Harvesting by the cubic metre
Prior to committing to sale it is important to understand:
- What pricing arrangement is being offered;
- What the point of sale is; and
- What additional costs may need to be borne by you - the forest owner.
The pricing arrangement may be a price per cubic metre or per tonne. These are basically interchangeable for small plantation owners as a green tonne is essentially equivalent to a cubic metre.
There are three main points of sale:
- Stumpage is a payment per cubic metre or tonne, paid to the owner at the stump. The purchaser pays all costs associated with delivering the wood. This is the most common point of sale.
- Fixed Price is a payment where your purchaser guarantees you a fixed payment for the right to harvest your trees, eliminating any uncertainty over harvest yield, harvest recovery, and product mix.
- Mill Door Price refers to the price per cubic metre for log products delivered to the mill yard. Mill door sales are generally restricted to large forest owners and are not recommended for smaller growers as the cost, risk and complications of managing harvesting and transport contractors may be significant.
- Be aware of additional costs that are not built into the quote. There are some expenses the forest owner may be asked to pay out of the gross proceeds from the sale of their wood. These include:
- LITA (Logging Investigation and Training Association) levy which is paid to assist training for the logging industry and to maintain standards.
- Tree marking costs.
- Roading costs.
- Marketing fees.
- Government levies.
A damage tree
The forest owner should explicitly ask for a statement of proposed deductions that could be subtracted from their payment or ask for an offer net of all expenses, to ensure that the likely total payment is estimated.
When engaging a purchaser, ask them to provide references for their previous operations. You could also ask to talk to some of your prospective purchaser’s other small plantation owner clients, and if possible, visit their plantations to get a feel for the quality of the operation, degree of utilisation, site cleanliness after harvest, amount of tree damage, low stump heights etc.
The best quote will likely be a combination of price and the degree of utilisation of all products from your plantation. Beware of attractive per cubic metre prices, where only a limited product range is offered. Selling 70% of potential recoverable volume at premium prices could generate a lower return to the grower than selling 100% of recoverable volume at average prices.
Maximising recovery can reduce forest fuel loads, improve access, and reduce future
The Green Triangle Regional Plantation Committee has a website which provides lists of purchasers, etc. http://www.gtplantations.org where services can be found.
Harvesting Contracts:
A contract should be drawn up prior to harvesting the plantation to detail important information including the area of plantation to be harvested, the products to be harvested, clean up standards, and log price and payment details. The contract may also include standard contract terms and conditions clarifying issues such as point of sale, payment terms, dispute resolution etc.
A harvesting contract should also specify harvesting standards and verify that the contractor has systems in place to demonstrate environmental and occupational, health and safety compliance. The purchaser managing the timber sale may carry out contractor assessments - criteria include product quality, value of product, safety performance, environmental performance, residual tree damage, stump heights and residue left on site.
You are entitled to ask for and receive copies of such reports. Selling wood at the mill door means that it is your responsibility to ensure the contractors have systems in place to ensure safety and environmental outcomes.
A harvesting contract may also commit future wood flows as a condition of sale. There are often two types of harvesting contracts:
- Marketing agreements that lock plantation owners into long term supply commitments. Such agreements are likely to include price indexation formulas and proposed timing of future harvest events.
- Spot sales are when a price is offered at a specific point in time for a specific harvest event.
- A marketing agreement offers greater security while spot sales provide more freedom to play the market. Legal advice should be sought before entering long term supply agreements so that the ramifications of such agreements are understood, including such things as restrictions on selling your plantation asset and the degree of flexibility with respect to harvest timing.
Compliance:
Those responsible for the harvesting operation must comply with relevant regulations and guidelines. As an occupier, the person who has the management or control of the site, you are responsible to supply a safe work place, including safe access under the Occupational Health, Safety and Welfare Act 1986. A land owner should have public liability insurance and it is advisable to ensure any contractor working on your land does too. This may provide some financial protection in the event that a member of the public is injured as a result of the harvesting operation on your land.
Roading:
Adequate roading is necessary before a plantation can be harvested. Depending on available resources you may be able to handle the roading yourself. Alternatively, there are many roading contractors available. It is possible that the purchaser will be able to offer a roading service, or at least facilitate a roading contractor to assist you.
Choice of road design and standard is influenced by row direction, forwarding distances, log landing locations and harvest planning. The purchaser can advise the internal roading requirements necessary to facilitate harvesting. It should be recognised that roading requirements can change over the life of a plantation. Higher volume harvest events like clear felling are likely to require higher quality roading than lower volume thinning operations. Types of transporting equipment also influence roading standards over time, for example, B-double traffic requires wider access and better roads.
Construction of surfaced roads can be very costly, with distance to gravel source a significant contributor to cost. Similarly, the need for culverts or creek crossings can dramatically increase costs.
