Good Time to Be Harvesting in Canterbury

Sawmills in Canterbury are struggling to procure enough logs to maintain full production. Wood products markets are buoyant with the Christchurch rebuild and the strong housing market in Auckland.

The conversion of trees to farmland has reduced forest area and, in particular, the wind-throw events in September and October 2013 and at Easter 2014 has reduced the area of mature forest and constrained log harvesting volumes. A large proportion of the trees blown over were on the Canterbury plains which is where conditions are often suitable for winter ground-based harvesting. Many of the good winter harvesting blocks are now gone.

Domestic logs

Strong demand and limited supply of domestic logs are boosting returns from forest harvesting in Canterbury.

The usual throughput at Lyttelton Port for PF Olsen is about 800 JAS m³ per day. At the height of harvesting the wind-throw we were supplying 1,600-1,800 JAS m³ per day.

Export prices have softened recently and we will look to transfer our harvesting crews from blocks with a high export content to blocks that contain a high portion of pruned and domestic sawlogs. We currently have two hauler crews working in a forest owned by McVicar's Sawmill.

Pruned prices are well above average, and domestic structural prices are above average as well as accepting a wider range of log types. Harvesting and cartage costs are down due to the low price of fuel. Fuel typically accounts for 20-25% of cartage costs and 10-15% of harvesting costs (depending upon crew configuration).

PF Olsen has met with the mill owners to assess options for increasing volumes. These include looking at alternative species, accepting a shorter log length, lowering the allowable small end diameter of logs or increasing the maximum knot size. These initiatives will increase returns to forest owners who are harvesting.

With good demand and prices for domestic logs, broader log specifications and lower harvesting costs, there is a great opportunity for forest owners to maximise their returns, especially if they have a stand high in domestic content. This won't always be the case as in a few years' time there will be increased wood supply from the bulge of mid-1990 plantings maturing. This increased supply is likely to soften log prices, especially as it will coincide with reduced activity in the Christchurch rebuild. Higher harvesting volumes will also tend to drive up competition for harvesting crews, and harvesting rates.

To find out if you may be able to benefit financially from this situation, please contact Scott Downs on M: 021 481 875 or E: scott.downs@pfolsen.com. Scott will be able to assess your forest and talk you through the relative merits of harvesting now or later.