Monthly Archives: October 2015

Another year of special timbers obfuscation and decline

FTAR2015

The Tasmanian State Government and Forestry Tasmania regard special timbers production as a taxpayer-funded community service. Tasmania’s most valuable timbers are produced for the poor, the needy, and the deserving.

Forestry Tasmania recently released their annual report for 2015, and it provides another wonderful opportunity to demonstrate the disaster that is public native forest management in Tasmania in the 21st century.

http://www.forestrytas.com.au/news/2015/10/2014-2015-forestry-tasmania-annual-report

Things are going from bad to worse. For my review of last years Annual Report go here:

https://blackwoodgrowers.com.au/2014/10/31/continuing-the-decline-forestry-tasmania-2014-annual-report/

But first an apology to readers. I have just become aware that I have been a victim of Forestry Tasmania’s special timbers obfuscations. Forestry Tasmania has an obligation and commitment to supply and report on “millable” special timbers sawlog production. But by including non-millable “outspec” and “craftwood” products in the reporting mix since 2008, they have created confusion and obfuscation to the point where “non-millable” products now dominate special timbers production and reporting. But FT has no obligation or commitment to produce or report on non-millable special timbers. Reporting on special timbers “millable” products is now at a minimum. Sustainable yield has become irrelevant. See below for details.

Special timbers are mentioned in many places in the Annual Report with the main production discussed on pages 21-22. Once again there is absolutely no discussion of commercial matters.

Deception #1

In 1991 with the Tasmanian Forests and Forest Industry Strategy, again in 1997 with the Tasmanian Regional Forestry Agreement (RFA), and again in 2010 with the Special Timbers Strategy Forestry Tasmania made the commitment to supply 12,500 cubic metres per year of millable special timbers sawlogs to the market (see Table below). This comprised 10,000 cubic metres of blackwood with the remainder being other species. That’s 25 years of commitment to supply and report on special timbers sawlog production.

This commitment was given within the context of significant ongoing “sovereign risk” concerning access to and management of the public native forest resource.

There has never been an obligation or commitment to supply or report on non-sawlog special timbers production.

In addition in both 1999 and in 2013 Forestry Tasmania published sustainable yield estimates for blackwood sawlog production. This has significance as the only other sustainable yield calculation that FT produces is for native forest eucalypt sawlog.

FT is therefore obliged to report against their repeated special timbers commitments and against the blackwood sawlog sustainable yield estimates.

However you have to go all the way back to the 2007 Forestry Tasmania Annual Report to get a clear unambiguous report on the production of total special timbers “millable logs”. In that year there was a separate table showing non-millable (craftwood & outspec) production. This was the first time that non-millable production was ever mentioned in the annual report.

Between 1995 and 2007 (12 years) Forestry Tasmania did not publish special timbers sawlog production by species. Only total production figures are available for this period.

From 2008 onwards the reporting of special timbers production becomes increasingly obfuscated. From 2008 onwards it is unclear exactly what the actual sawlog production by species is, as non-sawlog (outspec and craftwood) becomes mixed into the reporting structure.

The use of simple production tables and charts to show production by product and species, and hence demonstrate sustainability/profitability is completely absent.

Instead FT uses charts to show production by species, but it is unclear whether these charts relate to combined millable and unmillable production, or just the millable production. By 2014 and 2015 however it is clear that the charts of production by species refer to the combined and not the millable sawlog production. [Never mind the fact that the 2015 chart (p. 22) shows “Area (hectares)” and not “Production (cubic metres)”].

These are experienced, professional people who know how to write reports.

This is pure obfuscation!

So much for commitment! So much for transparency!

It’s a deliberate attempt to obscure the fact that millable special timbers sawlog production has plummeted, due to decades of overcutting of the resource and sovereign risk. See Chart below.

Here is the table of special timbers millable sawlog production commitments made by Forestry Tasmania in 1991, 1997 and again in 2010, against which they have not reported since 1995.

Annual supply targets for special timbers millable* logs for the ten-year period to 2019.

