Monthly Archives: June 2013

Using New Zealand farm-grown plantation blackwood in stringed instruments

Here is a great story featuring New Zealand farm-grown plantation blackwood timber being used in the manufacture of high-end custom-built stringed instruments.

http://www.burginguitars.co.nz/now-in-stock-2/

Paddy Burgin is a luthier based in Wellington New Zealand. Paddy has customers from all around the world. Amongst other timbers Paddy uses both Tasmanian and New Zealand grown blackwood to build his custom stringed instruments. The latter is farm-grown plantation blackwood, in this case sourced from a farm at Golden Bay in the far north-west corner of the south island. This particular farmer has been growing blackwood since the 1970s. While Tasmanian blackwood is more commonly used in instruments, examples of NZ blackwood in lutherie are still relatively rare. I suspect this is because a) there aren’t many luthiers in New Zealand, b) NZ blackwood is not widely available outside NZ, and c) there is still a lingering prejudice against plantation wood.

So here is a great example of a weissenborn guitar made from NZ plantation blackwood. Weissenborn are a style of lap slide guitar that was originally developed in the 1920’s in California during the Hawaiian music craze.

golden-bay-finish-1

Paddy recognises that the NZ blackwood has different tonal properties to Tasmanian grown blackwood but is very well suited to the task of producing quality instruments. As time passes and the NZ blackwood industry matures perhaps a selection and breeding program may develop plantation blackwood that is custom grown to meet the needs of the tonewood market. But it takes pioneers like Paddy to challenge our prejudices and help drive the future of the tonewood and blackwood industries. Check out Paddy’s web site and read this great story. Thanks Paddy and keep up the great work!

PS. More blackwood stories from New Zealand would be greatly appreciated……

Congratulations Pav

Congratulations to Pavel Ruzicka who has been recently appointed the new member of the Tasmanian Forestry Agreement Special Council representing the interests of the Tasmanian special species timber industry, as announced by the Minister for Energy and Resources Bryan Green in the State Government Gazette 6th June 2013.

Pav has a massive task ahead to try and put the special timbers industry onto a fully commercial, profitable and sustainable basis for all special timbers growers. Top of my wish list is the removal of all existing market distortions (subsidies, pricing and sales) so that a) Forestry Tasmania adopts a fully commercial approach to special timbers management, and b) fair, honest and transparent markets become available to private special timbers growers. I offer my services to assist Pav in any way I can.

Pricing blackwood out of the market

2013 UPDATE:

As of 2012/13 Forestry Tasmania have stopped reporting their average mill door log values (MDLV) by product grade, so it is no longer possible to track and report on their product sales and pricing performance. So much for greater accountability and transparency.

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It is very clear from recent pricing and production from Forestry Tasmania that the special timbers industry is completely divorced from any commercial reality. The administered sales and pricing policies are sucking what little life there is left out of the industry, and consequently the blackwood industry has a very bleak future unless there is serious change.

This is the second part in my analysis of the special timbers market in Tasmania. In the first part I discussed how in 2010 Forestry Tasmania decided that henceforth their special timbers business activities would be non-profit non-commercial, and therefore deserving of a massive 50%+ taxpayer subsidy to the value of $5.1 million dollars over the past 3 years. In part one I discussed how this change of forest policy disadvantaged private forest growers, the Tasmanian community and would ultimately lead the special timbers industry down the same road as Ford Australia.

In this second part I look at the special timbers pricing and sales policies of Forestry Tasmania and how they contribute to this perfect commercial storm, effectively destroying the industry and any potential that the blackwood industry has of a prosperous, profitable future based on a farm-grown resource.

Forestry Tasmania (FT) is the major special timbers grower in Tasmania so analysing their production and revenue figures provides useful insights into the opaque world of the “administered” special timbers market. With blackwood comprising 70% of special timbers production by volume over the last 5 years this analysis is largely relevant to the blackwood market and its future. Over the last 5 years Forestry Tasmania has provided separate blackwood production figures but not separate blackwood revenue figures. The chart below shows total special timbers (ST) and blackwood production, and the average unit special timbers mill door log value (MDLV). All data is from FT annual reports.

