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Good Forest Establishment Has a Good Economic Return

Interest in new planting has picked up in the last year or two due to an improvement in market confidence and potential additional benefits that can be gained under the Emissions Trading Scheme (ETS). Export log prices in particular, have improved and the ETS offers investors in new planting an income stream from carbon credits that was not previously available.

MAF figures indicate that new planting was around 12,000 ha in 2011, up from 6,000 ha in 2010. This is still a far-cry from the 98,000 ha achieved in 1993 but the signs are there that new forestry investment is increasingly gaining traction. Much of the new land being planted is uneconomic hill pasture land that has been difficult to farm. Often this land has poor access, is steep, of low fertility and with a noxious weed problem. The ETS scheme in particular, has lifted the economic value of such land.

While we are talking about "new planting" there is nothing new in the management techniques that make for a successful crop.

The following are in our experience, the most critical factors:

  1. Site Selection

    "You can't make a silk purse out of a sow's ear" as the saying goes. Likewise, a poor site can't be made to produce a highly profitable crop even if the best genetic stock and tending regimes are applied. Roading and harvesting costs have a major bearing on net returns so, if there is a choice, it would be better to buy higher-priced land rather than cheap land with poor access.

  2. Species Choice

    Only on a small range of sites will species other than radiata pine provide a greater financial return. Many smaller forest growers find it tempting to plant a range of more exotic species but then find all sorts of difficulties in trying to sell these trees. Forest valuers tend to discount the value of species other than radiata pine or douglas fir due to the lack of a robust market for lesser-grown species.

  3. Genetics

    Huge investments have been made in New Zealand to improve tree stock quality. Today's radiata pine tree is very different to the original populations from California, with vastly superior growth and form. Douglas fir breeding has concentrated on identifying provenances that are suited to particular geographic locations. The "GF Plus" scheme for radiata pine allows tree buyers to specify particular traits they desire such as wood density and disease resistance.

    While seedlings (or cuttings) with a GF Plus rating are more expensive than other stock, our analysis has consistently shown lower silviculture costs and greater returns at time of harvest. For example, a GF+ rating for growth of 23 will produce a 27% volume gain over unimproved stock at maturity.

  4. Site Preparation

    This is a huge topic in itself but suffice to say good land preparation will pay large dividends. Attempting to short-cut best-practice will cost more in the long run. On clean pasture a pre-plant spot spray is advisable as this makes for easier planting and better tree survival.

    Mechanical land preparation using roller-crusher or diggers with slash-rakes can provide a very clean planting site, often in combination with aerial spraying.

  5. Planting

    Often there is a mis-match between the objectives of the forest owner (desiring all trees planted perfectly and in a straight line) versus those of the contractor (as many trees planted in a day as possible). Poor planting results in low survival and potential for tree toppling and deformation (sweep) in the butt-log.

    Handling of trees from the nursery to the planting site is also important. Trees left to swelter out in the open or under tarpaulins will have little chance of survival.


Minimising time from lifting tree stocks to planting, and careful handling of tree stocks, is essential for good forest establishment. Despite the high hourly cost of helicopters, they can provide a cost-effective means of achieving good establishment.

  1. Post-Plant Treatment

    Within 3 months of planting trees will need to be spot-sprayed with an appropriate chemical. Studies have shown lack of weed control results in inferior growth, poor survival, and ultimately reduced harvest volumes and returns.

Summary

Establishing a good forest is critical to maximizing net returns. Shortcuts will inevitably cost more in the long-run. A simple IRR analysis illustrates the financial benefits of proper establishment, even with costs being twice those of inferior establishment.

Poor EstablishmentGood Establishment
Site Prep 200 500
Tree stocks 400 600
Planting 250 300
Post-Plant 0 250
Total $/ha 850 1650
Volume at Harvest 500t/ha 625t/ha (25% for GF Plus trees)
Stumpage $/t $40/t $45/t (higher average log grades)
Net Return $20,000/ha $28,000/ha
Internal Rate of Return 6.8% 7.3%

Peter Wilks
PF Olsen Nelson Manager
Registered Forestry Consultant