Species Annual volume (m3)
Blackwood 10,000
Silver Wattle 500
Myrtle 500
Sassafras 500
Celery-top pine 500
Huon pine 500
King Billy pine Arisings only
Other species (including figured eucalypt) Arisings only
Total 12,500+

* Millable logs include ‘Category 4’ sawlogs and ‘utility’ logs (Special Timbers Strategy 2010, p. 21).

I have contacted FT in the hope of gaining some clarity around their special timbers millable log production data.

Deception #2

The 2013/14 Forestry Tasmania Annual Report had a list of objectives for the 2014/15 year which included:

Produce 11,300 cubic metres of special species timber [quality unspecified], and conduct at least 12 tenders for special species logs (2014 Sustainability Report p.56).

That is an immediate breach of their commitment to produce 12,500 cubic metres per year of millable special timbers sawlog per year.

And so to this year’s Annual Report:

During 2014/15, Forestry Tasmania produced a total of 11,042 cubic metres of special timbers from Permanent Timber Production Zone land. This comprised 5,051 cubic metres of millable logs, with the remainder being [non-millable] ‘out of specification’ sawlog and craftwood.

Of the 11,042 cubic metres special timbers produced 3,744 cubic metres (34%) were “sold” through Island Specialty Timbers (IST). Of the 3,744 cubic metres “sold” through IST 220 cubic metres (2.0% and 5.9% respectively) were sold through the online tendering process to ensure that the best possible prices were obtained.

I created the chart below to clearly show what we currently know with certainty about special timbers production for the last 9 years from Tasmania’s public native forests. You won’t find a chart like this in any Forestry Tasmania publication.

Over the last 3 years FT has collected a whopping 17,700 cubic metres of special timbers non-millable craftwood off the forest floor at taxpayers expense for which they have no supply obligation or commitment!! That’s equivalent to 900 truck loads. For the same period only 15,700 cubic metres of special timbers sawlog was produced. That’s 20,000 cubic metres of sawlog short of the supply commitment!! Most of the missing volume is blackwood sawlog.

Why aren’t the alarm bells ringing??

Where is this vast volume of craftwood going? Who is buying it?

What are the sawmillers/boatbuilders/furniture makers doing with no sawlog resource?

Remember most of the special timbers story is about blackwood which makes up to 90% of annual production. So despite having a commitment to supply 10,000 cubic metres of blackwood sawlog per year, plus a sustainable yield estimate against which to demonstrate good forest management, we do not know with any certainly exactly how much blackwood sawlog has been harvested over the past 9 years.

Instead the chart shows the final declining years of Tasmania’s special timbers industry, including our iconic blackwood industry. Blackwood timber could be grown by Tasmanian farmers if they were encouraged. Instead all we get is politics, conflict and wasted taxes.

Welcome to Tasmania!

FTSTchart

Only two other useful pieces of information are provided in the Report concerning special timbers production. One is that 216 cubic metres of Huon pine sawlogs and 128 cubic metres of Huon pine craftwood were recovered from West coast forests, rivers and beaches. No information is available on how much it cost Tasmanian taxpayers to have this timber brought to market.

The other information is the curious comment:

The [IST] tendering program received strong interest, with the highlight for the year being a 0.57 cubic metre blackheart sassafras log that sold for $3,815 per cubic metre.

It’s curious because a) the Government has absolutely no interest in the real market value of its special timbers assets, and b) my records show that the IST highlight for the year was in fact a Tiger Myrtle log which sold at the April 2015 tender for $5,900 per cubic metre!! Curious!!

https://blackwoodgrowers.com.au/2015/06/18/ist-blackwood-sawlog-tender-results-2014-15/

Clearly the market is prepared to pay exceptional prices for quality Tasmanian timber. But forestry is not about business or profits. It’s a community service funded by taxpayers. Prices apparently are completely irrelevant.

Deception #3

Finally after many years we get a clear statement of exactly how much taxpayers money is being wasted subsidising boat builders, furniture makers, guitar makers and Salamanca trinket makers.

