Making Woodlands Pay Economic Resilience & Market Trends 2015

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Georgia Holland
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1 Making Woodlands Pay Economic Resilience & Market Trends 2015 Graham Taylor MICFor Pryor and Rickett Silviculture

3 Economic Resilience A Definition for a Woodland A woodland property which has the ability to withstand multiple foreseen and unforeseen timber market and other external shocks that directly affect timber income and woodland expenditure whilst maintaining capital values and provide healthy overall returns to the woodland owner.

5 Economically Non Resilient (Weak ) Woodlands - Loss making - Stagnating growing stock - Increasing overhead costs or low productivity ratios - Declining woodland infrastructure - Resource under-utilization

6 Economically Non Resilient Woodlands Impacts & Consequences - Loss of confidence / interest by owner - Neglect / shut the gate - Increase in shade - Decrease in biodiversity - Reduced sporting opportunities and increased pheasant ill health - Declining woodland infrastructure - Reduction in capital value - Increase in deer numbers / browse line - Grey Squirrels abound - Inheritance tax relief under threat

7 Economic Resilience in Forestry Lesson 1 Grow the Right species and understand their silvicultural nature and their timber market characteristics

8 Trustees for the Beneficiaries of RS Tufty Woodlands 2014/15 Budget Income Timber Sales Cpt 9 Felling of Poplar 400 t 35 /t = 14, t 56 /t = 5,600 Grants WRG Cpt ha 1,430 WPG Management Plan 1,000 Expenditure 22,030 Cpt 9 Harvesting 500 t mixed 22 /t = 11,000 Machine haulage 280 Timber haulage 500 t mixed 10 /t = 5,000 Cpt 9 Ground preparation 800 Restocking 4,405 Long Wood Spot spraying & Beat up 500 Gap up Christmas trees 150 Tree Safety works Category 1 1,135 Crown reduction of OK by house Category 2 do in 15/16 Professional fees Organisation, supervision and timber marketing 3,150 Production of management plan 1,000 27,420 Net Income -5,390

9 Income Timber Sales Trustees for the Beneficiaries of RS Tufty - Woodlands 2014/15 Budget Cpt 9 Felling of Oak 350 t 130 /t = 45, t 45 /t = 6,750 Grants WRG Cpt ha 1,430 WPG Management Plan 1,000 Expenditure 54,680 Cpt 9 Harvesting 500 t mixed 26 /t = 13,000 Machine haulage 280 Timber haulage 500 t mixed 10 /t = 5,000 Cpt 9 Ground preparation 800 Restocking 4,405 Long Wood Spot spraying & Beat up 500 Gap up Christmas trees 150 Tree Safety works Category 1 1,135 Crown reduction of OK by house Category 2 do in 15/16 Professional fees Organisation, supervision and timber marketing 3,150 Production of management plan 1,000 29,420 Net Income 25,260

10 Income Timber Sales Trustees for the Beneficiaries of RS Tufty - Woodlands 2014/15 Budget Cpt 9 Felling of Spruce 400 t sawlog / 60 /t = 24, t 56 /t = 5,600 Grants WRG WPG Management Plan 1,000 Expenditure 30,600 Cpt 9 Harvesting 500 t mixed 16 /t = 8,000 Machine haulage 280 Timber haulage 500 t mixed 10 /t = 5,000 Cpt 9 Ground preparation 800 Restocking 1,400 Long Wood Spot spraying & Beat up 500 Gap up Christmas trees 150 Tree Safety works Category 1 1,135 Crown reduction of OK by house Category 2 do in 15/16 Professional fees Organisation, supervision and timber marketing 3,150 Production of management plan 1,000 21,415 Net Income 9,185

11 Economic Resilience in Forestry Lesson 2 Understand those external factors influencing the resilience of different timber stand types and then act accordingly

12 Forestry Timber Income Resilience Timber Value Income Significance Significant External Risk Priority Forest Management Response High Quality Hardwood 40k/ha + High Grey Squirrel V High Absolute control Market Failure V High Continue to supply Disease (AOD, Chalara) Quite High Environmental restrictions High Biosecurity Lobby and adjust to regulations Low Quality Hardwood 5-15k / ha Medium Grey Squirrel High Absolute Control Disease High Biosecurity Contractor resource V High Invest & support skills High Quality Conifer 25k /ha High Market Failure High Continue to supply Disease Quite High Biosecurity Windblow Quite High Careful Forest Design Medium Quality Conifer 10-20k/ha Medium Exchange rates High Market responsive felling Disease risk High Biosecurity Market shortages High Grow species in demand Low Quality Conifer 3-7k/ha Low Changes to RHI Low Improve growing stock Market failure Medium Improve growing stock

13 Sporting Deer Pheasants Other Events Non Timber Income Resilience Value -10 to + 20/ha 1-100/ha / annum -5k to 20k / annum Income Significance Low Low- High Low Significant External Risk Priority Forest Management Response Poor neighbour control High Landscape scale planning Poaching Medium Increase control to reduce 'market' New Species Medium Target control Conflicting activity windows High Close liaison & willingness to adjust Disease High Create conducive habitat Enhanced GS Populations High Increase control of GS Adverse PR & disruption Quite High Manage PR Conflicting activity windows High Understand impacts on other income streams CS Grants Restocking 0/ha Very Low None None Management 100/ha Low Strings attached Medium ( 20/ha?) Live with the consequence of your actions Do Cost Benefit analysis Consider Impact on SFP Intermittent Medium Contextualise the support

