to our core systems. No more data entry required.

The approach of using a form linked to a workflow model that Assura has used as a base for the platform is providing us with many opportunities to reduce the burdens for data entry for our operations people. This functionality and the continued focus from Assura to further develop core functionality will allow us to continue the integration of Assura and a Core solution for PF Olsen.”

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Man crushed in Balmoral Forest

A man has died after he was crushed while repairing a machine in a forest in North Canterbury.

Emergency services were called to an incident at Balmoral Forest, Culverden, shortly before 10am on Monday, a St John spokeswoman said. An ambulance and a helicopter were sent to the scene but were not required.

A police spokeswoman said a man in his 20s had died in a workplace incident in the Hurunui district, on Hurunui Bluff Rd.

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Source: Stuff

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Taranaki: Roading cost charge to forest owners?

Central Taranaki forestry owners may have to cough up cash for road repairs - After reporting a five-year spend of nearly $1.5 million on repairing roads damaged by logging trucks, a Taranaki council is looking to charge forestry owners more to save ratepayers footing the bill.

The Stratford District Council said costs to repair the unsealed roads in eastern Taranaki during forest harvest has averaged $292,120 a year, seeing other roading projects in the district grind to a halt.

Mayor Neil Volzke said it was an “almost critical situation”, and something needed to be done. “The funds get sucked from every other project in the roading budgets,” Volzke said.

Last week, at a policy and services committee meeting, Stratford elected members moved to have a new roading targeted rate introduced for “exotic forestry” owners from July 1 to cover the cost of damage caused during harvesting.

The council has photos to document the damage, including those of Puniwhakau Rd (pictured), in September 2020, just a month after forestry work started in the area. The council intends to collect $100,000 annually, and the amount each forestry owner pays towards that is decided by their property’s capital value.

This must be approved at an ordinary meeting of council next month, before going out for public consultation. NZ Forestry manages around 7000 hectares in the Stratford district, and on Friday company director and Taranaki regional manager, Cameron Eyre, said he already had a lot of questions.

“Council can expect a very large pushback from the forest industry and some serious questions into to their own process if they are going to propose this targeted rate,” Eyre said in an emailed statement (to Stuff). Eyre said he was uncomfortable commenting fully, without seeing the report himself.

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Photo credit: Stratford District Council

Source: Stuff

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India: Yamaha develops unmanned forest monitoring

Yamaha develops unmanned helicopter for forest monitoring system - Yamaha has developed a forest monitoring system using unmanned helicopter. Equipped with cameras and equipment to measure light reflections, Helicopters will help to measure the topography as well as tree density, alignment, numbers, and trunk diameters. Unmanned helicopter can measure forest ranging from 100 meters high and up to 100 hectares.

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... almost finally ... Flying pizzas coming past soon

Don’t Look Up! Domino’s Drone Delivery Trial Cleared For Take-off - Domino's Pizza Enterprises Limited (Domino's) today announced it has signed an agreement with Flirtey Inc. (SkyDrop) to expand its drone food delivery trials in New Zealand.

After making history with the world’s first pizza delivery by drone from the Domino’s Whangaparaoa store in Auckland in 2016, the two companies have partnered again to offer the innovative service to even more Kiwi pizza lovers with new and improved drone technology.

“We believe drone delivery will be an essential component of our pizza deliveries in the future,” Domino’s Group CEO and Managing Director Don Meij said. “Customers benefit from the convenience of having fresh, hot pizzas delivered with zero contact to their homes by electrically-powered drones, which also reduces traffic congestion and greenhouse emissions.”

SkyDrop Founder and CEO Matthew Sweeny said the company was excited to launch the second stage of the commercial drone delivery partnership with Domino’s. “New Zealand has a real opportunity to be at the forefront of the drone delivery industry globally,” he said. “We look forward to expanding our leadership in the trillion-dollar store-to-door food delivery market.”

Since the initial trial, Mr Sweeny said SkyDrop had developed faster, safer, quieter, and greener drones capable of carrying increased payloads of up to 3.5kg. It had also improved the precision delivery altitude of the drone up to 60 metres, added a parachute system for safety, and received Part 102 Unmanned Aircraft Operator Certificate and Operations Specifications from the CAA in New Zealand.

Domino’s New Zealand General Manager Cameron Toomey said they were currently reviewing locations across the country for the drone delivery trial to commence later this year. “We can’t wait to give our customers the unique experience of having their favourite Domino’s pizzas delivered by drone,” he said.

The first Domino’s drone delivery in Whangaparaoa was conducted under Civil Aviation Rules Part 101 and was attended by both the CAA and Ministry of Transport. The delivery drone was subsequently accepted into the Aviation collection at the Auckland Museum of Transport and Technology (MOTAT).

Source: Scoop

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... and finally ... out on the construction site

An elderly nun who was living in a convent next to a construction site noticed the coarse language of the workers and decided to spend some time with them to correct their ways.

She decided she would take her lunch and sit with them, so she put the sandwich in a brown bag and walked over to the spot where the men were eating. Sporting a big smile, she walked up to the group and asked, "Do any of you men know Jesus Christ?"

They shook their heads and looked at each other, very confused. Then one of the workers looked up toward the floors above him and yelled out, "Anybody up there know Jesus Christ?"

One of the steelworkers yelled back down, "Why?"
The worker yelled back, "Cause his mum's here with his lunch."

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

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