I got an intriguing email last week.
It was from Crown Forestry, a business unit of MPI.
They were asking me if I had any suitable land to plant for the new government’s One Billion Trees programme, which is the ten-year target. To achieve, it will require new forests on up to 500,000 hectares.
This programme with Crown Forestry is but one of several initiatives to help achieve the target.
Unfortunately, I couldn’t help them as I fell outside the criteria of a minimum 200 hectares, which is just over half of our farm area, but most of the other criteria like access within the block and to local roads, terrain, fertility and such applied as we are about to harvest 8 hectares of our own trees that I planted 30 years ago.
I asked a few mates if they had got the email and some had but others hadn’t.
I later found out the initial approach was to those of us who have registered trees under the ETS. The word will get out to others shortly.
The proposal is for Crown Forestry to lease the land or enter into a forestry joint venture for one rotation or 30 years.
The Crown would pay for all establishment and management costs over the lifetime of the crop and pay a negotiated rent to the landowner. Rents will reflect the quality of the land, proximity to ports or wood processing plants, and the costs Crown Forestry expect to pay over the lifetime of the crop. The landowner would retain all rights to any carbon credits.
I thought about this for a few days and of the implications, potentially both good and bad, for our sector.
I contacted Crown Forestry and asked for further information.
I received a pleasant phone call directly from Warwick Foran, the general manager of Crown Forestry, and we discussed the proposal.
First, I needed to find out a bit more about Crown Forestry. I may have been a member of the Farm Forestry Association and even a branch chairman 25 years ago but knew little about them.
Crown Forestry manages a commercial forestry business on behalf of the Crown and has only four employees, yet turns over $100 million.
A lot of its work in the last 25 years has been divesting the Crown of forests and forest land, but it still administers 14,000 hectares of forests. It’s both a lessee and a lessor and works closely with iwi and Maori land.
This proposal is the Crown gets into partnerships with landowners to establish forests on a commercial basis through a forestry joint venture or lease model with the Crown as an equity partner (ie taking a financial stake in the tree crop; but not the land).
The Crown would cover all forestry establishment and management costs including rates and the ongoing costs of crop protection.
I pushed Warwick on what the rent might be, because this will obviously determine what sort of uptake the proposal will receive, but it depends on the variables mentioned earlier.
As an indication, some of the current leases are about 6% of unimproved land value.
The land owner will receive the benefits of the carbon options, and with carbon prices likely to keep rising this could be a significant incentive.
This scheme has merit and could offer an alternative for country that might well be more suited to trees than current land use.
For many, having a partner carry the costs of establishment and silviculture and providing an annual market lease could be attractive.
It could also affect the value and desirability of some classes of land. Expect to see an interest from syndicates and investors.
It will offer job prospects in regions like Northland desperately needing a boost.
But if whole districts are attracted to an offer like this, there could well be social implications.
And of course, depending on how big this portfolio becomes, it could be quite a drain on the Crown’s finances waiting, as many of us have, for that payback in a distant 30 years.
All something to keep an eye on.
