Forestry in Wairarapa - July

FORESTRY IN WAIRARAPA OPEN LETTER from the New Zealand Institute of Forestry

We, the New Zealand Institute of Forestry (NZIF), represent the professional foresters of New Zealand. Our organisation comprises experts trained in the science of forest management across all types of forests and species. We write to you today to express our deep concerns about the future of forests and forest investment in our country. It is crucial we bring attention to the cumulative impact of recent decisions, which have far-reaching consequences for all New Zealanders.

Firstly we are troubled by the government’s disregard of the previous advice of the Climate Change Commission (CCC) regarding ETS auction settings. This decision has led to a reduced price for NZUs and failed government auctions, creating a signiÿ cant ÿ nancial burden of at least $0.5 billion on the government. Ignoring the CCC’s advice undermined the potential of forestry to contribute to New Zealand’s climate change targets. Consequently, we are unlikely to fulÿ ll our commitments, necessitating the costly purchase of overseas units to honour our international pledges, impacting every taxpayer.

Secondly, we are concerned about the Climate Change Commission’s draft advice to restrict new planting, which appears to be in° uenced more by the media and political pressure than by sound science. These proposed actions swing the pendulum too far, resulting in planting rates falling below the required levels outlined in their own budget. This failure to meet our

commitments will have signiÿ cant implications.

Furthermore, both the National Party and the Labour Party have recently introduced measures which will limit new planting and creates an atmosphere of uncertainty. The National Party proposes a˛ orestation limits of 15,000 hectares and a three-year moratorium on forestry on farms, while the Labour Party introduces council consenting of a˛ orestation. Both of these initiatives will lead to reduced new planting, far below the CCC’s minimum requirements. Consequently, we will fail to meet our carbon reduction commitments, requiring additional expenditure on overseas units by the government. Our estimate is the cost to the NZ public for the purchase of units overseas which will no longer be grown here will be around $3.5b over the next 3 years. Money better spent on our education and health vote.

Lastly, the Ministry for the Environment (MfE) has recently released a consultation

document on ETS changes with four proposed options. All of these changes will result in decreased planting, particularly options 3 and

4. It is concerning the MfE aims to address the same subject as the ongoing consultation by the Climate Change Commission, even before the latter’s consultation has concluded.

The cumulative e˛ ect of these actions is dire:

1 Forestry’s potential to contribute to New Zealand’s climate change targets has been severely undermined, with projected planting in 2024 and 2025 signiÿ cantly reduced and approaching zero, leading to job losses throughout the sector.

2. Investor conÿ dence in forest investments has plummeted due to the prevailing uncertainty.

3. The ability to achieve the Industry Transformation Plan is compromised, resulting in a failure to add billions of dollars in value to the New Zealand economy.

4. The market for approximately 100 million forestry NZUs currently in the register has been devalued and weakened. The value and tenure of these units are now uncertain, particularly due to the presentation of options 3 and 4 in the consultation document. This uncertainty a˛ ects not only investors but also Iwi, thousands of individual New Zealand investors, farmers, and forest owners.

5. New Zealand falls further behind its climate change targets, necessitating increased spending on overseas carbon credits by the government. This misallocation of taxpayer funds could be better utilised to foster domestic forest investment and a more productive industry, including diversiÿ ed farming and carbon revenues. Retaining capital within the country should be a priority for any government.

6. The need to purchase overseas credits contradicts the Climate

Change Commission’s advice to prioritise gross emission reductions over o˛ setting.

We note planting new forests on farmland provides 75% carbon o˛ sets and 25% gross farming emission reductions, making it a superior option compared to many other planned emission reduction strategies.

It is crucial to acknowledge while New Zealand should strive for gross emission reductions, our Paris target is net emissions and

this must be met in the most cost-e˛ ective manner possible. The current political race to limit forest investment and the supply of forestry carbon credits has been remarkably successful, rendering further action unnecessary. Even if immediate steps were taken to improve forest investor sentiment, it will take years to rebuild trust in stable government policies concerning these issues.

The matter of trees on farms has been excessively politicised, with media reporting often lacking

in- depth knowledge or being disingenuous. This overall situation is detrimental to New Zealand. We urge all politicians and o˝ cials to consider the collective impacts of their actions and engage in urgent consultation with the forest industry for the betterment of New Zealand and global climate change. Let us work together to ÿ nd sensible and measured solutions that beneÿ t our nation as a whole.

Sincerely,

James Treadwell President NZIF

FORESTRY IN WAIRARAPA

Log market update

By Marcus Musson –Director Forest360

Unsurprisingly, as port deliveries have reduced in the past month (especially in Gisborne and regions supplied by the woodlot sector), the sentiment of exporters has noticeably changed as supply dips under demand and looks to be low for a reasonable period. This is re˝ ected in the increased pricing of July deliveries and the posturing for volume by exporters. While July pricing is barely above $100/m3 on an at wharf gate basis, it is a signal that there is some ˝ ickering light at the end of the tunnel. Actual sales prices in China have only increased very slightly, and the July wharf gate increase is a result of this combined with lower shipping and demurrage costs.