FT chart

The chart shows that the introduction by Forestry Tasmania in 2010 of the non-profit non-commercial policy plus major taxpayer subsidy appears to have had no impact on the price or production of special timbers. Certainly none of the subsidy appears to have been passed on to the rest of the industry, unless the industry was already enjoying heavily discounted prices, and FT was just seeking formal reimbursement from the Tasmanian taxpayer.

We also know that FT sells their sawlog through “administered pricing” that “are not determined by regular market forces of supply and demand”. These administered prices are even immune to global financial disasters. The global financial crisis that struck half way through the 2007-08 financial year had a significant impact on demand, with special timbers production almost halving, but had no impact on the administered price. Extraordinary!

Forestry Tasmania provides no information on what basis they determine administered special timbers sawlog prices. With a non-profit business objective and a generous taxpayer subsidy the administered special timbers sawlog pricing policy is anything but clear.

What is clear from the above chart is that special timbers sawlog prices are basically indexed to inflation. Over the above 7 year period sawlog prices increased by an average 3.4% per annum – the long-term inflation rate. In other words special timbers prices are not determined by regular market forces of supply and demand, and do not increase in real terms over time. If that is not a disincentive to private growers and investment I don’t know what is!

All of this has little relevance except for the fact that:

  • blackwood is the dominant special timber species;
  • blackwood is common on many Tasmanian farms;
  • farmers already sell small quantities of blackwood into the special timbers market in competition with dedicated non-profit Forestry Tasmania;
  • blackwood is the only Tasmanian special timber species that has the potential to be grown profitably by farmers to grow and develop the blackwood industry as farmers are doing in New Zealand; and
  • All the other special timber species are too slow growing, and too rare on Tasmanian farms to be of commercial importance.

So what does the above chart mean for blackwood sawlog prices and the blackwood market in the Tasmania?

  1. Blackwood sawlog prices in Tasmania are dominated by Forestry Tasmania and are clearly heavily discounted to the point where even a global financial disaster has no impact.
  2. With prices having absolutely no connection to any market reality it reinforces the understanding developed in Part 1 that the blackwood market is effectively closed to private growers and investment.

Another useful perspective special timbers pricing is gained from looking at tender prices achieved by Forestry Tasmania subsidiary Island Specialty Timbers (IST).  IST provides the only market-based special timbers price information available anywhere. IST only tender a tiny volume of special timbers every year (less than 100 cubic metres) so their tender results may not represent actual market conditions. But if the tenders are competitive and the results show the best offers received then they are much more indicative of real current market value than the FT administered price. IST doesn’t produce any regular market report or annual report so tracking their performance is impossible.

What is clear is that there is a significant disparity between the IST tender results and the average administered price received by Forestry Tasmania ($128 per cubic metre in 2012).  Obviously Forestry Tasmania does not use its own tender results to inform their administered pricing rules, and why the special timbers industry is receiving a massive taxpayer subsidy while these price discrepancies exist raises serious questions.

Presumably blackwood administered sawlog prices are less than the average price of $128/m3, due to it’s greater availability and quicker growth rates compared to the other species. However given the dominance and the importance of the blackwood market to the future of the special timber industry and to private growers IST provides scant information on this species. Current tender results for plain-grain blackwood sawlogs range from $250 – $450 per cubic metre, significantly higher than $128. This shows that the market is prepared to pay significantly more than the administered price for special timbers. But to help gain greater accuracy, detail and transparency into the blackwood market IST should be tendering at least 500 cubic metres of blackwood sawlog per year and publishing more detailed and regular market reports.

If Forestry Tasmania’s administered pricing more closely reflected IST tender results we could potentially have a tripling of FT special timbers revenue. The industry would then be transparently profitable, no longer in need of a significant public subsidy and would instead contribute revenue to the State Treasury and the community.

These changes would also provide significant stimulus into the blackwood market, Tasmanian farmers would be selling more blackwood at higher prices and wondering how to grow more. And that is where the blackwood growers cooperative proposal becomes important.