The community service obligations costs are set out on page 64-65 of the 2015 Annual Report. They total $6.87 million dollars of which $0.9 million dollars (13%) is used to fund special timber workers. That is a subsidy of $81.56 per cubic metre of special timber produced.

Community Service Obligations

In August 2014 the State Treasurer and the Minister for Resources directed Forestry Tasmania to provide the following community services. In undertaking these community service obligations Forestry Tasmania incurred net costs and was funded to the extent indicated below.

Special species management

  • Net cost $0.90 million
  • Government funding $0.90million
  • Identify, manage and harvest special species timber and manage the Huon pine log stockpile (Annual Report p. 64).

Tasmania is subsidizing wood that sells for hundreds to thousands of dollars per cubic metre in raw log form.

Tasmanian blackwood timber retails for $7,500 per cubic metre, and Tasmanian taxpayers subsidise this!! Why?

https://blackwoodgrowers.com.au/2015/10/26/blackwood-pricing-and-the-forest-industry-2/

Can anyone please provide me with some logic here?

That’s a $900,000 Tasmanian taxpayer subsidy so that the best possible prices are achieved on just 2.0% of the special timbers produced!!

So what’s the deception?

The deception is that any of this special timbers management and sales are logical let alone reasonable. Logic and reason, let alone profitable, sustainable forest management are completely absent.

Our forest managers and our politicians are definitely playing us for fools.

That this fiasco provides a sound moral, political, social and commercial basis for logging the Tasmanian Wilderness World Heritage Area is just offensive.

That this fiasco is applying for Forest Stewardship Council (FSC) certification is just a joke. Forestry Tasmania is a million light years from good profitable, sustainable forest management.

That this fiasco already has PEFC Australian Forestry Standard (AFS) certification makes a complete mockery of that particular certification system.

For his usual brilliant review of FTs miserable commercial performance and management for 2014/15 you should read John Lawrence’s blog here:

http://www.tasfintalk.blogspot.com.au/2015/10/has-ft-turned-corner.html

My apologies for such a long blog but what can one do when faced with such a disaster.

When will Tasmania get a fully commercial, profitable forest industry?

Blackwood pricing and the forest industry #2

In the previous blog on blackwood prices I discussed some of the issues around blackwood pricing and markets using an actual blackwood price list “from hell”.

https://blackwoodgrowers.com.au/2015/10/19/blackwood-pricing-and-the-forest-industry-1/

Here I present some better examples of timber price lists including another real blackwood price list, but this one should definitely stir some interest from existing and potential growers.

This retail blackwood price list exhibits both excellent overall prices from a grower and sawmillers viewpoint, but also includes allowance for the cost of time it takes to grow bigger trees to produce the larger size boards. Hence the 5.8% “step-up” in the price per cubic metre for the 38mm and 50mm thick boards. I’m assuming of course that this pricing structure reflects in some degree what was paid to the growers, with larger logs attracting better prices than smaller logs.

Remember that Tasmanian blackwood is Australia’s premium appearance grade timber species.

BPL2

By way of comparison here is a price list for American Cherry (Prunus serotina) from the same retailer. American Cherry is regarded as the number one premium appearance timber in the USA. Almost all American Cherry is grown in native forest by a vast number of small private forest growers, so the markets are very competitive. These prices therefore are likely to accurately reflect real market conditions, including grower profitability. The same certainly can’t be said for Tasmanian blackwood.

I’ve made both the blackwood and the cherry charts are on the same scales to allow for easy comparison.

ACPL

Notice the cherry price list has two step-ups in the cubic metre price (4.9 and 8.8%, with the over increase of 14.1%) to reflect the three timber thickness grades, and the cost of time needed to grow larger trees to produce the bigger boards.

By way of comparison Premium clear grade Radiata pine retails for about $2,500 per cubic metre.

So if retailers and sawmillers (but not the growers) are making money selling blackwood at $2,500 per cubic metre, surely at $7,000+ per cubic metre there is plenty of potential for growers to be rewarded sufficiently to consider commercial blackwood as a profitable investment.

