SALES STRATEGIES AND LOG MARKETING - Professional Harvesting Solutions

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.

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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.

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:

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.
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.
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.

Get in touch to discuss which option is best for your business

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.

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}