2019 has been an eventful time for the forestry sector so far.
The winter blip in the export log prices appears to be easing with anecdotal evidence suggesting there will be a resurgence in price this month.
The sudden correction in the timber market caught many by surprise with woodlot harvesting almost coming to a standstill. Larger forestry companies have continued to harvest, albeit at lower production levels.
Carbon credits appear to have consolidated at a level just below the government cap of $25 per tonne after a dip mid year.
Government policy to achieve carbon neutrality makes it easier for foresters to compete for better parcels of land with good growth rates, easy to harvest, and proximity to ports and processing facilities.
There have been a significant number of farm land sales for timber and carbon farming. These sales have been at levels well above established levels for moderate hill country throughout the South and North Islands.
The One Billion Trees programme provides subsidies for the planting of new exotic and native forests. While half of this will be replanting, the remaining (approximately 500,000 hectares) will be planted on farmland of varying quality.
The ‘average accounting for carbon’ rules, introduced in March this year, mean a greater allocation of New Zealand Carbon Units (NZCU’s) via the Emissions Trading Scheme (ETS), as well as greater protection from tree losses. Care needs to be taken with purchasing land that may not meet the strict criteria for entry into the ETS.
The Overseas Investment Office (OIO) is approving sales of New Zealand land to foreign investors for forestry, in contrast to most other uses of rural land, allowing the industry access to foreign capital for larger blocks of land. The approval of overseas purchase for forestry in some instances has been as quick as six weeks from application with the norm appearing to be closer to 4 months.