Private forestry potential

“A good productive forest can return the same dollars as grazing.”

That’s according to advocate Sean Ryan from Private Forestry Southern Queensland, who says while it’s a long term investment, adoption of good management of private forestry, can drought proof property, increase cash flow and improve green credentials.

This audio link  is a 15   minute  discussion with various interviewees; Sean’s discussion is approximately 5 minutes.

Direct Value Adding by Appropriate Product Classification

by Ken Matthews Private Forestry Southern Queensland 2007.

The ‘A’ grade sawlog is the backbone of the sawmilling industry and the sawlog has been and will continue to be a major resource need of this industry. In exploring comparative stumpage values the intention is not to diminish the important role of sawlog volume production, in fact, sawlogs play an essential role in supporting the demand of all other solid timber products, apart from fencing and to a lesser degree poles and girders.
The following Poster was shown at the Australian and New Zealand Institute of Foresters Conference held this year in Coffs Harbour
This gives a good overview of the “Value Hierarchy” involved in stumpage values.
Click here to see a full size pdf version of Ken’s Poster.

Value Adding by Product Classification
(requires acrobat reader or similar)

Executive Summary

Traditionally viewed as an impediment to agricultural development, western Queensland hardwoods have recently found application in high-value, niche markets, including musical instrument manufacture.

Many primary producers in the South West Strategy and Desert Upland regions of Queensland are seeking to diversify their grazing businesses with alternative or supplementary income streams and are keen to investigate opportunities to manage their remnant woodlands for timber production. However, there is a dearth of information about the timber resource, appropriate processing techniques, costs, markets and likely returns, which is stifling investment in this emerging rural industry.  

This research has aimed to remove much of the uncertainty surrounding opportunities for small-scale processing of western Queensland hardwoods. In particular, this investigation has focussed on:

• the timber resource, including its spatial distribution, estimates of merchantable wood volume and quantification of the wood properties of selected species;
• costs and recoveries of harvesting and portable sawmilling operations;
• appropriate seasoning methods and likely drying times;
• graded (saleable) product recoveries;
• potential markets for western Queensland hardwoods, including appropriate product types, quantities demanded and prices; and
• the commercial viability of western Queensland hardwood production, including a comparison with grazing.

Dozens of western Queensland hardwood species are potentially suitable for processing into products for niche markets; however, the wood property analyses and market research presented in this report has focussed on the following eleven: Acacia aneura (mulga); A. cambagei (gidgee); A. coriacea (desert oak); A. excelsa (ironwood); A. nilotica (prickly acacia); A. shirleyi (lancewood); Archidendropsis basaltica (red lancewood); Corymbia similis (Queensland yellowjacket); Eremophila mitchellii (sandalbox); Eucalyptus populnea (bimble box); and Grevillea striata (beefwood).

Budget constraints necessitated the limitation of research into standing merchantable volumes, timber processing and commercial viability to two species only. mulga and gidgee were selected because of their wide distribution, potentially large sustainably harvestable volumes and promising timber properties.  

Gidgee Acacia cambagei, a promising western Queensland hardwood                   

Undertaking preliminary timber inventories and employing the most comprehensive vegetation maps available, estimates of standing timber volumes have been made for western Queensland mulga and gidgee woodlands. The estimates indicate that total merchantable (sawlog, roundwood and craftwood) volumes are low (5 m3/ha to 15 m3/ha), which reflects the poor stem form of these species and past land management practices. Wood property research confirmed that, compared with other Australian and overseas timbers, western Queensland hardwoods are unique, particularly with regard to their high air-dry densities (1,000 kg/m3 to 1,300 kg/m3) and hardnesses (14 kN to 18 kN). Many of these species are deemed legally susceptible to the lyctid borer (Lyctus brunneus); however, this research has indicated that, with future studies, some species could be reclassified as non-susceptible. The gluing properties of all but three species were found to be satisfactory.

Portable sawmilling studies undertaken with mulga and gidgee suggested that standing sawlog volumes (minimum small end diameter under bark of 125 mm and 1.2 m in length) are in the vicinity of 1 m3/ha in western Queensland woodlands. In this study, harvested sawlogs were generally about 2 m in length with centre diameters over bark of 20 cm. Defects, for example, caused by insect and fungal damage, were found to be common in the logs. Nevertheless, green-off-saw (GOS) recoveries of 34.6% and 27.6% were achieved from mulga and gidgee sawlogs respectively. Total variable cost of harvesting and portable milling mulga and gidgee in western Queensland is estimated to be between $730/m3 GOS and $980/m3 GOS, and shown to be highly sensitive to imputed labour cost and GOS recovery. The land tenure from which logs are harvested is also demonstrated to have a large impact on total variable cost. Processing costs for mulga and gidgee were found to greatly exceed typical costs of sawing east-coast Queensland hardwoods.  