This doesn’t signal a change to the fundamentals of the Chinese real estate market which is in need of a serious dose of Prozac. You only need to look to the negative reports from the global steel industry to see that the general consensus is that the Chinese building boom has had its run. While there will be

a continued baseline log demand, it will very likely be below levels we have enjoyed for the last 15 years which will necessitate lower supply to keep prices to acceptable (maybe not enjoyable) levels. We are currently in the Chinese slow construction season and port o˛ take is in the 65 -70,000m3 per day range which isn’t horrible as NZ accounts for around 80% of total China softwood supply.

Looking to the domestic sawmills to increase production to o˛ set poor export returns isn’t going to work as the domestic market has its own issues with timber inventory build. It appears that the magnitude of over ordering by timber merchants during the past few years to secure timber supply in a tight supply

market was signiÿ cantly higher than expected by sawmillers. This has led to a number of framing lumberbased sawmills reducing hours to minimize stock build.

Those forest owners smarting about foregoing harvesting to enjoy the rewards of the ETS will have cancelled the holiday to the Maldives and book into the Eketahuna Top10 as the carbon price has plummeted by 60% in the past 7 months. The cause of this drop is extremely frustrating and primarily centered around uncertainty of government policy. The current governments’ brilliance in ignoring the Climate Change Commissions’ recommendations, kicking o˛ consultations around reviewing forestry’s participations

in the ETS and Nationals desire to minimize or eliminate farm conversions to exotics has wiped around 7.8 billion worth of value from the total NZU holdings. Looking back to the beginning of the year, you would have thought there was as much chance of the NZU value halving as a transport minister owning Auckland Airport shares, but it just shows you that no investment is secure, especially one that is at the behest of government policy and opposition vote pandering.

So, where does this leave us going forward? We’ll likely see further increases in price in coming months, albeit it more than likely a soft bounce. With lower supply and depressed commodity markets, shipping will remain at lower levels, the exchange rate should stay around current levels which means any increases in CFR sales price (sales price in China) should ˝ ow into forest owner returns. We don’t want to see huge price increases as has happened historically as we’re all aware that a race to the top is almost always followed by a race to the bottom (as shown in the graph). Although NZ will struggle to increase supply quickly in response, it would open the door for supply from other countries. In that sentiment, let’s hope that this ˝ icker of light in the tunnel doesn’t turn out to be a blowtorch.

Forestry students recommend local work experience

Students Liam Hughes and Harris

Allan spent the mid-year break working for local company Forest Enterprises and got a head start on their work experience.

In their ÿ rst year of a Forestry Science degree, the former Rathkeale College pupils received a WIDE Trust scholarship to study forestry at University of Canterbury. Forest Enterprises manages 20,000 hectares of forestry in Wairarapa, which includes active harvest, replant and silviculture programmes.

What work have you been doing?

[HA] Planting quality control plots, pest trapping, putting in road markers. [LH] Planting, regen cutting, looking at pruning and thinning and at road contruction and harvesting. [HA] Tomorrow we’re going to look at culverts and rivercrossings.

What side of business you like most? [HA] I don’t have a feel for

that yet. But it’s been good going out with Max and Jess to undertand what they do. [LH] They seem to be able to get out of the o° ce a lot and spend time with the operational crews which is something I’d want to do. [HA] It’s been good seeing the di˛ erent sides to forestry.

Enjoyed your time at Forest Enterprises? [LH] Deÿ nitely. I’d recommend it. There are a lot of people here that are just out of uni so it’s quite easy to relate to

them. You can see what to expect what will happen to you when you leave uni. [HA] It’s been a good experience.

How has uni been? [LH] It’s been great, I’ve really enjoyed it. Hasn’t been too hard. Better than you expected? [LH] Yeah, deÿ nitely. Any surprises about uni? [LH] People really overestimated how di° cult stats was. And people hyped up the halls a lot but they’re really good, the halls have been a

highlight. Some said it would be really hard to meet people and you can spend the whole year just doing your degree and nothing else. But the halls have been really good for me.

Many people in your year in forestry? [LH] About 55. So you’d know everyone? [HA] Not even close!

Plans for the summer? [LH] I’m deÿ nitly going to work this summer, hopefully here if there’s work available, or something silvicultural. [HA] I want to come back to Wairarapa. [LH] The university provides quite a lot of job opportunities, advertising jobs they know students are looking for. Some of the lecturers themselves give students jobs helping on research projects.

Flat sorted for next year? [HA] No, it’s this month’s job.

Photo/Supplied: Forestry students Liam Hughes (left) and Harris Allan (right) made the most of university holidays to gain work experience.