Monthly Archives: May 2016

Research funding into forestry on farms

Plantation

This article appeared in the news last night.

Money has been found by the Australian Federal Government to fund a project to “research to investigate the tree varieties, soil types and planning needed to introduce timber plantations on farm.”

http://www.abc.net.au/news/2016-05-19/funds-for-research-and-development-into-agroforestry/7430116

The project is to be coordinated by the Forest & Wood Product Association:

http://www.fwpa.com.au/

As of this morning there was no mention of this project either as a proposal or as a reality on the FWPA website.

In fact if you look through the FWPA website farm forestry doesn’t seem to rate highly at all. Oh well! If you do a word search on “blackwood”, Australia’s premier appearance grade timber species for over 100 years, you get nothing at all!! Blackwood is just not on the FWPA radar. Curious!

Anyway back to the new item:

“FWPA managing director Ric Sinclair said funding for the research project would benefit both timber processors and farmers.

“This research is about giving decision support to farmers about how and where to put trees on their property that can maximise value,” he said.

Mr Sinclair said the industry had “learnt a lot” from the mistakes made by the agribusiness companies behind failed managed investment schemes.

Ross Hampton from the Australian Forest Products Association said growing trees on farms would lead to a significant increase in Australian timber resources.

“The resource is obviously fundamental for growth,” Mr Hampton said.

“We’ve had two large resource baskets in Australia — the plantations and the native forest area.

“What’s been missing in Australia really has been a large input from our farming community.”

I wonder what they mean by “maximise value”?

There is no mention at all about costs, prices, markets, demand and profitability.

The project focus seems to be about growing trees for domestic wood processors, rather than about improving profitability for farmers.

It’s curious that money can be found for yet another research project and yet another dust-covered report, rather than allocating money to help implement the 2005 Farm Forestry National Action Statement:

https://blackwoodgrowers.com.au/2016/02/25/two-significant-forest-industry-reports-that-went-nowhere/

“What’s been missing in Australia really has been a large input from our farming community.”

Perhaps the farming community have been missing because until the forest industry starts behaving like every other primary industry, then farmers are not prepared to face the already significant risks associated with forest investment. Plenty of reports have identified reforms which the forest industry must implement in order to improve investment in planting. So far those reforms remain elusive!

Here’s just one example from a FWPA report:

“The lack of price transparency for forest products, particularly from hardwood forests/plantations, represents an impediment to the uptake of farm forestry. Unlike other commodities, price information for forest products is not published through the newspaper or accessible online. Better price transparency is required to encourage smallscale investment in trees.”

Well I’m happy to say I’ve been doing my bit to help the blackwood market in the face of significant industry and Government apathy.

Taylor Guitars latest Tasmanian blackwood promotion

TaylorTonewoods.jpg

The latest Wood & Steel magazine (Winter 2016) from Taylor Guitars offers yet another big promotion of Tasmanian blackwood, featuring in three of the articles in the magazine:

  • New 12-String Voices
  • 12-Fret Revival
  • The 300 Series Branches Out

https://www.taylorguitars.com/wood-and-steel

Here’s the main Tasmanian blackwood promotion found on page 15:

Blackwood’s Broadening Appeal

“Blackwood is one of my all-time favorite tonewoods,” declares Taylor’s master guitar designer Andy Powers, reflecting on the Tasmanian timber’s addition to the series. “I‘ve enjoyed its characteristics in every guitar I’ve built with it. It always sounds good.”

A lot of us at Taylor, in fact, are fans of the tonewood. Our product development team has crafted several series of limited edition blackwood guitars in recent years (including our 2014 500 Series Fall Limiteds) in the hope of broadening the appreciation among guitar players who haven’t been exposed to it. While blackwood has been a staple among guitar makers in and around its native region of Australia, its usage has been more limited in North America due in part to its lack of geographic proximity.

“That’s one of the factors blackwood had going against it,” Andy says. “It’s a long way to America from Australia. Historically, in the formative years of the steel-string guitar, it was a lot easier to get mahogany and rosewood here because they were already being imported for furniture.”

Despite its more limited usage in this hemisphere, blackwood has earned a loyal following across the industry.

“Martin has built some nice guitars with heavily figured blackwood, and they sound great,” Andy says. “And I know a number of small builders who work with it and live in the same camp as me; we all feel it’s amazing.”

