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Understanding the Different Harvesting & Marketing Management Options

This article was provided by Peter Wilks, (PF Olsen Branch Manager, Nelson, pictured left) for a local Nelson/Marlborough publication and is a timely reminder to forest owners to make sure they understand what arrangements they are getting into for harvesting their woodlot.

With so much woodlot harvesting happening of late due to good log prices, we have decided to devote this month's column to explaining the role of harvest managers and log buyers in woodlot logging. We explore two distinct options facing forest owners wishing to harvest their woodlot.

Full Service (Management and Marketing)

Under this option a harvest manager, such as PF Olsen, works on behalf of the forest owner. The manager directly employs each of the sub contractors for logging, cartage and earthworks and is responsible for supervising all these operations.

There should be a signed Harvesting & Marketing Agreement between the service provider and the client specifying in particular the obligations of the harvest manager. Generally this should be to maximize the net revenue to the owner, while minimizing and managing all the risks. Such risks include breaches of the Resource Management Act and Health and Safety in Employment Act, as well as credit risks from non-payment.

The harvest manager is also responsible for ensuring logs are cut to maximum value, marketing all the logs to best advantage, ensuring timely payment, reconciling dockets and deliveries.

The advantages of this approach are that the forest owner has full control over the operation yet has the benefit of using a professional company to manage the parts of the operation that require particular skill and experience.

Marketing Only

Under this arrangement the forest owner usually employs the logging and cartage contractors directly but sells the logs through a log buyer/trader. There can be an advantage under this system if the forest owner has the experience (and time) to oversee the operation themselves and thereby avoid the need to employ a harvest manager.

However, the forest owner needs to be aware that in employing contractors directly, they become the principal under the HSE Act and responsible for managing all aspects of health and safety. This can be a big undertaking and responsibility. If things go awry, it can be very costly.

In our experience, this option rarely provides the best overall return to the owner unless the owner has a small DIY type operation where they can be personally involved in the day to day running of the harvesting operation.

In most cases however, the small savings that are made by not employing a harvest manager are outweighed by lack of focus on log-value recovery, narrow range of marketing options (log traders usually don't like selling to their opposition), and the inherent risks that come with responsibility for environmental and health and safety issues.

Summary

It is important to decide what management option best suits your situation. If you decide to employ a harvest manager ask plenty of questions before engaging them and make sure that your interests come first. For most forest owners there is only the one chance to get it right!