Plantation and Farm Forestry

Australian Trade Position for Forest Products Markets

The Australian market for timber products is strongly influenced by the international market because Australia imports or exports most forest products. Australian trade in most forest products is small in comparison with world trade, and domestic prices are largely determined by the landed price of imports.

The Asian economic downturn in 1997-98 has had rather diverse short-term trade impacts on the Australian forest products trade. The fall in demand for forest products in the Asian region in 1997-98 has generally led to a decline in world prices (measured in US dollars) for forest products. However, relative exchange rate movements meant that prices for imported softwood timbers into Australia rose while prices for tropical hardwood timbers fell. World softwood timber prices tend to be set by North American market conditions, but the weakening Australian dollar, measured against the US dollar, tended to offset any advantage gained by North American suppliers in the Australian market from lower world prices. On the other hand, the appreciation of the Australian dollar against the currencies of Australia’s major Asian hardwood suppliers led to a fall in the price of imported tropical timbers within Australia.

The volume and value of imports of forest products into Australia rose in 1997-98. The value of forest products imports in 1997-98 reached $2.71 billion, up from $2.55 billion in 1996-97 (ABARE, 1999). The rise largely reflects increases in value and volume of softwood sawntimber imports. Australia’s strong economy, continued high level of housing activity and lower world prices for sawnwood contributed to the growth in imports. Plywood imports, mostly structural plywood from New Zealand and Indonesia, were another major contributor to the rise in the value of imports. The value and volume of paper product imports also rose, largely through increases in imports of newsprint, paperboard and industrial packaging imports.

Blue Gum, north of Digby

The value of exports of forest products from Australia rose by 13%, or $143 million, to $1.25 billion in 1997-98. The main contributor to the rise was a $128 million increase in the value of woodchip exports. Shipments of woodchips, which were almost solely directed to Japan, increased by 30% in 1997-98. While world woodchip prices (measured in US dollars) declined in 1997-98, Australian exporters were, to some extent, buffered against the decline in world prices. Prices in contracts negotiated by Australian exporters to sell woodchips to Japan are written in Australian dollars, and because the Australian dollar fell markedly against the US dollar in 1997 and 1998, Australian woodchips were priced competitively against those from suppliers selling in US dollars.

Sawmill at Warrnambool

The economic downturn in Asian countries has also had an impact on exports of other forest products with falls in the volume and value of Australian round wood, sawn timber and particle board exports in 1997-98.

Industry Development Opportunities

Sawlogs
The availability and quality of hardwood resources from the Glenelg-Hopkins Catchment Management Region will have a bearing on development opportunities. Subject to new sustainable yield analyses based on SFRI data, there appears to be little scope in the sawmilling sector for industry development in terms of resource quantity at least until 2001.

In the longer term, sustainable yields may further increase as the conditions of the forests are improved for sawlog production through programs of commercial and non-commercial thinning, reforestation and regeneration of currently low yielding stands. This will depend to a large degree on the strength of demand for fibre-based products, and the extent to which available supplies of residual logs can be utilised and funds are allocated for these programs.

In recent years, the Victorian hardwood sawmilling industry has:

• increased the proportion of sawn timber seasoned;

• recognised that a number of species other than ash can be seasoned and used in applications where their properties provide a competitive advantage;

• refined sawing, drying and further processing techniques to improve the recovery of appearance grade products;

• increased the utilisation of lower grade logs and experienced an increase in the demand for accurately sized timber for pallets;

• developed a greater range of products and a broader customer base; and

• developed a coordinated approach to the development of export markets and introduced quality assurance procedures.

The progressive transition of production from predominantly unseasoned to seasoned products by the Victorian hardwood sawmilling industry is expected to continue (Gooding, 1999).

Specific development options that could be considered by the sawn timber industry sourcing hardwood sawlogs and residual logs from the Glenelg-Hopkins Catchment Management Region include:

• increasing the proportion of sawn timber that is kiln dried. Most producers processing logs from the Glenelg-Hopkins Catchment Management Region have the capacity to increase the proportion of their production that is kiln dried and re-processed;

• increasing the processing of residual logs through investment in plants specifically designed to process logs that are smaller and more defective than sawlogs;

• developing networks between timber processors to facilitate investment in the specialised equipment needed to produce highly processed wood products;

• strengthening links with the furniture industry; and

• continuing to identify and expand markets where the properties of the various hardwoods from the region (durability, appearance, strength and hardness) provide a competitive advantage.

These development options have been successful for a number of firms and there would appear to be scope for the sawmilling industry processing logs from the Glenelg-Hopkins Catchment Management Region to extend their successful application.

