With the governments assistance in smoothing the pathway for foreign ownership to purchase land for forestry plus the additional income ETS credits can provide forestry looks to be a lucrative sector to invest in.
Judging by the numbers in the media most land conversions from sheep and beef to forestry are being conducted by overseas based companies.
Among a range of issues one thing stands out. What do the overseas investors see that local potential investors don’t?
Apparently of 18 land conversions 15 have been conducted by overseas interests. Are New Zealanders so wedded to the idea of not farming trees that they don’t wish to partake of the potential gains or is there something else afoot that is holding them back?
Historically purchases and conversions to forestry generally have been more active when timber prices are strong and while there is a current downturn complements of Trump et al, the fundamentals are still strong. However, trees planted now will take 27 -33 years to mature and it would be a brave person to speculate that far into the future as to what returns are likely to be.
When it comes to carbon credits you are dealing with a political beast - created by politicians to serve a purpose, and admirable though the objectives maybe they can be altered with a stroke of the pen.
In addition to this, technology is actively working to find ways which will eliminate the need to sequester carbon with trees. So current hype may not translate into long term profits.
Perhaps Kiwi’s recall seeing this happen before when the attractiveness of forestry has been heavily influenced by government policies only to be reversed at a later point in time.
The argument that forestry can provide more employment than farming is also very hollow. You only have to go to the East Coast and see the shadow of the communities that used to be there in the 1970’s before the wholesale conversion to trees. If trees provide jobs, they certainly don’t build communities.
Trees will always be an essential part of the landscape and most would agree that the scorched earth clearing of farmland in the past didn’t do the environment any favours and far too much land unsuitable for pastoral farming was cleared, often with the encouragement and incentives of governments. It is unfortunate the current incentives have pitted pastoral farming against forestry as in the ideal world they could be working together to achieve the best result with steeper land unsuitable for farming being planted and the productive land retained for food production and providing the cashflow and diversity to foster communities.
Shane Jones, who seems to love being in the limelight, is now threatening to put an “Oil and gas like ban” on overseas forestry companies to rein them in and to ‘force’ them to provide access to timber for local processors. Overseas owners make up 75% of total timber ownership.
However, access to timber is only a part of the issue with too much good land being converted. Mr Jones said he is seeking advice about whether government should be promoting forestry in “marginal, precipitous country”. It is a pity he or government did not seek a bit more advice before putting the policy out there and if conversions were only limited to “marginal, precipitous country” then the current backlash he is facing would be less vociferous.
The video showing off Hadleigh Station pre-purchase for conversion shows a very different picture to what Shane Jones appears to be talking about, with prime potentially cultivatable land going into trees. Also given the trickery involved in the purchase, the OIO had the perfect excuse to rescind the sale if they desired.
To date the government has approved $2.3 bln of forestry-related land sales - about 31,000 hectares of it previously in New Zealand hands. Of that, about half has been sold via a streamlined 'special forestry test' introduced by the government last October.
Overall, nearly $5 bln of sensitive land has changed hands through the OIO since this government was formed. With an aim of approving OIO requests to purchase forestry within 32 days the government appears to be going out of its way to move as much land into foreign ownership as it can with little chance of redress from local quarters with the speed of the decisions. Ironic when we see the snail’s pace of decisions in other areas such as RMA and the like.
So, while Kiwis may not see the potential of forestry the same way foreign owners appear to, in the meantime good land is going under trees, and to get it back into food production has became an almost uneconomic exercise.
16 Comments
Guy have I understood the system correctly -
Some forestry owners sell off off the carbon each year When the harvest, they will need to buy back.
Some just save the credits to use when they harvest..
But some are selling the credits in permanently sequested (usually reverting native) forests. The carbon is sold each year in this growing forest and will be permanently protected - never to be cleared again.
So planting plantation forest and selling the carbon seems a fools play - unless they think the $25 cap will not climb when taken the govt takes it off.
Thus the concern is with the permanently sequestered forests? Those that are being locked up in perpetuity?
(presumably such forest will be passed into QE Trust type rates free entities?)
I know there is a lot more to it, but is this close?