15 Economic Resilience in Forestry Lesson 3 Understand Simple Property & Asset Economic appraisal

16 Lowland Woodland Owner 260ha (20 Yr) 5 Year Net Profit Exc Sport Income Woodland Asset Value (million) 189k 28k 83k 66k 366k Actual Tax free Total Return IRR (5yr Period) Comparative Taxed equivalent Value / Share shares

17 Public Forest Estate FE England (10 Yr) 3 Year Net Profit (million) Forest Estate (Land & Timber) Asset Value (million) Total Return IRR (1 or 3 yr Period) (-39.5) (-119.3) (-61.4) (-46.3) (-266.5) UK Tax Payers (million) Value / Share Net additional investment / tax payer/ annum

18 Economic Resilience in Forestry Lesson 4 Address Ongoing Liabilities & Invest for performance

21 Woodland Liabilities Grey Squirrels Deer Diseased stands Poorly performing stands Unthinned stands Unsafe / dangerous trees & road edges Poor roading / fencing infrastructure Uncontrolled public access

22 Economic Resilience in Forestry Lesson 5 Get some professional advice

23 Features of Economically Resilient Woodlands Diverse age class structure ( ideally close to Normal ) Species diverse eg 5-30 species in lowlands depending upon scale, 3-7 in the uplands Some but not all CCF Market orientated management i.e. fell trees at market maturity, when markets are strong. Flexible / open regarding other non timber income activities Invest in standing crops and woodland infrastructure when necessary Owner / manager understands the Silviculture of each species and manages them accordingly Protects against mammal / pest damage & view Deer as a liability and not an asset Attempts zero tolerance with Grey Squirrels Utilises grant support appropriately but ignore fashions / current vogue Works with and supplies niche high value markets Responds to external economic pressures in a timely way

24 Part 2 - Timber Market Trends

25 UK Homegrown Hardwood Sawlog / Pulpwood Consumption Sector Trends Hardwood Sawlog (1000 M3) Pulp/ Fire wood (1000 M3) Hardwood Only Sawmills Dual Hard / Softwood mills

26 Factors / Causes for Decline in Hardwood Sawmilling Loss of market ( mining / furniture industries) Reduced upstream innovation Cost of reinvestment / H&S Uncompetitive / Cheap imports Inefficient / unprofitable Lack of Business succession Loss of tax relief cross subsidy for estate sawmills Reducing supply from forest Unfavourable exchange rate Valuable urban development sites & allied property boom = LOSS OF CONFIDENCE

27 Impact of Decline on Woodland Owner Fewer buyers & impure market Reducing contract workforce Reduced investment in crops, infrastructure and people Downward pressure on margins throughout supply chain Increased outsourcing to specialist contractors and managers Decline in owner morale and interest = Loss of CONFIDENCE

28 Indirect impacts Abandonment - Many woodland owners shut the gate Increase in deer and squirrel populations Lack of management causing bio-diversity decline Ageing workforce The loss of motor manual resource Profile of industry in decline Alternative income sources sought sporting and other recreational income reinforcing mammal populations & biodiversity decline Grant justification altered towards biodiversity and social benefits Aesthetic value increases

29 UK Hardwood Prices - Trends Ave Butt Size Oak 100 hft Oak 50 hft Ash 60 hft Ash 30 hft Beech 80 hft Beech 40 hft NB / hft roadside prices

30 Increasing Barriers to Hardwood Activity Bureaucracy - WGS / EWGS process»asnw Guidelines»Habitats directive»water quality directive»waste directive»cross compliance»nesting birds/ protected spp»nimbies»ukwas / FSC Contractor availability / skill sets Timing / weather / shooting constaints Market Perceptions Aesthetic value / protectionism / nimbysism

31 UK Hardwood Production & Employment Hardwood Sawlog (1000 M3) Feller Year (FTE) Pulpwood / Firewood (1000 M3) Feller Year (FTE) Harvester 138 Chainsaw 19 Harvester 83 Chainsaw 18 Harvester 45 Chainsaw 24 Harvester 60 Chainsaw Total Feller (FTE)

33 UK Forestry - Production Trends Year Softwood Hardwood FC PS Total FC PS Total UK Forestry Production 1000m3

34 Softwood grower s margin Crop type yr SS/DF 30/t 13-15/t 25-30/t 30-45/t 30-42/t 30 yr mid-thin 10-15/t 0-5/t 10-14/t 22-30/t 18-26/t Ave Clearfell Value ( /ha) 8-10k 4-6k 8-12k 15-22k 12-20k Max Clearfell Value ( /ha)

36 Perspective on Markets Optimistic ( RHI & Timber) Look after current contractor / staff resource Invest in new staff / equipment and assist contractors & supply chain with continued wood supply Invest in your woodland infrastructure Plant productive spp for the future low carbon world Long term trends are positive Grow quality hardwood / maintain silvicultural standards Silvicultural thinning is not optional for most species Don t be grant led ( FE budget ) IHT relief is for commercially managed woodlands Control Grey Squirrels

37 UK Forestry Policy & Legislative Framework Two thirds a conifer rotation of broadleaved policy Current support mechanisms targetted towards an unsustainable future Ignores climate / carbon & timber requirement trends CAP blockage Significant Private investment available (billions) Reforestation projects involve multiple & costly levels of consultation with uninformed stakeholders

39 International Comparison Land Area Million ha Pop n Million Broadleaf Forest Area Million Ha Ratio Hardwood Sawlog Production Million m3 Ratio Hardwood Sawlog / Broadleaf ha M3 / annum Efficiency Ratio France Germany UK

Marches Woodland Enterprise Zone MWEZ & CONFOR

Marches Woodland Enterprise Zone MWEZ & CONFOR Graham Taylor MICFor Pryor and Rickett Silviculture MWEZ Why Support? EU / UK Forestry Support requires engagement Market led solutions to support