Log prices, ETS bode well for forestry

Log prices hit an 18-month high in March. Photo / APN

It's a good time to consider planting trees, says incoming New Zealand Farm Forestry Association president John Dermer.

"A 20 per cent plus lift in log prices over the last year, with the prospect of more to come, the ability to sell carbon [emission trading units] and Government support for new planting add up to an exciting future," Dermer said.

The rise in prices was mainly because of demand in China, which had run into difficulty getting timber from Russia after it applied a levy, Dermer said.

"I think these [prices] could well be with us for a while," he said.

"The USA hasn't really got back into re-building mode after the recession but when they kick in that's going to be pretty interesting for anyone with a few trees to harvest, I think."

The ANZ Commodity Price Index for March recorded a 9.2 per cent rise log prices - sending it to an 18-month high and a 50 per cent increase on a low in mid-2009.

The Government's Emissions Trading Scheme will apply a price to greenhouse gas emissions to provide an incentive to reduce emissions and plant forests to absorb carbon dioxide.

The transport, energy and industrial sectors will join the scheme on July 1 and agriculture on January 1, 2015.

Carbon trading could give foresters a yearly income from their trees, which as they grow would retain carbon from the atmosphere and earn emission units.

"You're taking exchange rate risks, you're taking political risks but if you want to have a go and be cautious ... there is that opportunity," he said.

Dermer, 65, said the Government's Afforestation Grants Scheme was worth investigating.

The grower receives an up-front payment of around $2000 a hectare in exchange for the first 10 years' carbon units, he said. "This has to be one of the best incentives the Government has ever come up with," he said.

The association would lobby for more funds to be put into the scheme.

"There is plenty of eroding hill country which desperately needs tree cover so a good, hard look at this scheme is a must for any farmer with serious erosion problems."

Additional prospects for wood included biofuel, he said.

"You could summarise the case by saying that in a world of rising energy costs and pressure to constrain carbon emissions, low energy, carbon sequestering wood has to be a winner."