Much more than any other primary industry, forestry relies upon growers getting a fair deal and a good price, otherwise the forest industry has no future. A 30+ year investment to grow trees involves an exceptional amount of goodwill, trust and fair play in the marketplace. So far the forest industry does not have a good reputation in this regard.

The only other option is for growers to do the harvesting, sawmilling, and selling themselves. A Growers Cooperative then becomes the natural result of this outcome. But this still requires the marketplace to provide price and demand signals.

Both the blackwood and cherry price lists potentially provide incentive and reward/profit to forest growers to produce these beautiful premium timbers, as well as recognise and encourage the growing of large trees to produce the large wide boards that the market demands. These are the just rewards of time, patience, good forest/plantation management and a forest industry/marketplace working together to build a future.

The private American Cherry growers keep managing their native forest and growing and selling their Cherry timber.

But what about the growers of Tasmanian blackwood?

 

It is an interesting footnote that Tasmanian taxpayers pay to have public native blackwood forest logged (Forestry Tasmania deliberately makes a loss) in order that approximately $40,000,000 worth of blackwood timber and veneer is sold every year. Why does blackwood need to be subsidised?

 

Craft War!

Craft-War-Weekend-Australian

I just found this article in The Australian from 10th October 2015 by the Tasmania correspondent Matthew Denholm.

http://www.theaustralian.com.au/life/weekend-australian-magazine/tasmanian-forests-timber-craftsmen-and-another-looming-battle/story-e6frg8h6-1227563469827

Oh the sad stories of taxpayer-funded cultural and family heritage. It’s enough to make one weep with sympathy.

But as a forester after watching this fiasco for 35 years these stories don’t work for me anymore. My sympathy was consumed in the forestry wars of the last 20 years, and the ongoing blatant politicisation of the forest industry in Tasmania.

Forestry is just about wedging the community and winning elections – nothing more.

Now I’ve had enough of the sob stories. In fact I feel deeply offended by this ongoing stupidity.

The public native forest special timbers industry has never been and never will be sustainable nor profitable. And all the fine craftsmanship and beauty in the world will not make it so.

This is not a Tony Abbott moment revisited! Good [special timbers] forestry does not start tomorrow, nor any other day.

The past 30 years have clearly demonstrated that good, profitable public native forestry will never happen in this State.

Most special timber craftsmen lay much of blame for the emerging crisis on the politicians and timber barons who presided over a forestry industry that “wasted” vast volumes of special timbers in a head-long rush to clear old-growth forests.

Excuse me!! Ever since I can remember the special timbers industry has pretty much universally supported the industrial forestry orthodoxy and State Government policy, including the 1996 Tasmanian Regional Forestry Agreement. They didn’t really have any choice in the matter. All the forest policy was made for the big boys. The cheap subsidized wood provided by large scale industrial forestry is exactly what allowed the special timbers industry to thrive over the past 40 years.

So to turn around now and blame the politicians and greenies is disingenuous in the extreme.

…until the politicians squandered it!

The politicians did indeed squander it [our public native forest resource] and the vast majority of Tasmanians including the special timbers industry were right there in full support. Millions of tonnes of special timbers burnt and chipped over the last 40 years.

And now it’s time for tears and regrets?

Find someone else to blame? Don’t take any personal responsibility?

No! It’s now game over!!

No sympathy! No excuses! No exceptions! No Tony-Abbott promises of “good forestry tomorrow”!!

What little remains of our precious old growth and rainforest must not be used for further political games, waste, and stupidity.

However, Paul Harriss faces stiff resistance from many of the craftsmen in whose name he is -acting. They might be united in condemnation of previous “waste” of their resource, but they are divided when it comes to securing new ¬supplies from within the TWWHA.

“If a government decision was taken to harvest inside a World Heritage Area, I think we would suffer a backlash,”

Absolutely!

The community reaction would rival if not exceed the Franklin Dam blockade. The damage done to Tasmania’s reputation, as a recalcitrant belligerent State would take decades to heal.

Brand Tasmania would be completely trashed!!

The article finishes with what I regard as a complete falsehood:

Whichever way the issue plays out, the special timbers and traditional skills that shaped a state are in ¬danger of being consigned to its past.

