Category Archives: Markets

Salvaged Timber?

Salvaged Timber Sign_s

I discovered this small inconspicuous sign in a business I recently visited in Hobart. I found the sign rather curious. Other customers also found the sign curious.

The sign says a great deal about the mixed, confused emotions and morals, and acute sensitivity that surround the special timbers industry in Tasmania.

The business, like many in Tasmania, features Tasmanian timber in the shop fittings.

So is the sign an explanation or an apology?

I’m not sure.

Or perhaps it is a statement of pride.

If so it leaves me confused.

Here’s what I think the sign is saying:

A patch of old growth native forest in North West Tasmania was clearfelled to feed the industrial forestry business model that dominates Tasmania. After the industrial clearfelling operation was completed, a second smaller operation recovered some craftwood from the site including the 400-year-old Myrtle stump. The logging coupe was then burnt and resown to native forest. Or perhaps the coupe was converted to plantation. The harvesting duo (industrial and craft) then moved on to the next old growth forest logging coupe to repeat the cycle of sin and redemption.

Is that what the sign is about? Sin and redemption!

It’s a pretty standard story about the fate of Tasmanian old growth forest.

Most people regard the clearfelling of Tasmanian old growth forest as unacceptable practice in the 21st century.

But somehow the idea of “salvaging” after the industrial clearfelling has finished attracts some crumb of virtue.

Why? Where is the virtue?

For the past 40 years the Tasmanian special timbers industry only existed because it was a minor subset of the industrial forestry business model. It needed the industrial harvesting to continue for its own existence.

But to improve its status and product differentiation from those industrial loggers the special timbers industry adopted the word “salvage”.

“Are’t we good people! We help save all that good special timber that would have been wasted.”

No that’s not quite true now is it?

Yes there has been plenty of waste. That’s to be expected when dealing with a low value commodity. But to call the special timbers craftwood operation a virtuous salvage is specious indeed.

No virtue attached at all.

Just a marketing con.

The old growth forest in North West Tasmania is gone. Where is the virtue in that?

But the market now believes the virtuous salvage story and continues to buy these special timbers.

So perhaps the sign could just as well read:

This timber veneer was harvested from a 400 year old Myrtle stump as part of an old growth forest clearfelling operation. It comes from North West Tasmania. The site was subsequently burnt, cleared and converted to eucalypt pulp plantation.

It would be just as informative and a lot more honest!

By the way what did happen to the 400-year-old Myrtle tree that sat upon the stump? Where did it end up?

A second point is that the word salvage should automatically imply to the reader there is no notion of sustainability. It’s a cleanup operation, that’s all! But in the forest industry you will sometimes see the phrase sustainable salvage being used. I don’t think so. Another marketing con job.

Now is there such a thing as genuine virtuous timber salvage?

Absolutely!

The Hydrowood operation on the west coast comes close. Unfortunately it is wrapped up in the wrong marketing spin.

http://www.abc.net.au/landline/content/2014/s4129593.htm

Dead, dying and storm-damaged trees can also be honestly salvaged. They do this under strict Government supervision and competitive tender on Crown Land in New Zealand:

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11278973

And private property in Tasmania:

http://tasmaniantonewoods.com/salvaging-old-growth-standing-dead-blackwood/

But a craftwood harvest that is part of regular industrial old growth forest clearfelling operations does not classify as salvage in my books. And certainly has no virtue!

Finally now that Gunns has gone industrial forestry in our native forests is looking pretty sick. But never mind, the mouse has now become the lion. The (public native forest dependent) special timbers industry now dominates and controls old growth forest policy in Tasmania, with the Tasmanian Wilderness World Heritage Area firmly in its sights. It will be wrapped up in a glossy “strategy” and the language of virtue, but don’t be fooled.

Customers need to understand the consequences of their purchase decisions.

Ask for special timbers that are grown on private property. Let’s give Tasmanian farmers the clear message that they can grow and supply the profitable, sustainable special timbers market.

