Thursday, March 28, 2024

Trees beside cows

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It’s not a quick fix, but a simple question posed to dairy farm owners 25 years ago grew to a significant cash injection for a dairy farm business currently coping with the low payout. “Have you got anywhere to plant trees?” is a question all farmers should consider, John-Paul Praat says. He told Jackie Harrigan how the scheme unfolded.
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In the late 1980s a newly purchased dairy farm on the terraces of the Manawatu’s Oroua River had been running a mob of sheep on the steep, wet and shady sidlings flanking flat, productive paddocks of Kiwitea silt loam.

Massey University agricultural student John-Paul Praat had been alerted to an investment opportunity by a forester, who suggested for a cash injection of about $2000 a hectare a return of $20,000/ha was possible in 25 years or more.

“He also told me if I did the work of planting, spraying, pruning and thinning myself the only cash required was to buy trees and some herbicide, for potentially as little as $300/ha,” Praat said.

Running sheep was not an attractive option for the new farm owners, but they liked the idea that for very little work on their part they could reap a reward in 25 years for the essentially waste ground. The added benefits were using the trees to stabilise the steep country from slipping on to productive dairy pastures while enjoying the shelter and amenity aspect of the forest and reducing unwanted weed infestations on open ground.

There were risks – who knew what the circumstances or the price would be in 25 years – but given the potential it seemed worth a crack to Praat, with returns based on a radiata pine clearwood regime and a saleable yield of 500 tonnes of wood per hectare.

The factor that really swung the deal, Praat said, was the Forestry Rights Registration Act 1983, a system by which a forest could be established and legally registered so a landowner retained ownership of land and a forester owned the trees, and they split the profits after harvest. This scenario allowed a farm sale to build into it the harvest value of the woodlot and neither farmer nor forester was disadvantaged.

The partnership between student and farm owners solved a land management problem for the owners and was a 25-year investment opportunity for the two parties.

“These days we would call the regime prevention of both erosion and sedimentation of waterways.”

Tree ownership was registered against the land title for a set period with the new forester to foot the bill for the trees and manage the growing forest. A contract set out that returns from wood (logs) sold would be split 50:50 after harvest and marketing costs had been deducted. In winter of 1991 four hectares of radiata pines were established on the largest and most at-risk area. In 1992 a further 10ha was established with the help of Taskforce Green which provided subsidised labour for onfarm projects like tree planting. This included 4ha of alternative tree species such as blackwoods, Douglas fir and lusitanica.

In the process of establishing the new forest the dairy farm was further developed by the removal of large old macrocarpas, refencing, cow race upgrades and new troughs. The farm was bordered by a sealed road on two sides providing easy access to the forest blocks.

The advantage of this arrangement, Praat said, was the farmer had no need to risk his capital or become sufficiently knowledgeable about forestry to manage the trees for profit or pay someone else for that expertise, which could entail other risk.

“Without experience it is difficult for a farmer to judge if the work such as pruning is being carried out correctly and on time – if his expertise is farming he may not have the time or willingness to become a forester.”

The harvester was a busy machine, felling on the lower slopes, stripping branches and cutting the logs to length.

By February 2016 there had been noticeable lift in log prices, with an estimated net return of about $20,000 per hectare. A 20% lift in log prices had doubled net returns. Using an established relationship with FOMS (Forestry Owners Marketing Services) and with blocks close to the road requiring no initial roading, two weeks later trees were coming down and going out the gate, Praat said. Dry conditions underfoot and good weather for harvest along with good log prices lined up for a successful harvest. Waiting another three years would have added a significant volume of quality timber, but cashflow considerations and aspirations meant it was decided to go ahead and harvest.

Outcome and income

Hautapu Pine Logging harvested the first block with a mechanical ground-based system. Trees on steep upper slopes were felled manually while lower, shallower slopes were harvested by machine. Harvesting took about eight weeks with two excavator loaders, one tree processor and a grapple skidder.

The 40-tonne tree processor felled trees, stripped branches and cut logs to length for a range of grades sent to various markets. One issue particular to the organic farm site was no chemical residues could be left on-site so petroleum products were managed to avoid spills, logs were raised off the ground for marking with paint and logs requiring anti sap-stain were dipped off-site.

Harvest analysis

A total of 4264 tonnes of logs were sold from 8.5ha for an average yield of 501 tonnes/ha. Table 1 shows the costs and returns. Fixed costs included traffic management with trees on the road boundary fence and legal fees for a trust set up to receive and distribute income, keeping major transactions transparent to the landowner and forester.

Fortunately market prices for logs were relatively high at the time of harvest and combined with high log quality, the net income or “stumpage” achieved was $26,600/ha, about 33% better than initial estimate at the beginning of harvest. A large range in log grades and lengths helped achieve this return, Praat said. Harvesting the main woodlot injected more than $113,050 of income into the farm in a time of low milk payout.

For some farm businesses this could be critical to maintaining viability in years when successive payouts are low. Other benefits from forestry include land stabilisation, improved water quality and biodiversity. Carbon can also be added to the list of products from trees. Traditionally, trees on farms weren’t valued on the books until they were cut down. However, having a profitable forestry block can improve business resilience by providing cashflow when income from pastoral enterprises is challenged by the market and the environment.

• John-Paul Praat is a director of Groundtruth and provides advice about sustainable land management.

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