The supply is also sustainable, with a healthy sourcing outlook for the future. From a guitar-making point of view, blackwood’s relatively rapid growth cycle can often yield guitar quality wood in under 40 years, and the abundant supply of older, bigger trees produces a lot of straight-grained wood that is easy for guitar makers to work with. We purchased our blackwood from Tasmanian wood supplier Bob Mac Millan (profiled in our Fall 2014 issue), who also sourced the much rarer blackheart sassafras we recently used for limited edition models.

http://tasmaniantonewoods.com/

As an acacia wood species, blackwood sometimes draws comparisons to Hawaiian koa, another member of the acacia family, although, in reality, Andy says, the two species are unique.

“People sometimes refer to blackwood as the old cousin of koa, a more prehistoric version,” he explains. “While that may be so, blackwood has some distinct working characteristics, color, and grain structure, which distinguish it from koa.”

While blackwood will occasionally display exotic figure, Andy says our grading specifications for the sets used with the 300 Series call for more of a classic, straight-grained structure.

“We wanted a staple wood we could count on,” he says. “It’s a high quality guitar wood, clean, clear and straight-grained. In terms of color and overall appearance, it’s not a dramatic change from the classic mahogany or sapele aesthetic. It has a similar look a lot of times, especially paired with the mahogany tops and with a nice shaded edgeburst. Frankly, a lot of players may not even visually notice the difference unless they’re really looking for it.”

A color-matched stain for the blackwood back and sides and mahogany top and neck brings a seamless visual cohesion to the guitars, adding a rich undertone to the natural cinnamon-brown hues and highlighting the similar grain structure of both woods. Tonally, blackwood yields a strong midrange focus — dry and clear yet also warm, like mahogany and koa — with a splash of top-end shimmer and richness similar to rosewood. Its musicality, Andy says, suits a variety of body sizes and musical styles. Paired with a mahogany top, players can expect plenty of dynamic range.

Phew!

There’s a lot of promise, hope and opportunity in all those excellent words. Can they be matched by some clever product development and marketing, and finally by market acceptance and appreciation?

On top of the blackwood promotion there is other good news including the fact that Taylor Guitars has been the top-selling acoustic guitar brand in the USA for 26 straight months, with total (acoustic and electric) production in 2015 of 165,000 guitars and employ over 1,000 people! Even then they still can’t keep up with the demand.

Also the article Forestry for the Future on page 5 by Bob Taylor makes for interesting reading. Mr Taylor says “A word that has now become part of my daily vocabulary is “forestry.” He goes on…” The foresters I’ve met are mostly very good and brimming with concern, ideas and skills to help us all. And they’re frustrated because they work in a structure that often doesn’t allow them to work. Their work takes committed clients, and it also takes time.”

And as we have seen in Tasmania over the past 40 years, good intentions can so easily become corrupted and distorted to the point where the forest industry struggles to operate effectively because of the domination of ego, ideology and politics.

Bob Taylor says that forestry is the answer. I would say that good leadership is the answer. And I’m happy to say that Bob Taylor fits the leadership role pretty well!

I certainly sympathise with the expression of frustration! Being a forester in Tasmania means living with permanent dose of frustration.

Taylor Guitars and Bob Mac Millan at Tasmanian Tonewoods are doing their bit to bring Tasmanian blackwood to the world stage.

Now what can we in Tasmania do to support Taylor Guitars promotion of profitable, sustainable Tasmanian blackwood tonewood?

This is a commercial opportunity going begging.

Are Tasmanian farmers interested?

Are our politicians interested?

Is the TFGA interested?

We need leadership!

We need cooperation!

Plantation blackwood resonator guitar

Burgin_resonator.jpg

Wellington, New Zealand-based luthier Paddy Burgin has created another beautiful musical instrument using plantation-grown blackwood.

http://www.burginguitars.co.nz/

Made for a local (NZ) steel player who wanted an instrument made totally from NZ grown woods. Paddy’s plantation-grown blackwood comes from Golden Bay at the northern tip of New Zealand’s south island. The tree was about 35 years old when harvested.

https://www.facebook.com/paddy.burgin/media_set?set=a.10154096475482429.1073741829.692202428&type=3

I only wish more instrument buyers and luthiers would take the plantation tonewood challenge and try plantation grown blackwood.