To help put these special timbers sawlog prices into some perspective (which is not easy as sawlog prices in Australia are extremely opaque, while New Zealand sawlog prices are very transparent), current NZ Pinus radiata pruned sawlogs are $AU103 per cubic metre at wharf (allowing for differences in the exchange rate), while NZ unpruned douglas fir sawlog at wharf is $AU96. Pruned, farm-grown NZ Cupressus macrocarpa sawlogs are $AU240 per cubic metre at mill door, with macrocarpa grown on ~35 year rotations. Based on these comparisons Forestry Tasmania’s administered prices for our premium timbers are very shabby indeed and do not justify any public subsidy.

For the past 2 years I have been trying to understand why blackwood, a product that has been a quality Tasmanian icon for over 100 years, seems to have so little market activity, profile, price or transparency. Blackwood isn’t just an icon, it’s an enigma.

The commercial management of the special timbers industry by Forestry Tasmania and the State government is an unqualified disaster. The accounting, sales and pricing policies of Forestry Tasmania are directly inhibiting blackwood investment, destroying the special timbers industry and costing the Tasmanian community money at a time when the State can least afford it.

So what do you think?

Is Tasmania getting a fair deal for its public special timbers resource?

Do you think the industry has a great future as a profitable commercial Tasmanian icon?

Should FT change its sales and pricing policies to give Tasmanians and Tasmanian farmers a better deal for their special timbers?

Is a consumer boycott of the special timbers industry needed to motivate the industry to change?

Win? Win? Win? – URGENT!

I have recently discovered that the special timber industry in Tasmania (including the blackwood industry) is in serious trouble. Under the current circumstances any efforts to develop a commercial, farm-based blackwood industry, including a growers cooperative, are impossible because:

  • Since 2010 Forestry Tasmania have deliberately run their special timbers business activities at a loss (non-profit, non-commercial), specifically those State forests dedicated to the production of special timbers;
  • In addition all management costs for these production forests are now charged by Forestry Tasmania directly to the Tasmanian taxpayer. This amounts to a massive 50%+ or >$5.1 million direct taxpayer subsidy to special timbers industry over the past 3 years;
  • These changes combined with the existing draconian sawlog sales and pricing practices create a business model that would be the envy of the Australian car industry.

Read my article here for more details.

Given that Forestry Tasmania is the major special timbers producer, and that blackwood comprises at least 80% of special timbers production, this amounts to the commercial sabotage of existing and potential private blackwood growers. Under these circumstances there is absolutely no way that Tasmanian farmers can compete in the blackwood market. The blackwood market is now effectively closed to competition.

As I said in the Tasmanian Times article the special timbers industry must seek a win-win-win resolution to this problem – a win for the future of the iconic special timbers industry, a win for the Tasmanian community and a win for Tasmanian farmers.

URGENT

If you support the future of a profitable and sustainable blackwood industry please contact Forestry Tasmania and your local State members of parliament (as FT shareholders) and ask that Forestry Tasmania manage all of its special timbers activities on a profitable, fully-commercial, transparent and sustainable basis. No more subsidies, no more compromising farmers commercial interests.

 

PS. I will be posting another blog here in a few days with further details of why the special timber industry is in serious trouble. Stay tuned!

PPS. 2010 turned out to be quite a year – 1) the year I completed my PhD in blackwood genetics and wood quality that reaffirmed the potential of blackwood as a profitable commercial timber species, 2) the year FT gave me the flick as an employee, and 3) the year FT abandoned the blackwood industry and decided it was a charity deserving of a 50%+ taxpayer subsidy.

Calling all Kiwis

I’ve just added “New Zealand” as a blog category.

I would love to get comments, ideas and stories from New Zealanders who grow, process or use blackwood.

I know there are plenty of Kiwi farmers who grow blackwood. I want to hear of your experiences, both the successes and the failures.

Ditto with NZ luthiers. I know some of you use locally grown blackwood. Send me your stories and pictures of some of your work.

Looking forward to hearing from you soon.

Cheers,

Gordon Bradbury.