Friday, March 29, 2024

Planting picks up but still slow

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The economics of forestry stack up well for farm owners and that is where a lot of the new tree planting should come from, Forest Owners Association chairman Peter Clark says.
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Any pick-up in new plantings was still quite slow but the business of tree-stock and seed sales was more active this year than last year and “would get a lot higher”.

“It’s not that there isn’t a good return from forestry, it’s because the economics are not well understood,” he said.

A report from the Institute of Economic Research highlighting forestry returns and one from ANZ Bank rural economist Con Williams showing an average 6.3% real rate of return from good quality forestry within 200km of a port or processing mill and before any benefit from the carbon emissions system were good indicators.

“It’s better than for drystock farming and the only opportunity cost for a farmer is the loss of running stock on that portion of land used,” Clark said.

A non-farming investor or corporate forestry group would have to factor in the costs of buying or renting land at market value.

“The land economics aren’t as good as they are for the land-owner.”

Clark, chief executive of the Rotorua-based PF Olsen, said farmers had been active in forest planting in past decades but it appeared they had been put off by the recent long period of subdued returns.

However, the new survey of commercial forest nurseries by the Ministry for Primary Industries showed stock sales last year totalled 52.2 million seedlings, up from 49.5m in 2015.

FOA chief executive David Rhodes said there was a gradual trend of an increasing number of woodlots on farmland. One reason for that might be the potential for long-term carbon offsets from trees if agriculture was included in the ETS.

Farm Forestry Association incoming president Neil Cullen agreed 2017 seedling sales would be similar to or better than last year but said the new planting rate was still too low and a big increase wasn’t likely until there were Government “national importance” incentives.

Though pinus radiata dominated seedling sales they included 9.8m manuka seedlings – enough to stock 6300ha of planting, reflecting the value of manuka honey.

Clark said that like any part of the agriculture sector, forestry was subject to commodity up and downs but he believed the swings in forestry were not as deep or as long as in dairying.

Forest owners also did not have to harvest trees at a particular time if prices were poor. Trees were harvested typically in the 25 to 30-year age but could be grown out to 35 years if that suited market conditions and they would be building up carbon credits right through that time.

International negotiations over the next couple of years would influence the Government review of the carbon emissions regulations and the pressure would be on to make them more favourable for forestry, he said.

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