Residual logs
Residual logs are produced in conjunction with sawlog harvesting operations, and so their availability is directly tied to the sustainable level of sawlog production. In 1997-98, nearly 80% of available residual logs was utilised as a by-product of normal sawlog harvesting operations. Future usage of residual logs appears to becoming increasingly dependent on the export woodchip market.

Although it is estimated that the supply of residual logs in southwestern Victoria (ie. the West RFA region) will be around 220 000 m3 per year for at least the next 20 years, the resource is widely dispersed and variable with respect to species, age, log size and quality. It is thus unlikely to be available to support the development of competitive new industries such as panelboard or pulp and paper production based solely on the native hardwood resource. Any development proposals planning to use the native hardwood resource would have to use the resource in conjunction with available plantation logs. Other potential uses of residual logs are in the production of hardwood plywood and laminated veneer lumber (LVL). While there would undoubtedly be some residual logs suitable for this purpose, the critical issue is whether such logs can be economically segregated and markets developed.

The rate of softwood plantation expansion declined sharply in the 1990s and, although there is some potential to increase the current available volume of sawlogs and residual logs, it is unlikely that the increase will be sufficient to justify the establishment of any new major industries. A more likely scenario is the continued rationalisation of existing processing plants.

Future availability of softwood sawlogs and pulplogs has been made on the basis of forecasts by the National Plantation Inventory (NPI) in 1997. No increases in availability are anticipated in the Ballarat region over the next 20 years while the forecast for Portland suggests that softwood production will initially fall from current production levels of around 930 000 m3 then increase slightly to 1 098 000 m3 per year in the period 2020-24. While the pulpwood forecast does not increase over the forecast period, the sawlog component is expected to increase by 28%. These forecasts incorporate plantation owners’ plans for expansion at the time the NPI study was undertaken in 1996 but they do not appear to take into account potential expanded planting rates that could be expected through recent government initiatives such as the Plantation 2020 Vision.

A number of programs have been initiated to develop blue gum plantations in southeast South Australia and in the southwest of the Glenelg-Hopkins Catchment Management Region in the past few years, often with overseas involvement. As a result there has been a rapid expansion of hardwood plantations particularly over the past five years. All but one of these programs are export oriented, based on producing the export woodchip market.

Plantation options
There are a number of options for establishing plantations in the Glenelg-Hopkins Catchment Management Region. At one end of the spectrum, plantations could be established to augment the current large scale commercial investment, whilst at the other, farm-forestry, agroforestry and land protection may be feasible options in certain circumstances. Most softwood producers are expected to replant with second/third rotation plantations with a minor expansion to the current estate. However, the opportunity exists for increasing the area of softwood and hardwood plantations on private land on sites with suitable rainfall and soils, to supply products to existing and future industries.

Industrial or off-farm investor plantation options include:

• Sawlog-driven softwood plantation - close spacing, 2-3 thinnings for pulp or preservation and clearfelling for sawlogs at 30+ years;

• Clearwood sawlog-driven softwood plantation - high lift pruning operations, thinning to lower stocking for faster, increased diameter growth;

• Eucalypt pulpwood plantation - close spacing, short (10-20 year) rotation; and

• Eucalypt sawlog/veneer plantation - normal spacing, high pruning, thinning to lower stocking for faster diameter growth, on a medium (30-60 year) rotation.

Farm forestry/agroforestry options, which are integrated with a property’s agricultural pursuits and are applicable to both softwood and hardwood include:

• Timberbelts - alley farming system managed for timber with pruning and thinnings, while providing shelter for agricultural land;

• Wide spaced trees pruned for clearwood with grazing or inter-cropping; and

• Woodlots (small plantations) with lots greater than 10 ha becoming more economically efficient - suited to joint venture arrangements or subject to Government funding initiatives (NRE, 1997).

DSE is promoting the planting of specialty timbers on farms in southwest Victoria with a range of acacias, eucalypts, cypress and sheoaks having been planted in research and demonstration plots. The plots are being managed to produce high quality clearwood logs through pruning and thinning. Results to date indicate that the species best suited to the region include Spotted Gum (Eucalyptus maculata), Sydney Blue Gum (Eucalyptus saligna), Monterey Cypress (Cupressus macrocarpa), Mexican Cypress (Cypress lusitancica), River Sheoak (Casuarina cunninghamiana) and Black Wattle (Acacia mearnsii). DSE and local agroforestry networks are encouraging the planting of such species in small woodlots and shelterbelts in ways that integrate them into commercial farming systems.