Mulga at Yankalilla Station 

The suitability of unprotected air-drying, protected air-drying, solar kiln, dehumidifier kiln and conventional kiln drying was assessed for mulga and gidgee. Solar and dehumidifier kilns seasoned 25 mm boards to 12% moisture content within four to eight weeks, while air-drying required between nine and 27 weeks. The conventional kiln generally seasoned 25 mm boards within one to two weeks. Seasoned mulga and gidgee boards were appearance graded in accordance with AS2796 – 1999 – Timber – Hardwood – Sawn and Milled Products, which indicated high feature grade recovery in the order of 10% of log volume. Wane, insect damage and decay were found to be primarily responsible for this low appearance grade recovery.

*Seasoning grading1* indicated that unprotected air-drying resulted in higher levels of drying degrade in boards than protected air-drying, solar and dehumidifier kiln-drying. There was no appreciable difference in seasoned board quality between the latter three seasoning methods. Appearance grading of conventional kiln-dried material indicated that the drying schedules adopted could produce boards of sound appearance quality, when the thickness of those boards was not greater than 25 mm. However, high levels of drying degrade were common in boards exceeding 25 mm in thickness, indicating a need for new conventional kiln schedules to be developed for western Queensland hardwoods. A financial analysis incorporating the opportunity costs of air-drying, found air-drying to be the most economically efficient seasoning technique for mulga and gidgee in western Queensland. Where a kiln is required, for example, because product specifications require it, this study highlighted that a solar kiln is likely to be the best investment option for a landholder.

Veneer production has the potential benefit of maximising the value of a timber resource through higher appearance recovery than is possible with solid wood products. Commercial veneer manufacturers have stringent billet quality specifications and preliminary investigations have indicated that supplying western Queensland hardwood billets of such quality would be extremely difficult. A small-scale veneering trial was conducted with mulga, which resulted in the majority of veneer leaves containing unacceptable levels of defects (e.g. splits, grain tear, knots and decay) for standard veneer manufacture. Nevertheless, sections within the veneer leaves may be appropriate for special applications where small pieces of veneer can be utilised.

In an effort to ascertain likely markets for western Queensland hardwoods, a postal survey was sent to 225 Australian and international wood product manufacturers, and discussions were held with several current and potential consumers of western Queensland hardwoods. Currently traded volumes of sawn western Queensland hardwoods were found to be small and unlikely to be more than about 200 m3 per annum. Several reasons for the lack of uptake of these species were provided, including ignorance about the resource, the scarcity of information about their timber properties and a poor supply chain. Nevertheless, the majority of respondents expressed great interest in stocking or experimenting with western Queensland hardwoods. Parquetry flooring manufacturers, small-scale furniture manufacturers, musical instrument manufacturers and timber merchants were found to be the most likely purchasers of western Queensland hardwoods in the future.

It was asserted by respondents and interviewees that dried, rough-sawn western Queensland timber prices would initially be in the vicinity of $1,500/m3 to $3,000/m3. However, a potential opportunity for small volumes (perhaps only tens of cubic metres per annum) of the highest quality boards to be sold to domestic and international musical instrument and knife handle manufacturers at prices equivalent to between $20,000/m3 to $30,000/m3, was also frequently highlighted.

 Sandlewood in Mulga stand at Yankalilla

Feedback from domestic and international respondents to the postal survey highlighted opportunities for exporting western Queensland hardwoods, especially to North America and Europe. It was asserted that, with a well-funded, well-directed marketing campaign, the international demand for high-quality western Queensland hardwood boards could greatly exceed the Australian market.

Ringed gidgee, in particular, was believed to have high export potential. It was highlighted that eco-labelling of western Queensland hardwoods would be beneficial for marketing overseas.

Employing the portable sawmilling, seasoning, grading and market information generated by this research as base case values, financial analyses of eight small-scale western Queensland hardwood production scenarios were performed and returns compared with grazing. The net present value of clearing remnant woodland for grazing cattle in the South West Strategy and Desert Upland regions of Queensland was estimated to be in the vicinity of $20/ha to $40/ha.

Specific scenarios that have been modelled include selling green roughsawn timber, a landholder co-operative manufacturing parquetry flooring, and a scenario producing dried and dressed boards for high-value markets, including for knife handle and musical instrument manufacturers. Under base case assumptions, only the latter scenario generated returns competitive with grazing, with the net present value of managed remnant woodland estimated at between $60/ha and $80/ha. When small improvements in western Queensland hardwood processing efficiency over the base case are assumed, then the landholder cooperative parquetry flooring scenario becomes competitive with grazing. If it is assumed that, in addition to improvement in processing efficiency, western Queensland hardwoods can be sold at a 20% price premium over the base case market price, then green roughsawn timber production was found to be competitive with grazing.