It’s the usual dramatic scaremongering that the mainstream media loves to peddle.

This article did not cover anything like half the real story of the special timbers industry. It just repeated what has been repeated many times before. There are many aspects of the story that were completely ignored.

The special timbers and the skills will not be consigned to the history books and museums. They will be confronted with reality just like the ivory traders and whalers were. Those that choose too can adapt and change to the new reality. Those that choose not to change will no doubt chew their old bones for comfort.

My own proposal to develop the commercial potential of growing blackwood timber via a blackwood growers cooperative is just one of the many special timbers opportunities waiting to be developed. But it’s not likely to happen whilst the old wars and the old warriors continue to play their games.

When will Tasmania get a fully commercial and profitable forest industry?

Blackwood pricing and the forest industry #1

Having had a few discussions recently about blackwood prices and price lists I have begun to investigate this aspect of the forest industry and the marketplace. Pricing a commodity that takes 20-100+ years to grow requires stepping outside the realms of normal economic theory. And when you are a retailer and not a grower, are you rewarding and motivating the grower, or are you killing the forest industry?

What the market is prepared to pay, product substitution and technology become critical issues. This is particularly true in the wood commodity markets such as pulp, paper and construction which accounts for the lion’s share of the wood market.

But what about the premium end of the wood market where wood quality and appearance are fundamental aspects of the market? This market exhibits a significant degree of inelasticity (with a high capacity to pay), and a resistance to product substitution, as well as technological change. This is the market that Tasmanian blackwood inhabits.

From a blackwood growers viewpoint, how does pricing affect grower behaviour? Most premium timbers around the world come from (public and private) native forests. Few premium timbers are grown in plantations. Economic management and performance of native forests is quite different to growing timber in plantations. Compared to native forests plantations have high establishment and management costs, with little or no income from the investment until harvest in 20-30+ years time. As a straight investment this requires careful planning and management in order to achieve a reasonable profit from the investment (not to mention a great deal of passion and patience).

So what does the marketplace tell us about the economics of growing trees for premium quality wood production?

Here’s an example of a real blackwood price list of dimensions and prices per linear metre. I then calculated the price per cubic metre for each of the dimensions and made a chart of the results. The prices are for kiln-dried rough-sawn (KDRS) clear-grade blackwood.

I was horrified!

This pricing and pricing structure will kill the blackwood industry stone dead!!

Firstly I don’t know too much about the costs of regulation, harvesting, transport and sawmilling, but I suspect the growers of this blackwood got bugger all for their trees.

If the retailer is selling blackwood for $AU2,500 per cubic metre regardless of size, what did they pay the sawmiller? And after paying the costs of planning, harvesting, transport and sawmilling, what did the sawmiller pay the poor growers? I reckon the growers got the clear message that growing commercial blackwood is for mugs and losers!

Instead of providing incentive and reward for their blackwood growing efforts the marketplace punished these growers.

So do we want the forest industry to have a future?

It won’t have a future with this retail pricing!

Do we want to be able to buy blackwood timber in the future?

There wont be any to harvest if these prices continue?

I don’t know where in Tasmania the blackwood timber came from but it wasn’t plantation grown. It could be public or private native forest; meaning these trees were between 40 and 80 years old when harvested.

BPL1

The second failing of this price list is the complete absence of the cost of “time”.

Time costs money. That’s what interest rates are all about. They represent the cost of money over time – for either loans or investments.

In general the price of timber reflects the volume/size of the piece of wood. The greater the dimensions and length the greater the price. The above pricing structure would be fine IF blackwood was produced in a factory where the ingredients were fed into one end of a machine and the various sizes and lengths came out the other end, with little time involved in production.

Unfortunately blackwood timber grows on trees and trees take time to grow, and time costs money. The bigger the piece of timber the bigger the tree required, and the longer it takes to grow, and greater the cost to the grower/investor.

But the above pricing list says that size (and hence time) has no cost. Wrong!!

