New Opportunity Challenges Conventional Wisdom on Best Time to Harvest your Forest?

"What is the best time to harvest my forest?" is a critical question facing forest owners and has been a central theme in our Harvesting Seminar series. In the seminars we dealt with the issue of how the woodlot is performing. We presented a theoretical graph showing the value increment of a typical woodlot relative to a threshold rate of return. As a woodlot matures, its value increment starts to fall below the threshold rate of return and this creates an "Earnings Gap" - this is the opportunity cost of holding the asset relative to alternative uses for the money tied up in the trees. See graph below.

The conventional wisdom is that the economically optimum age to harvest Radiata pine is between 25 and 30 years. A recent harvesting job in Northland challenges this thinking. Admittedly, the driver for this harvesting job was to enable conversion to pasture. However, the harvesting returns suggest that it may also have been an economically optimum age to harvest this type of forest relative to the current market conditions.

The 17 year old woodlot near Mangakahia has so far yielded a net stumpage of $15.27/tonne over the 3,742 of harvesting to date. Most of the volume is being exported to China. One of the features of the China market we discovered during our January trip to China (see story in WoodMatters 7 - link) is that there is a lot of motor-manual handling of logs at the sawmills. The mills are not well equipped to handle really large logs. Also, the smaller diameter logs, if good form, are more like the Russian logs that the Chinese sawmillers favour. These factors make the smaller K-grade logs attractive for export at present.

This harvesting job, and the one described elsewhere in the issue (see Success Story Three - Great Returns from 18-year old Forest - link), show relatively high returns from what has traditionally been regarding as immature forest. Part of this opportunity relates to the characteristic that Northland wood is more dense and stiff than its counterparts from more southern climes.

What do these case studies tell us? They tell us that the best time to harvest can vary greatly in different situations. If a forest owner wants to make sure that potential opportunities are not missed, all options should be considered, and forest owners should be prepared to get Harvest-Ready at an early age.