| OPINION |
FFORNE HARDWOOD COOOPERATIVE is pleased to publish opinions from the wider farm forestry industry.John Woodley from Farm Forestry Services on why the economics of farm forestry make good sense. Disclaimer. They should be accepted as such with the knowledge that John Woodley has no formal training in Forestry. All Forestry knowledge has been gained through hands on work and experience with farmers and the timber industry and through being involved with people who have much more knowledge than him. John Woodley has a background in Aircraft engineering (1968 - 1976), National and World championship motorcycle road racing including the Isle of Man TT ( 1971 – 1981 ) and Forestry. John Woodley is a director of two forestry related companies, Silviculture Services Australia Pty Ltd (trading as Farm Forestry Services), and Treelot Company Pty Ltd, and currently employs four permanent staff who are involved in doing the hands on silviculture work for both farmers and the forest industry. During his 26 year time as a forester and treegrower, he has worked in the New Zealand plantation industry (silviculture and logging 1981 – 1987), Native timber harvesting in the alpine forests of Victoria (1987 – 1994, as both a faller, crosscutter / log grader , and machine operator), Plantation establishment and management in Australia ( hardwood and softwood ) from 1994 to the present day. Why Farm Forestry? Farm Forestry is worth money and, when well managed, can make a significant contribution to the financial wellbeing of farming families. It is a long term crop (10 –30 years) and because of that forestry plantations can be less vulnerable to price fluctuations in the market. In many cases trees, particularly sawlog plantations can stay standing until the market price reaches a satisfactory level. Some background from my experience in New Zealand Those farmers, who had well managed woodlots on their farms that were ready to harvest, had their lifestyles changed for the better almost overnight. I had clients who, in the early 80’s, were poverty stricken sheep farmers whose bank manager would not refinance their overdraft. They wanted to pay for the valuable silviculture work to be done on a 16 hectare plantation of regen pines which were ready for pruning. They approached a rival bank to see if the bank would be interested in refinancing with them. Unbeknownst to them the bank manager of this bank owned a pine plantation. Once he knew the extent of the plantations on their property he took them on and loaned them the money. Those people are very well off today through forestry sales and they are enjoying a very comfortable retirement. Incidentally, when I visited those people in about 2000 in New Zealand they thought that the 16 hectares mentioned earlier was probably worth about a million dollars in the market at that time which had dropped somewhat from the 1993 spike. Why am I so optimistic and enthusiastic about Farm Forestry in Australia? If Australia enjoys the increase in sawlog and timber royalties that I believe that it will then those who plant now will be in for a very rewarding ride financially. Prices for Farm grown timber are currently low and do not reflect a cost of growing. This is partly influenced by low native sawlog royalties in the case of eucalypts, and a low cost growing system in the case of pine and no premium is being paid for pruned sawlogs in Australia, at present. When New Zealand started pruning pines in the 50’s and 60’s there was also no premium being paid in that market. My New Zealand experience encourages me greatly. New Zealand was always a nett exporter of timber, selling into the world market. Australia is currently a nett importer of timber, pulp and paper and needs to import approximately 50% of its timber , pulp and paper requirements. World population is growing rapidly. Native timber resource around the world that is available for logging is shrinking rapidly. My belief is that within a few years the World Bank will move to stop illegal native forest logging in the interests of managing the climate change issue. This view is supported by the number of FSC (Forest Stand Certification) schemes that are available which provide future evidence to timber buyers that timber that comes from certified forests has been produced from plantations with minimal environmental impact and not from native forests. In 2006 native sawlog royalties in Australia rose by 50% because overseas buyers came into the market and could see that the native logs were being sold very cheaply.