What do you think?

Post your comments.

Kids in the Candy Store

Indeed!

Some people may ask why I promote Taylor Guitars so much.

The answer is very simple!

They clearly love Tasmanian blackwood and are keen to promote it.

And so am I.

They are one of the few manufacturers in the blackwood market who heavily promote Tasmanian blackwood. It’s a very positive message and I’m more than happy to piggyback on their efforts.

(Plus I’m a guitar play and I love guitars. What could be more perfect than that?)

I only wish I could find some commercial or custom furniture makers who had a similar attitude and approach. Is there anyone out there??

Anyway on with the story…

Here’s a great interview between Acoustic Letter’s Tony Polecastro and Andy Powers from Taylor Guitars. The video is titled How to Build Expensive Guitars with Tony Polecastro & Andy Powers and is part of a 3 part series of interviews between Polecastro and Powers. The video is about Tony and Andy starting from scratch to design and build 2 custom guitars. The whole video is interesting but if you want to cut to the chase where the Tasmanian blackwood comes in then scroll to the 4.10 minute mark of the video.

Polecastro asks Powers what he would do to build his perfect guitar. So Powers walks off ……. and comes back with Tasmanian blackwood.

Jackpot!!

You do know that this blackwood was supplied to Taylors by Bob MacMillan at Tasmanian Tonewoods don’t you?

Watch and enjoy!

Now here’s the review of the Custom Brazilian Rosewood GS (Grand Symphony) guitar from the first half of the above interview:

And now here’s Tony Polecastro’s  review of the Custom Tasmanian blackwood GC (Grand Concert) 12-fret guitar from the interview:

All up it’s a great little story (and a beautiful guitar).

A very positive message about Tasmanian blackwood moving onto the international stage as a premium timber.

Now for the bigger challenge.

How do we get the blackwood industry up and running and away from the politics and conflict that has all but smothered the forest industry here in Tasmania?

I need help with this! Anyone??

Destructive anti-commercial policies continue at FT

After an absence of a year the Forestry Tasmania 2013/14 Annual Report belatedly includes data on the mill door log value (MDLV) of the various product classes sold including special timbers (Appendix 2 – Supplement to table 3.1). This together with other data in the annual report has allowed me to update a chart I originally published in this blog in June 2013.

http://blackwoodgrowers.com.au/2013/06/13/pricing-blackwood-out-of-the-market/

As most readers will know Forestry Tasmania places a very low priority on commercial matters like getting the best possible price, and making a profit. It is difficult to understand FT’s approach to issues such as sales processes, pricing, markets, costs, supply and demand. None of these issues are discussed in their annual reports. What little information is available shows that good commercial management is absent at Melville St. By behaving in this reckless manner Forestry Tasmania is undermining the profitability and livelihood of all existing and potential future private tree growers and destroying the very industry it is supposed to be supporting. Such is the inevitable outcome of crony capitalism.

Of course Forestry Tasmania is aided and abetted in this behaviour by legislation and politicians that support crony capitalism.

Remember that Forestry Tasmania is by far the largest grower/supplier of premium quality special timbers logs in Tasmania/Australia. But it is not the only existing or potential future grower!

FT_MDLV_chart

The updated chart shows total special timbers and blackwood sawlog harvest for the past 9 years. 2006 was the first year that Forestry Tasmania published Mill Door Log Value data. For some reason no MDLV data were published in 2013.

As can be seen, blackwood makes up the majority of the special timbers harvest from public native forests in Tasmania. The chart also shows the total special timbers mill door log value (effectively what the sawmillers paid for the logs delivered to their mill). I have then calculated the average MDLV ($/m3) by dividing the total value by the total volume, effectively the per cubic metre royalty paid.

