Forum Archive Index - September 2003

["Dave Missen" <d.tackle@xtra.co.nz>]

Macdunk wrote:  "A ten year old pine tree that costs 50c to buy will produce 8 fence posts without even pruning or any other expense. The pine gets planted on land that Is useless for anything else..."

 

Take a trip around the country and have a look at where pine trees have been planted - some very good sheep and beef breeding farms have been converted to forestry over the past decade.  This significantly reduces the need for fenceposts and with the number of trees in the ground at present, reliance on this market to sell timber production would soon produce a glut of posts and the accompanying drop in price (Basic economics of Supply and Demand 101).

 

I agree with Macdunk's sentiments that forestry companies appear to be run by idiots (especially the larger ones), most of whom failed marketing 101.  Notwithstanding that, it is of concern that we watch log ships and bulk chip carriers taking the raw materials offshore with minimal processing/value addition carried out here.  I believe that such practices indicate a fundamental flaw in the entire forestry industry - the absolute focus has been on the production of more and more trees and as such investment funds have predominantly been used in research to make the trees grow faster and bigger (with some undesirable characteristics becoming evident in the later generations of trees), and in the acquisition and planting of more forests.  This myopic approach has lead to the development of predominantly monocultural type forests producing one group of products and exposure to significant risk through the invasion of biological pests and pathogens specific to pinus radiata.

 

Overseas markets are very specific as to what they will accept as "whole logs" with log diameter, density and fibre type being among the critical variables.  The growth rate of the later generations of pinus radiata is too high to achieve sufficient density within the butt diameters required by the market (ie once sufficient density is achieved the butt size exceeds the maximum acceptable to the customer).  This has the impact of devaluing forests if they are not able to be harvested at the appropriate time due to depressed world markets for timber.  When such loss of value is added to the other losses experienced through forestry company mismanagement (a loose term that includes acquisition binges, divestment binges, merger activities, and general mismanagement as indicated by Macdunk) it is not surprising that the sector is performing poorly.

 

There are no easy answers - forestry is a long-term investment and it is certainly difficult to predict market trends 25 years into the future.  Perhaps we should be thinking in terms of the ideas pushed by Winston Peters a few years ago - development of value added type processing in NZ, and not just paper and cardboard type value addition. Whether we like it or not, we are committed to forestry production and will be for the foreseeable future.  Perhaps the management at Fletcher's would be better employed finding ways to add value to product for specific markets, rather than the current focus of exporting to anywhere at any reasonable return what is essentially a raw material.

 

Dave