I have a friend in the game. Planted 8 million trees this year ,1200 trees a hectare as carbon sink looking to plant 10 million next year. Carbon credits averaged over life of forest, so a yearly payment as high as $1800 a hectare. The idea is to set up a limited liability company, take the money ,then bankrupt it before harvest or maturity in this case. Leave the taxpayer holding the can, it's one the most brainless things I have ever seen and I've seen a few. When will the madness ever end?
That's just a Nat Party beat up. If carbon is more valuable than what they were doing, then the land, location and so on was likely rubbish (the stuff Nat cleared under the old livestock incentive scheme).
In reality this is a real plus for hill country farmers. They can fence off those irritating small blocks of rubbish that have no value and receive a decent cheque off us townies for for 20 - 30 years.
I'd suggest your farming friends try and get to grips with this scheme (don't get the info from a Nat Mp) and get it working for them. With high meat prices and cheques for carbon and bees, they are in a good spot. National have a very active misinformation programme running. The carbon scheme is good news for townies and country folk, not to mention the environment.
I don't get information from a Nat Mp, the Carbon credit scheme is a scam on the average Kiwi.. Carbon credit investors are now wanting better farms as the returns are better. High log prices are already making farmers think about forestry diversification. Many of these farms are where store stock markets get animals.
Gets better. No allowance for the loss of soil carbon when planting pine into pasture. We've just logged a block ( not entered into ETS) and 67 tonnes of carbon/ha went out the gate. That first rotation will lose a minimum of 100 tonnes/ha soil carbon. It is visibly bleached. The whole kill cows plant pine dichotomy of the debate is frustratingly too simple. The carbon cycle is the life cycle. The more vibrant, abundant and diverse the ecology the more carbon is employed in living systems with less redundant in the atmosphere. A mono-culture, be it forest, pasture, orchard or crop is a simplified ecology with atmospheric carbon representing the life opportunity cost of such a system. It is not about either pasture or trees, We need it all, including wetlands, to foster a healthy vibrant diversity across the whole landscape. The worry is that no government has a good track record of drafting policy to account for ecological complexity.
Does no one read the news. The majority of land being purchased for planting is by kiwis by far. Overall it’s peanuts compared to the forest removed for dairy farms in the last 10 years - some of this going back to forest now as it’s a major environmental stuffup. Pines do not destroy the soil, the next tree crops grow even better. Under the new rules you get carbon for 18 years harvest at 28 and just replant, no carbon from them. Who’s going to walk away from a mature timber crop!!! People need to read up and get the facts. This is the greatest opportunity for hill country farmers ever to become very profitable. Carry on struggling if you wish but there’s a reason top farmers are planting big areas and buying more land and planting trees. They just roll there eyes at this sort of tirade and get on with improving there profits. The truth is forestry produces more jobs and profit than most farming. Integrate it into your farm and become more profitable and stop carrying on with false facts and ignorance.
Just another rant from the farming lobby.
Forestry has provided good returns from export sales. People are investing in forestry because it is a better investment. It does provide very large returns, greater than farming generally. It creates jobs. The pastural farming economy of the East Coast in the 80s had collapsed, and the economic expansion of the East Coast area is now driven by forestry. There are more jobs, greater employment, and investment in the region.
Carbon credits are a market driven economic mechanism to support investment in environmental sustainable activities, which demonstrate forestry is significantly more sustainable than pastural farming. They are not "subsidised" by the Government. Its agriculture which is subsidised because they are exempt from carbon taxes.
Instead of moaning about a small increase in the area of forestry from conversion of pasture, we should be looking at ways to increase domestic processing of logs, exponentially increasing the value of exports earned, and expanding employment and investment in the sector exponentially. This is one of the few areas of great potential for expansion in the NZ economy.
What the East Coast, Northland, Southland and other regions need is more mills producing a range of wood products to displace the mountains of logs we export each year.
Instead of moaning about a small increase in the area of forestry from conversion of pasture, we should be looking at ways to increase domestic processing of logs, exponentially increasing the value of exports earned, increasing employment and investment further, and growing the economy. This is one of the few areas of great potential for expansion in the NZ economy.
What the East Coast, Northland, Southland and other regions need is more mills producing a range of wood products to displace the mountains of logs we export each year.
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