Sales Strategies & Log Marketing

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Log Marketing in New Zealand

Professional Harvesting Systems can manage sales and log marketing for NZ woodlot owners in a number of ways, depending on current market conditions and your cash flow requirements.

PHS works for you, the client, to get the best return that will suit your preferred strategy and risk profile. Our team has years of log marketing expertise, you can rely on us.

 

MANAGED SALE (MOST COMMON):

 

 log marketing in nz

  • This is where the owner appoints PHS to oversee all aspects of the project on behalf of the owner.
  • The owner will receive a written estimate from the management company detailing revenues and costs, as well as an estimate of the bottom line return to the owner.
  • The project is very transparent for the owner, with the owner receiving a detailed report of all revenues received and costs incurred from the project.
  • The owner pays the management company a fee will be outlined in the beginning and is typically on a $ per tonne figure, or a % of net revenue returned from the project.
  • Because it is an open book project, the owner takes on the market risk, and will make more money should the market rise during the operation but conversely may lose revenue should the market fall during harvest. However PHS will always advise of market changes and an option may be to stop the harvest and pick up again when the market does.
  • We like to use the managed sale approach mainly because we feel it returns the highest revenues to the forest owner, while allowing the owner to retain a hands-on approach to the operation on their property.

 

STUMPAGE SALE

 

The advantage of the stumpage sale to the forest owner is that they have the surety of knowing exactly the $ per tonne figure they are going to receive for every tonne of wood harvested from their forest. However stumpage buyers will discount their buy price to offset grade, volume and market risk, and thus returns can often be lower.

There are three subcategories to a stumpage sale:

  1. Graded (pay as cut) sale: This is where PHS pays a different price for each grade cut. The significant risk for you in this sale method is a potential lack of incentive to optimise the grade outturn.
  2. Composite (pay as cut): This is where PHS pays a composite price for all logs removed. While this produces an incentive to optimise grade outturn, it is likely to result in a price discount-to mitigate PHS’ risk that the grade mix is inferior to that assessed before harvesting.
  3. Lump sum sale: This is where PHS pays a lump sum for all logs before the start of harvest. PHS takes all the risk of grade mix and total recoverable volume, as well as market risk. This typically leads to a heavily discounted bid price to cover this risk.

The table sets out the various risks and returns lower from the various sales methods

SALES
METHOD
RISK TO
FOREST OWNER
CASH FLOW TO
FOREST OWNER
PROBABLE PRICE
DISCOUNT FOR RISK
Managed Graded Log Sale Moderate  Favourable Low
Graded Stumpage High  Favourable Moderate
Composite Stumpage Moderate Favourable High
Lump sum Stumpage Low Very  Favourable Very high



Once you have decided on the sales method that you prefer and the timing of your harvest agreed, then PHS will endeavour to optimise the stands’ return by:

  • Determining which log market is suitable at the time; domestic or export as the market prices change on a monthly basis.
  • Providing the logging crew with a priority ‘Cut Plan’ to meet the market’s demands.

 

Top tips that cost you nothing!

  1. Get your trees assessed as early as possible to get an indication of volume and infrastructure requirements
  2. Get on our newsletter market update list
  3. Phone for a chat, use us to keep yourself informed
  4. Ensure you become a priority client so we can ensure we have the crew capacity to harvest your stand when it suits you
  5. If you are looking to make changes to your land, subdividing or building - ask us for advice; our harvest plan and infrastructure planning has the potential to help you add value to your land or future project
  6. Ask lots of questions and ask for references
  1. Assessment

    Produces an estimate of your crop value based on market values and taking into account associated costs
  2. Harvest Plan

    A detailed harvest plan identifying road and skid placements
  3. Agreement

    Proposal signed and timing of operation scheduled
  4. Infrastructure

    Preparing your environment for the harvest project
  5. Tree Harvesting

    Logging crews & equipment move onsite to fall and process your trees according to the Harvest Plan
  6. Log Sales

    Negotiate the best price for your logs in the current market
  7. Land Rehabilitation

    The land rehabilition will be undertaken according to your preferences
  8. Project Completion

    Provide a detailed financial reconciliation and onsite review of harvesting operation to ensure expectations have been met