Woodbanks strength is its hands on approach to maximizing forest owners returns. The people that run the company run the projects.
Woodbank has a proven track record of generating the best returns for your forest for woodlot. With 20 years of commercial forestry experience, Woodbank has the relationships with sawmills, pulp mills, and the contracting workforce (loggers, trucking, road engineers) that will ensure that the harvest of your trees is hassle free and into reputable markets.
Woodbank can tailor a number of different sales methods to suit the forest owner as we realise that every forest owner has differing financial, tax and risk appetites. We offer the following harvesting and marketing methods, and in some cases a mixture of the methods depends on the clients needs.
- Managed forest sales
- Pay as cut stumpage sales
- Log grade sales
- Open book management contracts
- Lump sum purchases
FREQUENTLY ASKED QUESTIONS
- What are my trees worth?
- What liability do I now have under the ETS if I want to harvest?
- What is the value of forest inventory?
- When should I harvest?
- What is the best way to sell my forest?
What are my trees worth?
Valuing a tree crop will depend on a number of variables and no forest is generally the same. Since the inception of the ETS tree crops now effectively have two main value drivers; log and carbon prices.
Factors to be considered are:
- Type of tree species
- Silvicultural regime – pruned, unpruned, thinned, unthinned?
- General market demand and prices at time of harvesting
- Distance to domestic markets or ports
- Harvesting and roading costs
The best approach is to contact us for a no obligation assessment.
What liability do I now have under the ETS if I want to harvest?
The ETS has created a lot of confusion in its implementation but the basics are pretty simple for forest owners. We must make a key distinction; deforestation = permanent removal of trees and harvesting (with subsequent replanting) does not mean deforestation.
Effectively forest owners are divided into 2 camps – pre 1990 and post 1989.
Pre 1990 forest owners
Assuming you have done nothing under the ETS in terms of obtaining an exemption (<50Ha Blocks) if you are going to replant, your liability is zero. If you are considering a and use change and therefore permanent deforestation, you may have a ETs liability to consider. There can be significant so contact us for advice.
Post 1989 forest owners
If you chose not to participate in the ETS you will have no liability on deforestation. If you have chosen to participate and you have sold New Zealand Units (NZU’s) from your forest you will be required to file an Emissions Return on harvest and buy back’ NZU’s required to keep your account in balance.
There is some devil in the details with the ETS so contact us for advice.
What is the value of forest inventory?
The value of your forest is dependent on forest volume and log grades within the stand. Depending on the type of log sales method chosen and for smaller stands, it is often not worth the cost of paying for a full stand inventory. A visual stand assessment by Woodbank will provide a broad idea of log grades. If owners are seeking to sell a forest via an average stumpage price or lump sum payment, we recommend that a full MARVL assessment is done.
- Commercial factors – market and cost conditions or alternative land use issues of the time.
- Biological factors – general tree growth and log characteristics for particular market segments.
Modern day market dynamics play a significantly greater determinant on forest value than a theoretical rotation age. Due to this we suggest forest owners remain flexible on harvest age. Depending on site characteristics generally the optimum harvest age for a well grown and well tended radiata pine forest is between 26 -30 years of age. However ex pasture sites that have had high residual fertilser in the soils can bring harvest ages forward.
Broadly, the optimum time to harvest is when:
- market conditions are suitable for the forest in question
- the stand has generated maximum growth verses the cost of capital invested
- when trees have maximised their pruned clearwood growth and structural sawlogs have developed the high density fibre required for domestic framing sawlogs.
What is the best way to sell my forest?
First rule = engage a professional with a good track record and good references in the industry. In terms of sales process, typically there are two main types of log sales – managed sale and stumpage sale.
1. Managed sale
This is where the owner appoints a professional harvesting/marketing company to oversee all aspects of the project on behalf of the owner. The project is very transparent for the owner, with the owner receiving a detailed report of all revenues received and costs incurred from the project. Because it is an open book project, the owner takes on the market risk, and will make more money should the market rise during the operation but conversely may lose revenue should the market fall during harvest. In our experience the most favoured sales method is a managed sale, mainly because we feel it returns the highest revenue to the forest owner, whilst still allowing the owner to retain a hands-on approach to the operation on their property.
2. Stumpage sale
The advantage of the stumpage sale for the forest owner is that they have know the exact dollar per tonne figure they are going to receive from their forest. However stumpage buyers will discount their buy price to offset grade, volume and market risk and thus returns can often be lower.
There are three subcategories to a stumpage sale:
- Graded (pay as cut) sale: This is where the stumpage buyer pays a different price for each grade cut. The significant risk for the forest owner in this sale method is the stumpage purchaser’s lack of incentive to optimise the grade outturn.
- Composite (pay as cut): This is where the stumpage buyer pays a composite price for all logs removed.While this produces an incentive to optimise grade outturn, it is likely to result in a price discount to mitigate the buyer’s risk that the grade mix is inferior to that assessed before harvesting.
- Lump sum sale: This is where a stumpage buyer pays a lump sum for all logs before the start of harvest. The buyer takes all the risk of grade mix and total recoverable volume, as well as market risk. This typically leads to the buyer heavily discounting their bid price to cover this risk.
Additionally the forest owner will typically need to pay a forestry company a fee to take their forest to the market, package the stumpage sale and oversee the stumpage process for them.
Woodbank can arrange stumpage sales for forest owners if required and/or purchase forests on a lump sum basis. Woodbank can provide a good graphic of the various risks and rewards of various sale types – contact us to view.
Some things to consider in the sales process
Your trees have been growing for a minimum of 25 years and you are going to get one shot at optimising the return from your investment.
You need to consider:
- Revenue – Is the current log market relatively good for your stand of trees and will it generate good sales revenues for your logs?
- Harvesting capacity availability – Harvesting crews are no longer readily available. Once you decide to harvest it could be months before you can secure a harvesting crew. You need to plan well in advance to ensure you can actually harvest your trees when you want to.
- Seasonal issues – Does it fit in with other farm operations? Do you need to consider winter vs summer harvesting due to soil type?
- Costs – You need to consider harvesting and trucking costs, along with roading costs and the costs of transporting in a harvesting crew.
- Log value recovery – Does the harvesting crew you are using have the necessary skills to optimise each tree stem into the highest value log components, at the appropriate log quality?
- Return on investment – Should you wait another year, or will you make more with the money in the bank or some alternative investment?
- Land use – Is your current tree crop the best use of your land going forward?
- What are you going to do with the land post harvest? Replant or clear? Have you considered ETS liabilities and subsequent reestablishment costs?