Insignis Forest Partnership
Annual Report & Budget
9 March 2004
We are pleased to report as follows:
Your forest stands are fine despite a season of wild climatic fluctuations. A cool wet spring then two warm months of summer but no rain, followed by a cool wet autumn-like February. Some gales were thrown into the mix too. Still, it could’ve been worse, as a look further north reminds us.
Forest Stand Progress
Ramshead. This forest has very good form and health, better than forecast. We have divided it into three stands for silviculture. The fastest growing area (14ha) had its first pruning lift over a year ago and is due for a second one this year. The second stand (48ha) had a first lift last year and will be due for another early next year we believe. The third (20ha) may await its first lift next year. We will assess it again late next spring.
Paratu. This stand (32ha) is probably the Partnership’s best so far (It’s too early to really tell). The trees not only have very good form and health but are also tall for their age and their latitude. It is a reasonably sheltered site and clearly the soil and climate is ideal for tree growth. They were all pruned to an average of 3.8m last year and will take another 2m at least this year, followed by a thinning. We are seeking the Consultant’s advice on whether to do the pruning in two lifts or three.
Chimney Creek. Most of this forest is a year younger than the other two, and some of it is two years younger. Growth, form and health are good. The first lift of pruning is underway on the older stand (130ha). We expect this will average 3.5m, which is good as it will give us the option of getting to an acceptable height in two lifts rather than three, thereby lowering the average cost per metre.
The Rational for Pruning
With some large forestry companies selling their forests to huge investment funds following write-downs in value and claims they can’t make enough out of them, plus low export returns, it is timely to be reminded of the merits of adding value to trees.
Investment in pruning young Radiata pine of good form and growth pays dividends because the tree from then on produces clearwood and it is as clearwood, that Radiata pine excels, despite also being perfectly good for many other uses.
It is not a question of making a loss if you do not prune. Rather by pruning you aim to maximise the return on all money already invested as well as the new investment. There is still a return for growing good unpruned trees. But where a stand has good growth and form, the rate of return can be more than doubled by carrying out pruning (& thinning) on time and to a scientifically determined degree.
CHH say they do not prune even their best stands because their cost of capital does not justify it. Instead they use processing technology to add value to knotty wood grown as fast and as cheaply as possible. Some think this is yet another mistake to add to their past ones, but with hi-tech processing capacity they could (in theory at least) add value at a greater rate than nature will do it for them.
Smaller ‘single purpose’ growers like you and I are well advised to aim for the quality end of the market rather than compete at the high volume low end. So we should add as much value to our trees as we can.
That strategy is even more supported by current log prices than it has been in the past. Over recent years you have no doubt heard ‘log prices’ reported as ‘high’ or ‘low’ regularly, and now the media like the phrase ‘the wall of wood’ meaning the increasing harvest volume available in NZ . However what are being described are the mid to low grade logs that still form a large proportion of the NZ harvest. There is a big supply of them, most going to Korea and China for bottom end uses. These lower grades compete with other cheap softwoods on the world market and prices and volumes fluctuate quite considerably. But mostly it’s a buyer’s market.
You will be pleased to know that market is not what your partnership is aiming for. Three quarters of your net return should be from the pruned portion of the tree and the next log above that. Good pruned logs are in a high value end use, more stable market so demand at good prices is more sustained. The same is true for high quality saw-logs, which are principally the larger ones with small knots. These are sought after for top grade (stress-tested) framing timber.