Portable sawmills have been identified as an effective method for graziers or others with limited timber industry experience, to value-add western Queensland timbers with minimal financial risk. Knowledge and experience gained throughout the project has indicated that, from the range of portable chainsaw mills, bandsaw mills and circular mills, the latter type are likely to be the most appropriate for small-scale production of western Queensland hardwoods.

It has been concluded that management of remnant western Queensland woodlands for hardwood production could potentially create a new rural industry generating substantial financial and environmental benefits. There was found to be considerable scope for future investigations into the western Queensland hardwood industry to maximise the benefits from sunk research expenditure, including a resource assessment incorporating studies on woodland regeneration and the potential for sustainable management, opportunities for agroforestry, appropriate processing techniques, markets and marketing, and a total economic valuation of the western Queensland hardwood industry.

*Seasoning grading1* A grading technique developed by QFRI to assess drying degrade, which facilitates assessment of the suitability of different drying techniques for particular timbers.

This article was printed in the Southern Queensland Forestry News magazine in Autumn 2005

Report by Ken Matthews E.O. PFSQ

The purpose of this article is to provide a better understanding of how native forest sawlog stumpage/royalty value is calculated. Additional information is then provided to assist in the interpretation of stumpage/royalty to achieve the best result for your situation.
 

Often a landholder is approached by one miller; they are given a price for their timber per cubic metre and then simply accept that price in the belief that is all they can achieve. In many cases this may be correct simply due to the lack of options available when marketing and selling their resource.

 Compulsory Grade Sawlog

Over the last 5 years especially, the timber industry has found it increasingly difficult to find reliable resource supplies. As a consequence the average stumpage rate and haulage distance of native sawlog has risen. Many landholders have more market options in the veneer, pole, and compulsory and salvage grades than before simply due to the fact mills are prepared to haul longer distances.
 Sawn/graded timber has a market value that is determined by resource costs, processing costs, marketing and delivery costs and profit margin. The market price for sawn timber is influenced by competition, demand and trends. In other words, it is extremely difficult for timber wholesalers to raise the sale price, so in order to achieve a higher profit margin; sawmiller’s seek to find efficiencies and savings.
 The basics of stumpage/royalty (The two terms have become synonymous in the private sector) is that a standing tree has a value determined by a number of factors such as species, wood quality, dimensions, distance to sawmill, quantity of resource in comparison to the scale of the property, property access and terrain i.e. rocky, steepness that impact upon cut and snig costs.
 Once theses factors have been taken into account and cost of extraction calculated, the mill offers a price.
So the basic formula for stumpage is (Mill gate price i.e. what the mill can afford to pay for log delivered to the mill yard – extraction costs = stumpage). In other words, to a certain degree the stumpage/royalty applicable to a resource is “site specific”. It is not advisable to hear of a stumpage price achieved by one landholder and automatically assume that the same price will be applicable to your timber. The variables/constraints applicable to your property may result in either a higher price or lower price per cubic metre.   

Termite-protected ‘blue’ pine framing is proving a hit with builders in Australia, with growth in blue pine framing increasing to more than 20 per cent of pine framing production in less than three years. This latest innovation from the timber industry is featured in the KingGee “Jack Of All Trades” (JOT) TV series, currently being broadcast on Channel 9.  A3P chief executive officer Neil Fisher, said “blue pine framing was the obvious choice for the JOT promotion, because it offers homeowners peace of mind from termite attack and the natural advantages of plantation pine framing – light weight, economy and environmental sustainability. Source: A3P statement

Apart from our workshops our staff can offer professional assistance on a fee for service basis. If you need a forest managament plan developed, a harvest managed, or professional advice the PFSQ team can assist. If you would like to take advantage of our consultancy services you can contact us during business hours or send us an email and we will be happy to assist.

Sam Slack lives on a family farm near Gayndah in Central Quuensland, he wanted a sawmill from an early age. He attended field days and farm management courses from when he was eleven and formed his philosophy on timber production from a broad field of information. As his property had large areas of standing timber, value adding that resource and broadening the enterprise base of the family business was a logical progression. Sam quickly realised the importance of good forest management in maintaining productivity to ensure their future resource and has incorporated this philosophy into a business the whole family is involved in.

To read Sam’s Story visit our Market page and download the case study.

So you’re getting down to planning you harvest. You have assessned the stand and now you need to find and contract and harvest contractor and buyer. How will you manage the agreements between yourself and the other parties? PFSQ Model contract s provide a guide for how parties involved in a native forst operation might draw up an agreeement.

PFSQ Model contract 3 provides for the situation where a landowner or independent third party sells standing timber to a purchaser on a royalty/stumpage basis and the purchaser also harvests the native forest.
To downland a Microsoft Word document that can be used as a template for developing your own agreement Click here