Clarky's Comment - March 2012, Forest Grower Commodity Levy

Forest Grower Commodity Levy

PF Olsen Ltd strongly supports the introduction of a levy on logs harvested to fund pan-industry good activities. While the NZFOA and Farm Forestry Association voluntary funded activities have served the industry well in the past, some changes taking place now suggest that may not be a sustainable model into the future. In particular:

  1. Many of the mid-1990s farmer and partnership plantings are not captured under the existing voluntary levy system. Many forest owners have simply elected not to contribute to pan-industry good activities. Harvesting of these forests will comprise a larger portion of the future national harvest. A levy is consistent with the "who-benefits? - who pays?" principle.
  2. Ownership changes in some of the larger estates also puts the voluntary system at risk. There is already evidence of this occurring.
  3. The government is expected to reduce its financial support for Research and Development for any industry not showing signs of investing more itself. The impact on forestry sector R&D could be very material unless the industry itself is willing to fund a greater share of the total spend. Aligned to this need is the recently produced New Zealand Forestry Science and Innovation Plan. Implementing this plan will need a portion of the levy funding to be committed to multi-year projects identified in the Plan. Past experience has shown that seeking voluntary funding for individual research programmes becomes extremely time consuming and inefficient relative to the size of the actual research projects.

Additional reasons for our strong support are:

  1. The voluntary system provides no certainty of funding for multi-year projects. In research in particular there is a need for multi-year certainty of funding if research providers are to attract and retain world-class scientists. A Commodity Levy provides up to 6 years of assured funding before the levy-payers vote for continuance or not.
  2. The industry is engaged with the government in a programme called Government Industry Agreement (GIA) that would see a joint decision-making process plus shared funding to respond to any critical biosecurity incursion. Having a Commodity Levy in place provides the necessary structure to respond to any funding demand in a timely fashion, regardless of whether the funds are levied under the Biosecurity Act or the Commodity Levy Act.

The NZFOA is taking the lead on this proposal as there is no other body or agency as well placed to do so. Some have interpreted that to mean that NZFOA will dominate how the levy funds are used and that this will not be in the best interests of smaller forest owners. PF Olsen does not share these concerns on behalf of its client base that is dominated by smaller forest owners. Our smaller owner clients share exactly the same concerns, risks and issues as larger forest owners, be that a biosecurity risk, foliar diseases, skilled workers for harvesting the logs or market access for forest produce. They mostly also grow radiata pine, and larger forest owners have a real interest in Douglas fir and cypresses at least.

A series of public consultations run around the country during February was used to inform the final shape of the levy proposal before it is put to the vote of affected forest owners. More information can be found on the NZFOA web site at: http://www.nzfoa.org.nz/component/content/article/924