FOA makes the case to farmers for planting trees through NZ Farmer ‘Real Estate Matters’

29 September 2017.

Planting woodlots viable commercial proposition.

The most attractive farms are those with a lot of trees.  There are many reasons to grow trees. They may be there for the sheer delight in how they look along the driveway.  A farmer may have set aside an area to preserve native trees and the wildlife which lives in that stand.

There are also utility plantings; such as shelterbelts, erosion control, tree crops, drought-feed trees or there are trees put in as riparian strips. 

Then there is the woodlot choice.  Again, the options are many.  Species have different preferences for location, growth rates and wood characteristics, which range from the fast-growing paulownia, to black walnut and then to radiata pine which is the tree of choice for nearly all commercial plantings in New Zealand.

A woodlot on a farm is a commitment with consequences. Some are constraints.  It will take an area of the farm out of animal or crop production for years. Income is confined to, at best, production thinning during this time.  If the area is large enough it will attract carbon credits but most have to be relinquished at harvest if the land is not replanted.

Other factors though, make planting trees as woodlots an attractive proposition.

It is difficult to get totally reliable figures comparing sheep and beef returns with forest returns.  Situations vary so much.  But extrapolating back over the past few years it is clear that log prices have been much more stable than, for instance, the highly volatile dairy returns.

At the national level, the export returns, per year, per hectare, of land use, rank forestry a better prospect than sheep or beef farming.

Trees can be planted in locations where livestock productivity is less viable.  This makes the overall property’s animal efficiency greater.

Forest investment is an on-farm option to spread the risk of relying just on the meat income.  Wool used to be the counter cyclical for the drystock farmer, but the viability of that alternative is looking terminal.

Most of the costs of forestry are delayed to near or at harvest time.  There is the actual expense of the harvest process.  A potentially bigger outlay is constructing roading of sufficient quality to take log trucks.  But, the shorter the road and the easier the terrain the lower the bill. Furthermore, roads are an expense which is not replicated anywhere to the same extent in future forest rotations.

Unlike animals, trees need little landowner attention once established and thinned.  Forestry is mostly about looking and waiting.  The harvest job is done by bringing in the professionals.

It is not compulsory to have to wait to harvest to get cash flow as an avalanche. There are investment structures which allow an owner to divest some of their tree ownership over time so their income is spread and more immediate.

Capital gains on a property are sometimes the most important consideration for a farmer.  Yet the confidence in an escalating land value for sheep and beef farms over the years, is becoming less secure.  The same environmental constraints on dairy farming are looming also in the hill country, with a consequent depressing effect on land prices.

When farming is brought into some form of an Emissions Trading Scheme, as one day it will, it is prudent to remember that greenhouse gas emissions measured from the meat and dairy sectors are about the same. It is not just about dairy cows.

Forestry can also enhance capital value.  Initially the ‘land out of production’ may diminish sale price, but from what I understand from land agents, there is strong interest in buying farms with production forest nearing harvest.

But above all, farmers thinking of planting woodlots, should get professional advice and not charge in to planting up the back of the farm on a whim.

Peter Clark

President FOA

September 2017