Some specific ways that farm Forestry can improve the financial well being of farming families. Income from farm Forestry can fund retirement of the older generation and reduce the need for increased borrowing by the younger generation in order to fund that retirement. Funding of education for children including university education that under normal circumstances may not be able to be afforded without significant borrowing. Income protection in the event of major health problems such as cancer. ( This has been my personal experience ). Can support farm borrowing for development when there is a projected future income from harvest of timber to satisfy the debt. Improvement of lifestyle through funding the employment of farm labour, or purchase of machinery and infrastructure which otherwise may not be afforded without borrowing. Funding of family holidays and creature comforts which improves the overall wellbeing of farming families. ( This is one of my favourites because historically the quality of life of poorer farming families has been less than ideal in terms of financial opportunity.) Other possibilities for Farm Forestry. Sale of immature standing timber using the Forestry rights legislation which allows the ownership of standing timber by a different person or entity to the landowner. This is why at the age of 57 years of age I continue to plant trees using the joint venture concept as my main vehicle. It does not matter that I may never survive to see the timber harvested if I sell it early and enjoy the money. If I have enough well managed plantations and can sell a plantation every so often this is a form of superannuation in providing for my later years (perhaps not necessarily retirement!). Environmental income is a future possibility for Farm Forestry. This is an obscure topic but so was the possibility of carbon income ten years ago. Now carbon income is a reality, albeit a very small one but one with great potential. Water preservation, salinity control, land degradation are some of the possibilities where I see possible income for owners of farm forestry plantations in the future. Relative income As a simple comparison well managed Farm Forestry can contribute to farm income on an annual income per hectare basis that is slightly less than sheep farming but on land that would not achieve the same income level under sheep. When well sited and well managed it is likely that Farm forestry income would be on a par with sheep but of course the cash flow is in big lumps at long intervals whereas sheep farming has an annual income. Farm Forestry - Positive or Negative? In my years of being involved with Farm Forestry, I have heard many negative arguments against the value of taking up “valuable” farming land by planting trees. We are only one or two generations on from the generation that removed as many trees as possible from the land in order to grow grass and crops. Now the scientists and forward thinking farmers have demonstrated clearly that trees can be very useful in the farming landscape and in some well known cases they have proved to contribute to the farm income by way of increased production through shelter, and this is without any income from timber values. In one case I know of case the farmer has 30% of his land under trees without losing agriculture production. He thinks that this is on the limit. 20% would be easier to manage without any loss in agriculture production. Others have said “But the trees use water so they are a danger to our water”. My view is that once upon a time the land had a lot more trees on it than now and creeks flowed better than they do now in many cases. Young plantations have a great appetite for water and nutrient but later on when the plantations reach an older and more balanced state they are less demanding on water and they provide many environmental benefits which are not immediately quantifiable in money terms. Sustainability in farming is very important and I believe somewhat misunderstood in many quarters. Change. We live in a time of rapid and dramatic change. The biggest change required if we are to survive is cultural change and thinking about things in a different way. There are greater and greater demands being placed on our resources because of population growth and a hunger for technological enhancement of our lifestyle. This is coming at a cost which is not always appreciated and not is always beneficial. Climate change is a real issue that is with us. The growing gulf between rich and poor is with us Worldwide. Farming people have historically been the risk takers in dealing with climate to produce their income. It would be fair to say that the vast majority of farmers would be in the middle to lower income earning bracket if we considered national averages. They need every opportunity they can get to reduce risk and enhance their income potential. Farm Forestry provides some real opportunities to help them achieve these outcomes. My own commitment. ( Putting my money where my mouth is!) In my own case I continue to plant trees because I believe that they will contribute to my future financial well being. I currently own a 40 hectare property at Taggerty which I bought in 1994 and began planting. The property is planted in a variety of configurations to demonstrate how trees might be used on farms. This is a work in progress and I have learned a lot about species. Pines and some eucalypts work well. Monterey cypress does not. Mexican cypress does well. I have two Forestry Joint Ventures with a farmer at Highlands near Yea of 15 and 10 hectares, eucalypts. In 2007 I formed an investment company with a client, Paul Montgomery, specifically for growing forestry plantations which would involve investors as joint venture partners. We called it Treelot Company and our first project was established in 2007. This was a 35 hectare hardwood project for sawlogs and veneer logs. My vision with Treelot company is to provide opportunity for City based investors who would like to grow trees but don’t want the hassle of land ownership. An added part of this vision is that forestry investment by city based people is a tremendous way of bringing city money out to the land and also involving city people in rural based productive farming activity. Treelot company schemes are subtly different to the MIS (Managed Investment Scheme) schemes as we know them, in that it is more boutique by nature and allows the investors the possibility of a closer involvement with their trees rather than just taking a share in a large company investment scheme in projects often with many other investors. Many of the MIS schemes have pulpwood as their end product. Establishing plantations purely for Pulpwood is easy maintenance and financially viable and I think actually necessary to provide the resource in large enough quantities for the pulp and paper market.However, it feels a bit like farming sheep primarily for dags rather than for fine wool and meat with dags as a by product. Just as most farmers are proud of their farming activities and the results they strive for, I feel that if they can embrace Farm Forestry with the same enthusiasm they are likely to be well rewarded with a longer term financial outcome which may benefit their families and the farming lifestyle greatly.
e-mail: johnrwoodley@bigpond.com
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