The above list says that a cubic metre of 25x25mm costs the same to grow/produce as a cubic metre of 125x125mm. Wrong!!

You can cut 25x25mm timber from young 30 cm diameter trees, but you need much older 60+ cm diameter trees to produce 200×50 mm or 125x125mm blackwood.

A common complaint in the premium timber market is the scarcity of wide boards. However the above price list fails to provide any incentive/reward to the grower to grow bigger older trees.

A common caveat in the premium timber market goes something like:

Availability of specific sizes and lengths cannot be guaranteed.

This is largely due to the wood being sourced from native forest where tree size and supply are relatively random. In forestry lingo it’s called “run of the bush” – whatever turns up.

Plantations however are highly controlled and managed, so that (if things work out) size and supply can be better managed. A bit of tree selection and breeding and wood quality and supply is more assured. No caveats required.

So if you want to contribute to the destruction of Tasmania’s iconic blackwood industry here’s the place to buy your timber. It’s a double whammy for the industry!

But if you want to support a profitable, sustainable forest industry then understand that time (and big trees) costs money!

Alternatively this price list may just reflect the fact that in Tasmania growing blackwood is according to Government policy a (taxpayer-funded if you are a public grower) community service not a business. These may just be community service prices, not real prices reflecting the cost of production let alone building and growing the industry.

In my next blog on blackwood pricing I’ll show an example of a better timber pricing structure together with much more realistic prices.

When will Tasmania get a fully commercial profitable forest industry?

Comments and ideas welcome!!

 

Tasmanian Primary Wood Processor Directory 2015

PFT TPWPD 2015

The Private Forests Tasmania wood processor directory for 2015 has been released.

http://www.pft.tas.gov.au/index.php/news/89-newversiontasprimwoodprocdirect

Here’s my review of the 2014 directory:

https://blackwoodgrowers.com.au/2014/10/27/blackwood-sawmillers/

This Directory has been primarily developed to help private forest owners with logs for sale to identify potential buyers. As well as enabling the forest owner to more easily locate and contact primary wood processors, it also identifies the log types purchased by them.

There is also a mutual benefit: this Directory will also help the listed primary wood processors to source logs from the Tasmanian private forest estate.

The Directory is a listing of 37 of the estimated 56 primary wood processing businesses, regardless of size, that Private Forests Tasmania (PFT) believed were operating within the State of Tasmania at the time of publication. Their inclusion in the Directory has only been with their consent. All the data was collected directly from them, including permission for PFT to list their business within this Directory. Not all processors either replied or agreed to be included in the Directory but PFT hopes that, over time, more will see the benefit of participating and that future editions of the Directory will list a greater proportion of the State’s primary wood processors, regardless of size.

Compared to last year only 37 of the estimated 56 wood processing businesses in the State are listed this year. Of these only 14 indicate they are interested in purchasing blackwood logs from private growers (blackwood or special species), down from 21 last year.

What does this reduction in blackwood processors/buyers indicate? Does it indicate a shrinking market? Or are businesses just choosing to stay off the Directory?

Last year 21 of 45 listed businesses were blackwood buyers, which to me indicated a very crowded marketplace. Perhaps too crowded given the limited private blackwood sawlog resource.

Even 14 of 37 businesses in 2015 is still too crowded in my opinion.

The Tasmanian blackwood industry needs to be more commercial, efficient and profitable. This means fewer processors who are processing larger volumes more efficiently, accessing more valuable markets and offering growers better money to encourage more blackwood growing.

Do these processors understand the critical part they play in ensuring the future of the industry? Or are we still in salvage mode going nowhere?

Commercial blackwood growing needs to be transparently and abundantly profitable for the industry to have a future. Right now we are a long way from that.

Personally I believe the blackwood log exporters have the best chance of helping to change the current situation and make the blackwood market more transparent and profitable.

PS. Curious how the most obvious things are sometimes the hardest to see. I just realised that Britton Brothers P/L, by far the largest blackwood sawmiller in the State, is in the directory but does not specifically list blackwood in the Logs Purchased list. Clearly the directory lacks some clarity and detail.