Keep your own watch – Forest Value Recovery for Forest Owners, Investors and Fund Managers
Forest Value Recovery includes the disciplines, decisions, tools and actions for maximising returns to the forest owner at harvest.
Estimates relating to NZ forest harvest show that 7-40% of potential forest value is lost during logging operations. At worst, this means negative margins – your logs are trucked away and you get a bill. At best you miss out on the cream of your forest investment.
If you educate yourself about forest value recovery, you will be in the optimal position to make best returns when you harvest. If you are logging and you are not doing this – What are you doing?
The Forest Value Recovery Paradox
Value recovery is a key to successful forest investment. Yet this discipline is seldom reflected in operations or company structures. Job titles refer to production, sales or operations, but rarely to value.
Investment in value recovery is often dismissed and this sends the costly signal that it is not a priority relative to production. Staff are led toward a production ethos, however destructive of value.
A root cause is probably that it is difficult to be precise about value loss and financial returns from corrective actions, while production is easily measured and rewarded. And so, attention goes to production over value. This is a mistake.
With focus on production over value being common across companies, education and encouragement for value recovery are in short supply, and poor understanding runs deep. In some organisations forest value recovery is poorly understood at all levels in the structure, from president to manager, and contractor to bucker. Immediate gains can be made by addressing this.
Value loss and errors in forest harvest operations are the result. These can be seen in forest cutover, audit data, reports, log stacks and on trucks. If you learn where to look.
A forest has a maximum potential value at a given time of harvest. Let’s call this ‘100’. This is the net amount you could expect at local prices of the day – if all aspects of harvest are in your favour.
The challenge in ‘getting your 100’ is that there are a number of decision points during harvest, which we call valuepoints. Each gives the chance for better returns if the best decision is taken. Or worse if you don’t.
Making good calls at every valuepoint is the path to providing you with the most wealth from your forest investment.
Perspectives you may hear on forest value recovery
Poor value recovery is inherent and defended in many forest operations, despite its impact on margins. While many things are said about value recovery, the sound integration of good principles into operations is rare.
You may be told that value recovery is in hand, without any convincing data or evidence of a sound value recovery culture. Even mediocre value recovery performance takes specific effort which will be apparent in reports and operational data.
Some refute the wisdom of investing time or money in pursuit of forest value recovery. In fact immediate and significant gains can often be made easily and at no cost. There are many risk free actions you can take today if you intend improvement.
You may hear that there is not enough gradient in values between log grades to warrant intensive value recovery effort. A statement like this is a red flag. There is normally considerable variation in log features, customer requirements and end uses. Check for yourself that potential matches between customer uses, log character and price are being assessed. Small changes in quality, knot size, internode, log diameter or length specifications may lead to gains in net stumpage. New cartage or backload opportunities may offer more profitable sales options.
You will almost surely be told that focus on value recovery will negatively impact production. This common assertion infers that a value recovery culture is already in place, which is doubtful if you are hearing this when value recovery is discussed. It also infers that it is acceptable to waste decades of forest value growth to save a few seconds. In contrast to this view, many steps to better value recovery will also improve productivity.
After your own inquiry, you may find that there is already an effective value recovery culture in your operations. But you will be wise to check before you bet your forest returns on it.
Your own plan
The behaviour of providers will reflect their trading environment, goals, culture and integrity. It is easy for these to be in conflict with your value recovery aims.
“Without your own plan you will fall into someone else’s plan. And their plan for you? Not much”. – Jim Rohn
Some may withhold or misrepresent the intelligence their clients pay them for, to gain an advantage of their own. Some call this situational honesty. This recalls the old jibe at consultants – they take your watch and charge you to hear the time.
Providers may have staff with strong value recovery skills and ethics, but they may be constrained in their ability to use them.
All reasons to learn to represent your forest investment well, and act on what you learn, so that you can be sure all possible value is extracted during the harvest of your forest.
Educate yourself for Forest Value Recovery success
When your harvest is complete, and you thank your providers, you will know that you have received best value from their service and your forest. Just like you planned.
You will also have the best possible cheque for your next investment, adventure or Rolex.
James Powrie B.For.Sc (Hons)
James Powrie is a Freelance Forester and has worked in all aspects of forestry since starting with the NZ Forest Service in 1984.
He offers Operations reviews, Education, Planning Assistance and Coaching for Forest Owners, Directors, Investors and others wanting to Maximise Forest Value Recovery at Harvest.
He is also available for conference sessions and workshops by arrangement.
firstname.lastname@example.org | +64 272 757757 | www.forestvaluerecovery.com