Response to Open Letter to NZ ‘s Forestry Minister

Friday 24 Apr 2020

My name is Roger Dickie, I am a long-term promotor of forest investment for New Zealand and overseas investors. Adrian Loo's comments are right on target. We speak to a wide range of forest owners who are appalled at the way the Minister of Forestry has spoken in such derogatory terms about forest owners.

One assumes his actions are some sort of cheap shot to increase his electoral prospects in Northland. That he would even propose the idea of confiscation of private property rights from tens of thousands of New Zealanders is abhorrent. Coming so soon after his abuse of Indians living and working in New Zealand one questions this person’s ability to represent anyone in a fair and balanced manner.

Below I have made a series of factual points relevant to the discussion raised by the Minister.

• Forest owners have had their money invested for 28 years to reach this harvest date, in that time they have had no return, only costs.
• Because of inflation, demand/ supply factors and increasing compliance costs the forthcoming returns from their forests will be significantly less than what owners thought they were getting when they made their first investment 27 or 28 years ago.
• There are well over 30,000 Mum and Dad New Zealanders invested in these forests, the major syndicate operators have at least 28,000 shareholders that I know of. None of these New Zealanders will take kindly to a politician retrospectively changing the rules and diminishing their private property rights.
• Using Red Stag Timber Mill website figures "about 300" staff (their words) produce 600,000 cubic metres of sawn timber. MPI statistics for 2019 show that New Zealand produced 4.4 million cubic metres of sawn timber. So, extrapolating the Red Stag figures there will be 2,200 staff working in saw mills. Allow a few more for inefficient small mills, maybe it is 2,500 FTE.
• Using the figures from three significant forest owning companies I calculated that there are 10.3 full time employees per 1000 ha of forest. Interestingly all the three companies had very similar employment statistics. Those figures are for permanent staff salaried or contracted to do forest management, harvest, silviculture, planting and trucking. For 1.72 million ha of forest then there are 17,700 permanent employees working in the forests. In addition to this, additional employment takes place at the mills they supply and the port and log scaling infrastructure.
• Virtually all these 17,700 forest workers live in the provinces, small towns and cities.
• Shane Jone’s proposed changes favour 2,500 or less mill workers over 17,700 permanent forest staff and more than 30,000 New Zealand forest owners.
• Sawmills have been closing because the old-style small mills are too small to efficiently cut wood in the present environment. Now we have less sawmills cutting in total more wood than before.
• In 2019 MPI figures show sawn timber production of 4.4 million cubic metres, ten years earlier in 2009 the production was 3.64 million cubic metres i.e. 20% more production from significantly less mills and a smaller work force.
• Forests in regions that are far from port, like Gisborne are already very marginal in operation because of distance from port, high road making costs, high harvest costs high transport costs and high environmental and compliance costs.
• Harvesting forest owners have suffered significant price drops in the past nine months with major fall in prices in January because of Covid 19 and also the July 2019 price collapse brought on by Trump tariffs, Chinese New Year, Belt and Road transport initiative from China to Europe and the massive European Spruce bark beetle die off releasing 400 million tonne of logs on the world market.
• Because of the above, any imposition of costs or reduction in revenue on forest owners will mean that forest owners will stop harvest and more provincial staff will go to the unemployment queue.
• We and almost every forest owner we know are already supplying our local mills. Out of our organisations million odd tonne of logs per annum about 20% of our cut which is in range of Napier goes to Pan Pac and other mills there. We also supply logs to mills on the east coast from Masterton to Hastings. We cannot supply local market in Gisborne (much to our disappointment) because there is not a local mill there that will buy our logs. We supplied a total of ten domestic saw mills over the past year.
• Local mills only want certain log grades, they do not want some grades and they have to be exported. For most of New Zealand we have a symbiotic relationship with the mills and exporters. Each takes the grades of logs they prefer.
• The log prices for domestic pruned sawlogs are set by Pan Pac Mill and Tenon, not by the forest growers. If sawmills cannot make a profit at those prices then they need to look at their own efficiency of operation.
• Obviously, Northland has its own specific supply issues, that the Minister will know all about.
• An action taken retrospectively to reduce forest owners’ income will have a hugely negative effect on foreign investment in New Zealand because investors in all categories will not trust government to act any differently than some of the delinquent countries of the world. New Zealanders have worked hard for many decades to earn the reputation of second safest country to do business. This reputation would be in tatters overnight if retrospective legislation was introduced.
• If government want to help out mills that are too inefficient to pay the market price then perhaps they should subsidise them.
• With the depression coming in the world because of Covid 19, export prices of sawn timber will fall along with volume requirements. In the coming year or two sawmills will most likely have less customers to sell to especially in USA.
• Manufacturers of panels and other wood products in New Zealand have said they have no issue with the present arrangements.
• Labour government promised to change New Zealand building code to ensure use of more environmentally friendly wood, it hasn't happened, if it did it could be a game changer for local mills.
• The much vaunted Billion Tree programme will suffer under this move. 600 million trees were already being replanted in the next ten years in harvested forests. These 600 million trees are planted by the forest owning companies at zero cost to the government. Most of the other 400 million trees i.e. 40 million per year rely on commercial foresters embarking on new planting with zero subsidy from the government. The proposed action to tax log exports will bring new plantings to a halt.

Roger Dickie

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