Good news story – Great returns from small blocks

Great returns.jpg

https://nz.pfolsen.com/about-pf-olsen/case-studies/great-returns-from-small-blocks/

Following on from my previous blog about the importance of front line troops in the forest industry, here coincidently is a recent fantastic example from New Zealand.

This is the kind of media the forest industry needs to generate on a regular basis to stimulate interest and investment.

New Zealand has a very successful forest industry which is a major contributor to that country’s economy, without taxpayer subsidies.

Sure they have their challenges – that’s fundamental in business. Any business that doesn’t have challenges is going out of business quick smart.

Those clever Kiwis know how to run a proper forest industry.

It’s nothing to do with blackwood apart from showing that farmers can grow trees on a small scale and make very good money, provided Government and industry policies are right and the market’s working properly.

Kevin Thomsen, a small farm forester at Hawkes Bay, harvested just 8.6 hectares of well managed pine grown on land not suited to other land uses. And here are the results:

The harvesting results far exceeded expectations for 24 and 25 year old trees. Key statistics averaged across the two blocks (both Radiata pine) are:

 

Per hectare log yield of 875 tonnes over 8.6 hectares.

 

Net income (stumpage) of $NZ528,297

 

Net income (stumpage) per hectare $NZ61,430

 

Net income (stumpage) per hectare per year of $NZ2,507

 

Net income (stumpage) per tonne of $NZ67.63

Kevin credits a lot of this successful result and “stress-free harvesting” to PF Olsen and “the specialised marketing division based in Rotorua who have access to a number of competing overseas buyers of our logs.”

Clearly Mr Thomsen, besides having a well managed quality resource to sell, was close to markets and had easy harvesting conditions.

What a great story!

And another thing we don’t have here in Australia – great forest product market information like that provided by PF Olsen:

https://nz.pfolsen.com/market-info-news/

When will Tasmania get a fully commercial profitable forest industry?

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9 responses to “Good news story – Great returns from small blocks

  1. I’m a bit confused as to what the stumpage is referring to here. The article says net stumpage. So do you think this is after harvest costs or before? If it’s before harvest costs, then is NZD67.63/tonne all that good? If it’s after harvest costs and represents what the farmer pocketed this is a better return.

    Does anyone know how payment to farm forestry growers generally works in NZ? Does the mill organise and pay for transport costs?

    • Hi David,

      I’m assuming that “net” means just that – in the growers pocket, so after harvest and transport costs.

      It would be interesting to know what the transport distance was. It obviously wasn’t far.

      An email to PF Olsen NZ may be in order.

      Cheers

      Gordon

  2. Hi, Scott Downs from PF Olsen here. Net means after all costs. Can be called Net Income or Stumpage.

    As an aside you may also hear someone refer to On-Truck Stumpage. This is net income after cartage. (i.e. Sales revenue less cartage). We often use this to determine the priority for log grades to be cut.

    In a graded manage sale the log cartage is a cost paid by the forest owner.

  3. Thanks Scott. Any ideas why the return from pine is so much better for NZ farm foresters than in Australia? Compare the return from pine from this agroforestry demonstration site in Australia:

    http://www.gippslandagroforestry.com.au/?page_id=63

    with the return in the PF Olsen case study.

  4. G’day David
    This is not a case of comparing apples with apples for several reasons. The NZ case study was from a significantly larger harvest area and two different silvicultural regimes. Lardner Park (which I visited some 10-15 years ago but can’t recall the radiata stand clearly) is an agroforestry regime so I presume wide spacings (hence much lower per ha yields) which leads to large branch development and lower log quality above the pruned butt logs when compared to the NZ case. Harvest costs at Lardner would be significantly higher due the small area and harvest techniques used. Then there is the greater market availability in NZ due to the scale of the radiata industry in NZ.
    Regards
    Stu

  5. G’day David
    Prices in your links are mill door, harvest and transport costs need to come out. Compare them to the ~$68 average log price received in the PF Olsen case (average stumpage for pulp logs through to pruned logs). The PF Olsen case is not agroforestry but a well managed stand starting at 1000 sph, thinned to final pruned stocking of perhaps 400 sph. I’ve no doubt that returns in nz are significantly better than here but comparing Lardner Park case study to PF Olsen case is no comparison. Putting it bluntly, Lardner is an example of a rubbish agroforestry regime with rubbish trees and rubbish returns by comparison.

  6. Stu,

    A few things.

    – I was hoping to move on to a more general discussion of pine sawlog prices in NZ vs Australia and perhaps the industry scale driver you mentioned – hence the links I posted on NZ sawlog prices and regional volumes – but for anyone wanting just grower returns the millgate prices I posted can be converted to indicative grower returns by subtracting harvest prices as per:

    http://www.laurieforestry.co.nz/Pricing-Table#cartage

    and there’s a number of other grower returns at the PF Olsen WWW site:

    https://nz.pfolsen.com/about-pf-olsen/case-studies

    – Re your comments about agroforestry, most definitions center around growing trees on farms. This could include areas established and managed as you suggest as well as silvopasture, timber belts, widely spaced trees and shelterbelts.

    – Re Lardner, it’s a shame the harvest report didn’t contain sawlog grades. I didn’t spend much time looking at the pines during a field day visit a year or so ago but the mature eucs I saw during that tour looked good. I suspect the group that has worked on the agroforestry demonstration site for many years comprising local forestry consultants, forestry extension officers, various folks working in the forestry sector, farmers with agroforestry plantings and others would disagree with your opinions above. An interesting and valuable range of agroforestry techniques and species.

    David

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