As can be seen the average MDLV is effectively a straight line with a gradient of 3.1%. In other words the price paid by sawmillers for these premium timbers is fixed in line with long term inflation. In other words their value does not increase in real terms – exactly the same real price today as 9+ years ago. That’s what I call a great deal!

In 2013/14 the average special timbers MDLV was $132 per cubic metre. That value includes all the administration and overhead costs, plus the costs of harvesting and transport to the mill. One can only guess what the effective stumpage price was, maybe $40 per cubic metre!! What a joke!!

The other obvious trend in the chart is that special timbers log prices are not affected in any way by market conditions – supply, demand, costs of production, etc. For example the Global Financial Crisis of 2007 had absolutely no impact on prices.

And finally the trend in special timbers revenue over the last few years suggests that 2014/15 will see revenue drop below $1 million. We have no idea what the costs are in special timbers management and harvesting because Forestry Tasmania does not provide separate accounts for these “non-profit” activities.

But it doesn’t matter because Forestry Tasmania sends the special timbers bill to the Tasmanian taxpayer! 10,000 cubic metres (or 500 truck loads) of some of the world’s best timbers sold for a song, AND teachers and nurses lose their jobs. Does anyone care? Apparently not!

Is it any wonder that many Tasmanians regard Forestry Tasmania as an albatross around the neck of the community?

Despite the fact that Forestry Tasmania deliberately operates its special timbers operations at a loss, it:

  • Fails to provide separate financial statements for these operations;
  • Fails to provide any commercial management model and objectives that might identify limits to costs and losses;

The Tasmanian community is left with an unmanaged out-of-control special timbers liability. And the situation is going to get worse with the proposed logging inside the World Heritage Area!

Interview with Bob Taylor

For a bit of great holiday entertainment here’s a recent interview with Bob Taylor by Tony Polecastro of Acoustic Letter. The interview is in three parts.

Much of the discussion is about sustainability and what Taylor Guitars are doing to secure their wood supply for the future. Basically Bob Taylor is expanding into the tree-growing business.

Like Martin Guitars, Taylors are increasing the focus on home-grown North American hardwoods (The USA has the largest hardwood resource outside of the tropics). The discussion about Maple is particularly interesting.  Unfortunately there’s no mention of farm-grown Tasmanian blackwood.

Enjoy!

Tasmanian forest turkeys

In response to a comment I received on my earlier blog on the Canadian-US lumber dispute I can’t help but post a link to this excellent article from the British Columbia Private Forest Landowners Association.

http://www.pfla.bc.ca/log-export/what-turkeys-can-teach-us-about-b-c-timber-supply-complaints/

rsz_turkeys

Just so much of the comments and observations on forest policy and practice in British Columbia ring true here in Tasmania.

One major difference is that at least in BC the private forest owners understand that they are being screwed by the Government and its forest industry servants.

Thanks to Rod Bealing, Executive Director of the BC PFLA for the comment and link.

Canada–United States softwood lumber dispute

softwood-lumber

Isn’t it amazing.

Here’s a forest industry story that has strong echoes here in Tasmania.

It seems the forest industry has the same problems around the world.

http://business.financialpost.com/2014/10/31/the-granddaddy-of-all-canadian-u-s-trade-disputes-is-about-to-rear-its-ugly-head-again/

and even a Wikipedia entry about this trade dispute:

http://en.wikipedia.org/wiki/Canada%E2%80%93United_States_softwood_lumber_dispute

So what’s the issue?

Well the Canadian lumber industry is unfairly subsidized by federal and provincial governments (just like here in Tassie), as most timber in Canada is owned by the provincial governments (just like here in Tassie). The prices charged to harvest the timber (stumpage fee) are set administratively (just like here in Tassie), rather than through the competitive marketplace, the norm in the United States.

And why are forest product prices in the US set through the competitive marketplace? Because most forests in the US are privately owned and private owners do not want to be competing against stupid anti-trust Governments. They want to get the best price possible for their trees.