Great work Paddy!

Blackwood Plantation Financial Model

Plantation

This is a financial model that calculates the Internal Rate of Return (IRR) from an investment in one hectare of commercial blackwood plantation. The model is setup in an Excel spreadsheet:

Blackwood financial model.xlsx

Here’s the link to find out more about the IRR function in Excel:

https://support.office.com/en-us/article/IRR-function-64925eaa-9988-495b-b290-3ad0c163c1bc

This model is a work in progress and is designed to encourage feedback, comment and updating.

You can download the model and use your own numbers if you wish.

Contact me if you want help modifying the model to your personal requirements.

To begin with I went back to the New Zealand Blackwood Growers Handbook that contains an financial model on page 77. I set this model up in a spreadsheet and came up with the same values as shown in the handbook.

http://www.nzffa.org.nz/farm-forestry-model/species/blackwood/#Blackwood handbook

I then modified the model according to my own recommended simplified plantation regime. This simplified plantation regime reduces the initial establishment and management costs, and reduces the workload required in the first 10 years.

I also changed some of the values in the model to better reflect what I consider are current costs.

Assumptions

  • A 35 year rotation length;
  • In 35 years time there will still be a high demand for quality appearance-grade timbers. Technology is rapidly changing many timber markets, including construction-grade timbers, but I think there will always be a demand for premium solid appearance-grade timbers;
  • The objective is to grow the plantation to an average stem dbh of 60 cm, with all trees pruned to 6.2 metres. This should produce approx 300 cubic metres of premium blackwood sawlog;
  • The plantation is established on a site suitable for growing commercial blackwood;
  • The land is already owned (ie. no land purchase costs are included). But go right ahead and add land costs and see what it does to the investment;
  • The simplified plantation regime is used planting 200 blackwoods per hectare;
  • One of the largest costs in blackwood plantations is protection/fencing to protect the trees whilst they are young. Blackwoods are highly palatable to a wide range of domestic and wild herbivores, so good protection is essential. Protection costs will vary considerably according to plantation size, shape and location/terrain.
  • Annual weed control (spot spraying) is essential whilst the trees are becoming established. Blackwoods do not like competing against heavy grass/weed cover. After 5 years I have included a general weed control (slashing) every 5 years for general maintenance. By about age 20 years the blackwoods should have the site under control with little need for ongoing weed management.
  • Actual costs will vary according to individual circumstances. Most of the costs are my best guesses. If anyone has some real data to contribute that would be appreciated;
  • No harvesting or transport costs are included;
  • Other costs can be included fairly readily, such as rates and other overheads, and management costs;
  • The sawlog price is my current best guess at a competitive market price for a large parcel of quality blackwood sawlogs. For example the December 2015 Hydrowood log tender had 14 quality blackwood logs sell for an average of $625 per cubic metre.

https://blackwoodgrowers.com.au/2015/12/11/tasmanian-blackwood-sawlogs-at-625-per-cubic-metre/

Results

The model shows an internal rate of return on Tasmanian blackwood plantation investment of around 10% over 35 years.

For a 35 year investment that is a decent return. Fixed term deposits are currently offering around 3.00% over 4 years (updated Feb 2016).

http://www.infochoice.com.au/banking/savings-account/term-deposit-interest-rates.aspx

If a very good site is planted and hence the rotation shortened to 30 years the return on investment increases to 12%. Alternatively if the value of the plantation after 35 years is only $100,000 per hectare the rate of return is still 9%.

In other words the investment is quite robust to changes in conditions and markets.

Commercial blackwood plantations are a profitable investment under current market conditions.

I wouldn’t recommend buying land just to grow commercial blackwood. Blackwood is not a broad-acre crop but requires certain site characteristics to grow successfully.

Many Tasmanian farms have areas that are currently underperforming or neglected; covered in weeds, bracken and blackberries. These areas are not contributing to farm income, but many of these areas are suitable for growing commercial blackwood.

If a farm has a number of these areas, the investment and the workload can be spaced over time, for example by planting an area every 5 years. After 35 years a set of periodic incomes is achieved from regular harvesting and replanting of plantation blackwood.

Now the one major feature missing in the forest industry is greater market and price transparency to help encourage this investment.