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UFG (United Forestry Group) has the financial strength to buy your forest before maturity and manage it through to harvest.

UFG | News and Market Analysis

United Forestry Group aims to fight 'wall of wood' - Business - 3 News

A newly-launched forestry company is aiming to help New Zealand investors in around 14,000 small forest against the looming "wall of wood".

The wall of wood refers to the large amount of trees that are due to reach maturity over the next five to 1 years.

United Forestry Group (UFG) was launched in Wellington today, and is concerned the increased volume of trees will drive down harvested timber prices.

UFG director Malcolm McComb says the company's approach is to consolidate the output of several fores in an area to effectively create one large forest to keep costs down and profits up, and to compete with larger forests.

"Unless there is a co-operative approach to consolidating the output from as many of our 14,000 small forests as possible, controlling costs and achieving a stronger position in the market place, there is a real risk that export earnings from forestry and the return to investors will be very disappointing," he says.

Forestry is New Zealand's third largest export earner after dairy and meat. Last year's total forestry export were worth $4.272 billion.

It is believed production from New Zealand's small forests over the next 20 years could be worth $30B. He says consolidating the forests will also add sustainability to the industry.
"This approach will help create confidence for investment in domestic processing as well as reducing risk, creating better marketing opportunities, encouraging investment in more productive and safer machinery and resulting in less congested transport corridors in any particular year ."

Mr McComb says those in the dairy, beef and sheep industries generally don't export individually because "they know union is strength".

The current set up of the forestry industry means a weak negotiating position on the international market, says.

Australian, Chinese-backed company targets small NZ forest owners - The National Business Review

United Forestry Group, backed by Australian timber marketer Pentarch and China's Xiangyu Group, is targeting small forest owners in New Zealand in a bid to cash in on a looming 'wall of wood' it estimates will generate $30 billion over the next two decades.

The Wellington­based company wants to consolidate the country's 14,000 small forests, which account for just over a third of New Zealand's plantations, and use its forestry management skills and supply chain to achieve a more efficient network and boost returns for the owners, it said in a statement. Acting managing director Malcolm McComb told a briefing in Wellington the company aims to build a 30,000 hectare plantation, and is initially eyeing trees ready for harvest in the next 10 years.

United Forestry, which counts Pentarch and Xiangyu joint venture Superpen as a cornerstone investor with 60 percent, is offering to buy small forests outright, or buy a combination of land and trees. It will also offer advice on harvesting and marketing mature forests.

Forest owners will also have the ability to take cash and shares in the company, and McComb said the company hopes to grow the number of New Zealand investors by doing so.

"We are taking a whole new approach to this emerging problem, and are committing major resources to be in a position to buy forests outright, control shipping services and consolidate forest output through the country to give the participating small forest owners a strong hand to play with," he said. "We will have the financial strength, expertise and presence in the local and Asia markets to offer them a much more comprehensive range of options."

New Zealand sold $4.04 billion of logs, wood and wood articles to overseas markets in the year ended July 31, up 20 percent from a year earlier, making it the country's third­biggest export commodity. Global log prices have come off the boil in recent months after surging through 2013 on strong demand from China.

United Forestry's move comes as a spike in plantation activity between 1992 and 1998 nears maturity, which will ramp up supply in a bid to meet demand coming from increasingly wealthy Asian nations.

Kiwi forestry company eyes up small forest owners - One News - TVNZ

A new forestry company is targeting owners of small forests in a bid to boost returns on what it describes as a looming “wall of wood”. United Forestry Group, backed by Australian timber marketer Pentarch and Chinese conglomerate Xiangyu Group, says the production could be worth $30 billion dollars over the next two decades.

UFG wants to consolidate the country’s 14,000 forests under 1000 hectares to create one large, competitive forest which can be harvested sustainably over time.

“The high harvesting and transport costs faced by the owners of single small forests, and their weak negotiating position with buyers, means the potential value of these forests may not be achieved and the final return to their owners … may be disappointing”, says UFG’s acting managing director Malcolm McComb. Mr McComb says UFG brings major resources, logistics expertise and international business connections.

The Wellington­based company will offer owners of small forests a range of sale options including: buying the forest, with the owner keeping the land for future use; buying the timber and land; or a deal that includes cash and shares in UFG. UFG is already operating in the lower North Island and upper South Island. Some of the production would be exported as logs to meet growing construction demand in China.

Assisting proprietors who own less than 50 hectares

1. Export log prices fluctuate, as depicted in graph 1, and they can do nothing about it.

Gross income for average log price

2. Even if a small-scale forest owner is harvest-ready (this taking a year or two) when he/she decides that log prices are good enough to begin cutting, he/she can’t expect to have a gang in place for several months because it will take that long to get to the front of the queue, and by then prices may well have moved down. If logging is underway and price drops to an unacceptable level, stopping the operation will also cost money, and the cycle of uncertainty and delay begins again.

3. Typically, harvesting machinery carries considerable interest and depreciation costs. Consequently logging gangs will agree to charge less per m3 to harvest a forest if they can be sure of continuity of work. This, together with set-up costs, is a significant component of scale economies in forestry. As a rough rule of thumb a logging gang needs 100 ha of forest to keep it busy for a year. Scale economies apply to transport, management and other costs of getting the wood to market also.

The United Forestry Group (UFG) has been set up to address these very issues. UFG aims to unify timber resources to generate a sustainable cut, capture scale economies and reduce risk. Small-scale owners will be able to exchange their forests for cash or UFG shares, or a mixture of cash and UFG shares. By obtaining shares owners will be able to participate in the increased efficiencies of UFG’s scale and streamlined wood supply chain from stump to market.

However, initially UFG will be focusing on the purchase of cutting rights to ‘larger’ forests, i.e. those that are more than 50 ha in size. This strategy is likely to change once UFG gets going, but meanwhile UFG is willing to assist proprietors, who own forests less that 50 ha in size, to aggregate their forests into a harvesting and marketing cooperative. Here is a simplified version of what might be achieved. Assume that there are four owners, [A, B, C, & D], each of which is the proprietor of 25 ha of forest yielding 500 m3/ha. Their forests have different topography and soils, hence they have different harvest and extraction costs. Scenario 1 tabulates their likely total stumpages if they harvest their forests sequentially, but independently, during 2015 under certain assumed quarterly log prices.

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