And the National and Provincial Governments in Canada refuse to reform their forest industry and open it up to competitive pricing, just like the Tasmanian Government.

And don’t the American’s hate that!

Hence the massive trade dispute!

Here in Tasmania private tree growing is still a bit of a novelty. Until 20 years ago most farmers regarded trees is a liability not an asset. Governments did forestry, not farmers. After the disaster of the failed MIS schemes of the last 20 years we have returned to that same situation – trees as liabilities. And we still have Tasmanian Government policy deliberately discriminating against existing and potential future private tree growers through taxpayer subsidised Administered log pricing. Echoes of failed Government bureaucracy from around the world.

Now I’m not sure what defines “unfair” subsidies? Sounds like an oxymoron to me.

I just hope the Americans give the Canadians a lesson in economics 101.

Now I wonder how many of those subsidised, anti-trust Canadian forest operations have FSC certification?

And here we are in Tasmania with exactly the same problem, but we don’t have a trade partner like the USA to kick our stupid butt!

A shame really!!

 

United Forestry Group NZ

UFG

Notice was given of the formation of this New Zealand organisation in my story back in August.

http://blackwoodgrowers.com.au/2014/08/23/new-group-looks-to-become-fonterra-of-forestry/

So here they are up and running with their own website.

http://www.unitedforestrygroup.co.nz/

And here’s a collection of “cut and paste” from that website to give you an idea of what they have to offer the small forest owner in New Zealand.

United Forestry Group | UFG

A strong new company, United Forestry Group Ltd (UFG), has been formed in New Zealand to help the owners of some 14,000 small plantation forests, totalling more than half a million hectares, with the challenge of marketing a  “wall of wood” coming to maturity  over the next two decades.

Mission Statement

To unite the interests of forest owners to provide innovative and attractive harvesting options incorporating world class logistics and marketing resources delivering excellent commercial and community benefits.

Our approach will assist small forest owners to compete with the owners of larger forests who currently enjoy the advantages of economies of scale and greater expertise.

About Us

Joining with United Forestry Group (UFG) will enable small forest owners to compete more successfully and achieve better returns than by trying to go it alone.

United Forestry Group (UFG) shareholders bring local forestry management expertise and contacts together with considerable financial resources, long established contacts in the Asian and local markets, and shipping and supply chain expertise.

Joint Venture Superpen Limited, a NZ company, is a cornerstone investor in the new company. Partners in the joint venture are major players in timber exporting – international timber marketer Pentarch of Australia and Chinese conglomerate Xiamen Xiangyu, which has considerable logistics, shipping and and supply chain assets.

The Superpen joint venture will deliver expertise, contacts with timber buyers, shipping services and financial strength to United Forestry Group (UFG).

Financial Strength

Our financial strength, our expertise and contacts, and a strategy devised to improve the return from small forests whether by marketing to local processors or overseas buyers, are the key.

Our size and resources will enable us to buy and consolidate existing forests and co-ordinate orderly harvesting, marketing and shipping. Our approach enables small foresters to join with us and extract the maximum possible return – the lowest possible cost and and the best possible price. At the same time we offer forest owners investment opportunities if they wish to participate in the wider forestry industry.

Asset Protection and Security

We believe that union is strength and that owners of a single small forest are vulnerable because of their limited bargaining power and marketing ability.

Consolidating forests through UFG (United Forestry Group) will enable you to enjoy the benefits of economies of scale, greater bargaining power and greater expertise. It will be possible to manage a consolidated forest resource sustainably to produce better outcomes and to time the market better.

Consolidation will protect your asset and give you greater security.

 

I doubt we will see anything like this in Tasmania anytime soon but it sure sounds like a great idea.

It will be interesting to see whether they can attract the support of small forest growers and become a major player in the New Zealand forest industry.

Those New Zealand farm foresters are lucky to have such an option.

Go to the website and check them out.

