Farm forestry market report
Wednesday 11 Sep 2019
August 2019: Log Export Prices Under Downward Pressure - For those forest owners actively harvesting, the news out of the export segment will not be what they wanted to hear. In less than a month we have seen wharf gate prices fall $32 a cubic metre across the structural grades and $40 a cubic metre for pruned logs.
We have seen this sort of drop and rise in the past but never in the space of three weeks. Indeed, while some commentators have suggested there have been similar movements in the past, my records show June and July 2019 to be the most rapid.
A Very Elastic Band - In this report I cover off on some of the key factors which have us all reeling under the strain of being on the end of a very elastic band, for some of us quite a large one, while going round and round in circles. Some might even be hoping the elastic breaks and it would all stop, albeit in a rather dishevelled and broken heap.
I said in my last report that a correction was not unexpected. If I reflect back, the warning signs have been there since the last quarter of 2018. New Zealand suppliers to the China eastern seaboard seemed to want to continue to push prices up when domestic sale timber prices in China were falling while Uruguay, Europe and Russia were ramping up supply. And good old New Zealand just kept increasing production with a staggering 70 to 80 vessels a month, New Zealand ports flooded with logs, vessels stacked up and not a care in the world. Frankly we can scour the world to look for some people to string up over what has now happened but I would suggest start looking first in New Zealand.
Just to silence those who will continue to espouse the wall of wood and never sell it ? all falsehoods, there is no wall of wood. If we started harvesting forests when they are supposed to be harvested, rates of harvesting would drop 20 to 30 per cent overnight and there would be no over- supply at all. Gisborne port is a classic example of out of control supply. For some time now vessels have been stacking up, and at the beginning of July no less than seven were waiting to come in to load. Meanwhile wood is arriving daily at the port well in excess of the daily load rate. You would have thought someone should have put the big white gloved hand up long before now.
Some have defended the position saying a there was large number of days this year when the pacific swell has been preventing loading. But this has not been a last minute problem.
Source: New Zealand Farm Forestry Association website
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