As an adjunct to DSEs interest in specialty timbers, Central Victorian Farm Plantations (CVFP) (external link) are conducting a study to investigate the feasibility of growing, processing and marketing a wide range of products from black wattle.

Plantation options: scale and purpose



For plantation expansion to occur in the region, a number of elements need to be brought together. These include land, capital, expertise and markets for plantation products. Plantations are, and will be, grown by a range of entities for a variety of purposes. The table below provides a general summary of the characteristics and needs of existing and future participants in the plantation industry (GFP, 1997). This is relevant to all regions of Victoria, including Glenelg-Hopkins.

Plantation grower characteristics and needs

Increasing scale ->
Grower Type	Farmer		Investor		Industrial/Corporate
Objectives	Income diversity Farm value Farm productivity		Dollar return Income diversity Tax offsets		If Grower only: Dollar return If Vertically Integrated Processor: Resource security Price control
Characteristic	Own land		Own capital		Own capital
Variations	Own capital	Other’s capital	Own land	Other’s land	Own land	Other’s land
Needs		Joint Venture agreement		Joint Venture agreement		Joint Venture agreement
	Establishment & silvicultural advice; Markets		Establishment & silvicultural advice; Markets		Markets, if not vertically integrated; Resource supplementation

Source: GFP (1997)

Minor Forest Produce
Due to the close proximity and size of the potential markets for minor forest produce in the Glenelg-Hopkins Catchment Management Region, the demand for produce could increase in the future. However, supply of some products, such as specialty timbers and seed, depends on their availability. The demand for other products is affected by competing products, eg. hardwood posts and poles compete with treated pine and steel products for market share. The product with the most potential for increased production in this region is firewood.

Firewood
Steady growth in demand is expected with the increasing number of domestic wood burning stoves and heaters being installed in homes. While the long-term demand for fuel wood is linked with the price and availability of major energy sources such as natural gas, the demand for firewood is expected to continue to increase in line with population growth.

Residual timber remaining after timber harvesting operations is currently underutilised and opportunities exist for commercial operators to harvest firewood from State Forests for sale in local, Melbourne and interstate markets. Firewood collection operations may also benefit silvicultural operations through reducing harvesting residue or by using products from thinning operations. However, demand for Red Gum and other durable species is expected to remain high, as a strong preference for these timbers exists in larger markets such as Melbourne, Adelaide and regional markets.

Future reduction in the availability of durable species from private property, due to native vegetation retention controls, has the potential to increase the demand for firewood from public land.

Specialty Timbers and Craftwood
At present, only small amounts of specialty timber species, other than Blackwood, become available through normal forest operations in the Glenelg-Hopkins Catchment Management Region. Across much of the region, supply of these species is generally linked to the extent of sawlog harvesting operations; therefore, a significant increase in availability is not possible.

Demand is, however, developing for River Red Gum (Eucalyptus camaldulensis) craftwood in the Horsham area, for specialty furniture timbers. Specialty timbers from this species are a product of sawlog operations and single tree selection. Strong demand for Blackwood is also expected to continue.

Apiculture
Roads developed for timber production and other purposes potentially increase access to areas of State Forest for beekeeping. However, due to the preference for particular forest tree species and access to suitable apiary locations, it is expected that current levels of demand for access to public land are likely to continue.

Source: C of A and VicRFASC (1999)

Other relevant information on the private and plantation forestry industry in the Glenelg-Hopkins Catchment Management Region is also available from the West Victoria: Comprehensive Regional Assessment in the West Regional Forest Agreement as well as at the Victorian Resources Online Private Forestry pages for the Greater Green Triangle Region.

For more information regarding investing in the farm/plantation forestry industry in the Glenelg-Hopkins Catchment Management Region contact:

Trish Kevin
Department of Natural Resources and Environment
Creswick Land Care Centre
Daylesford Rd
Creswick
Victoria
3363

Phone: (03) 5345-2200
Fax: (03) 5345-2795
Email: trish.kevin@nre.vic.gov.au

Related Links

The DPI website has a number of Farm Forestry Information Notes (that cover General Farm Forestry, Pests and Disease, Planning and Establishment, Species and Stand Management).

References:

ABARE (1999). Australian Forest Products Statistics, December quarter 1998, Canberra.

Commonwealth of Australia (C of A) and Victorian RFA Steering Committee (1999). West Victoria: Comprehensive Regional Assessment. Commonwealth of Australia, Canberra.

GFP (1997). Business Plan 1997 - 2000. Gippsland Farm Plantations Inc., Victoria.

NRE (1997). Management prescriptions for the control of timber harvesting, roading and regeneration in native forests. Midlands Forest Management Area. Department of Natural Resources and Environment, Victoria.

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