Hydro Wood – Landline – ABC

This is just such a great feel-good story, no one could possibly have any problems with salvaging public timber at taxpayers expense. Could they?

Hydrowood Landline

Hydro Wood – Landline – ABC.

Generally I support the project.

And I congratulate SFM Forest Products for getting the project going.

However I do have a few issues that I think warrant consideration.

And the ABC Landline program was screaming these issues at me loud and clear.

1) The complete disconnect from any commercial reality (but we do have a very long tradition of this in the forest industry). Can the market absorb an extra 20,000 cubic metres of specialty timbers per year? How will the wood be sold to market? Tender? Auction? Mates rates? Will these logs be available for export? What impact will this have on current market prices, especially for blackwood, given that private growers will be competing against even more subsidised wood? For heavens sake!! When will the private forest grower ever get a fair deal in Tasmania? When will we stop bastardising the forest industry? When will we stop thinking of the forest industry as a community service and start thinking of it as a business?

2) If the timber resource is so valuable then why the need for a taxpayer subsidy? The forest industry already has a bad track record of squandering vast millions of Government handouts and subsidies. This just sets yet another bad example, and it didn’t need too. This could have been a fully commercial, profitable operation with no taxpayer funding.

Here’s a recent example from New Zealand that provides a much better model for how to deal with the salvage of a public special timbers resource, and this will result in money going to the Government not costing taxpayers. Why can’t we do it this way in Tasmania?

http://www.doc.govt.nz/about-doc/news/media-releases/2014/first-west-coast-timber-salvage-approved/

And this is just the first of what they hope to be many Hydro special timbers salvage operations!! Excuse me while I scream in frustration!!!

There will be very little investment in blackwood in the next few decades whilst the market is flooded with this cheap subsidised wood.

Screw my plans for a blackwood growers cooperative!

Screw existing private blackwood growers whose resource is now worthless!

I think given this is a private company running the Hydrowood project whose goal it is to look after the interests of private forest growers, a bit more thought on the commercial context and planning would have made this project much more agreeable to private blackwood growers.

As it is I think the project is currently detrimental to the interests of private blackwood growers. This needs to change!

Please can’t we do better than this?

November 2014 Island Specialty Timbers Tender Results

27 of 28 lots sold to 10 of 19 bidders at good to very strong prices for most lots.

http://www.islandspecialtytimbers.com.au/shops/ist/pages/april-may-2008-tender-report

(and scroll down the page for the latest tender results)

Lots 2 and 24 contained blackwood logs.

Lot 2:

A recently harvested good quality log with good colour, a little twist, fluted shape but solid with some tear-drop figure. High quality, large diameter log.  

Length 3.9 metres, butt diameter 79 cm, head diameter 69 cm, volume 1.67 cubic metres.

This log sold for $1,250 per cubic metre or $2,090 for the log.

A very good price!

Lot 24:

This was a parcel of 13 smaller plain-grain blackwood logs.

A fresh parcel of average to good quality Category 4 blackwood sawlogs, on a size and quality scale of 1 – 5, with 5 best quality, this group would rate about 3.5.

Length range 3.7 to 6.5 metres average 5.0 metres, head diameter range 31 to 54 cm average 42 cm, volume range 0.4 to 1.26 cubic metres average 0.78 cubic metres. Total volume 10.1 cubic metres.

This parcel sold for $200 per cubic metre or a total of $2,020.

IST Oct14 Lot24

Once again the domestic market shows that any blackwood logs with figured grain attract great prices, with plain grain logs coming a long way behind in second place.

As usual the black heart sassafras logs dominated the tender and the price action, with the best result being $3,350 per cubic metre.

But who is going to plant sassafras and wait 300 years even for those prices?

Of note, even silver wattle is now attracting good prices. Two of the lots were silver wattle logs that sold for $450 per cubic metre. Not bad at all. Good to see this beautiful timber starting to get the recognition it deserves.

