Some observations on the economics of commercial forestry in New Zealand

Authors: David Evison
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2013, Issue N.Z.J.For. 58(3) 2013, pp 3-13, Nov 2013
Publisher: New Zealand Institute of Forestry

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Abstract: Introduction The 1913 Royal Commission on Forestry recommended the development of the planted forestry sector in New Zealand. The Commission clearly saw forestry as an investment activity which should be evaluated on commercial terms when it recommended the use of discounted cash flow analysis and the inclusion of land costs and management costs in the calculation of net present value in evaluating forestry investments. Economics is also a key tool for analysing forestry markets and processing options, as well as export competitiveness and land use change to and from forestry. These topics, and a discussion of the development and implementation of forestry sector strategies, are the subject of this paper. The New Zealand forestry sector is currently examining processing options. The Wood Council of New Zealand is leading the process, and has provided a scenario of the ‘size of the prize’ in terms of increase in export revenue (Wood Council of NZ, 2012). Analysis by Scion with the help of FP Innovations of Canada, to estimate the profitability of different processing options has been completed - the ‘Woodscape’ project. Along with that work we need strategic thinking, market analysis, government and policy support, and the involvement of the existing major players in the sector. If we choose to process a larger volume of harvest, we will need investors. If significant new investment results, there will be a major expansion in the sector in the next 10 years.

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