Blackwood Markets

Thanks to those blackwood sawmillers who contacted me in response to my recent blog.

http://blackwoodgrowers.com.au/2014/10/27/blackwood-sawmillers/

Here are some of the things I learned from these discussions – some very good, some not so good.

THE GOOD

Firstly there is strong demand for blackwood from export markets.

Local domestic markets remain generally quite.

Blackwood growers wanting to get a good price need to search out those few processors who are accessing these markets.

Prices “on stump” of up to $500 per cubic metre for good quality plain-grain logs are being offered, with exceptional logs going well above this.

Access to these export markets is available from anywhere in the State.

One processor is currently shipping an average one container of logs a day and is looking to increase this dramatically next year. They are accessing markets in 7 different countries!

Will Tasmanian farmers be able to meet this demand?

Strong demand for quality appearance-grade wood and a falling Aussie dollar are helping to drive interest in the blackwood market.

At these prices a blackwood plantation at harvest would be valued at well over $100,000 per hectare! Anyone interested?

Do I have a problem with exporting blackwood logs? Not at all!

Farmers should have the option to access whatever markets they wish for their products. If local processors can’t offer a good price then export it is. As I often remind people, forestry is business. Growing trees for wood production is about profit and good forest/land management.

The absolute foundation of any successful forest industry must be profitable tree growing. Not community service! Not taxpayer subsidises! Not ideology!

THE NOT SO GOOD

But the blackwood marketplace is not functioning anywhere near as well as it could/should.

All of this commercial activity is happening “off the radar”.

Instead of building interest in the farming community, creating much-needed positive sentiment in the forest industry, and building support and interest from the wider Tasmanian community the blackwood marketplace is still pretty invisible.

Why?

Fear and mistrust

With so many processors (at least 21) in the private blackwood business in Tasmania it is a very competitive, and at times cut-throat business. Hence the industry is dominated by fear and mistrust. Because of this fear all business is done quietly by word-of-mouth. No advertising. No promotion. No marketing.

Invisibility

Because of the fear and mistrust within the industry Tasmania remains ignorant of what is happening in the blackwood market. Farmers are generally unaware of the current and future potential of growing and selling commercial blackwood.

A lost opportunity for Tasmania.

The blackwood industry will only grow and prosper if there is greater transparency and integrity.

The market clearly wants quality blackwood timber and is prepared to pay good prices.

No voice

The forest industry in Tasmania is dominated and controlled by a select few sawmillers and processors. Private forest growers essentially have no voice or power/influence in the industry. Any forest industry that is dominated by the processors is doomed to fail. Forestry is fundamentally about making profits by growing trees. If tree growers have no power or voice in the game then no one will grow trees. It’s that simple.

State forest policy and Forestry Tasmania

There was plenty of criticism in the discussions with processors, about State forest policy and Forestry Tasmania. It is a myth that the Tasmanian forest industry is united and speaks with one voice. We generally only hear one voice because the dissenters fear the consequences of speaking out. The forest industry can be a rough trade at times.

These processors who deal with private forest growers know very well the damage that past and current State forest policy and practice is having on the industry.

CONCLUSION

The discussions with blackwood processors gave me a great sense of hope. But there are still plenty of challenges ahead.

The market clearly wants more Tasmanian blackwood.

The industry is currently too crowded and cut-throat. It needs 2-3 processor/operators that are prepared to cut through the mistrust with openness and integrity, and an efficient low-cost business model that delivers what the market wants whilst building trust and good relationships with the farming community.

With so much negative sentiment and bad experiences it will take a lot of work to rebuild trust within the farming community. Keeping “off the radar” is not the way to rebuild trust and interest. Most farmers will respond positively to a professional, honest, transparent approach. But good long-term relationships take time to develop.

Getting farmers to make a 30+ year investment by planting blackwood will require as much positive support and encouragement as possible. We need lots of flag waving and trumpet blowing on a major scale. And plenty of market “pull”.