Last Chance to Vote in the Forest Growers Commodity Levy

Last Chance to Vote in the Forest Growers Commodity Levy Referendum

Ian Jackson

A proposal to introduce a compulsory commodity levy on logs and other forest products at the time of harvest is presently being voted on by forest growers. The voting concludes at 5.00pm 29 March 2013. It is imperative that affected forest growers register and vote now.

The New Zealand Farm Forestry Association have been working alongside the NZ Forest Owners Association to spearhead a promotional campaign prior to the referendum, so that all growers are well-informed about the implications of the levy.

Why the New Zealand forest industry needs a levy

At present, the forest industry has no co-ordinated or universal approach to funding of its organisation or science activities. The introduction of a levy seeks to address this.

The two main forest owner organisations - NZ Forest Owners Association (FOA) and the Farm Forestry Association (NZFFA) - are the voice of the forest industry, promoting wood and instigating research, lobbying local and central government, and providing general direction. Members of these two organisations account for more than 80% of the plantation forest area, but there are many forest growers, perhaps 10,000, outside these two organisations, who gain the benefits of the work of FOA and the NZFFA, but do not contribute; they are basically “free-loaders”. The challenges and opportunities that lie ahead for the forest industry need the commitment of all growers, not just the enthusiasts.

The bigger industry picture

The New Zealand Forest industry is worth around $4.5 billion to the export economy, the third biggest export sector and a huge employer. Forestry is important to all of New Zealand.

A levy will provide a funding basis for research aimed at producing higher yields of better quality timber, and harvesting that timber more efficiently. The industry has set itself some bold targets: for example, the NZFOA’s Science and Innovation Plan aims to increase MAI (mean annual increment) of radiata pine from the present day level of 18 tonnes per hectare to 35 tonnes/ha by 2025. The Wood Council of New Zealand in their 2012 Forest and Wood Products Action Plan aims to more than double export earnings to $12 billion by 2022.

The Science and Innovation Plan will be the basis of future research, broadly aimed at doubling production through genetic improvement and growing healthier trees. Already the major corporate industry members have committed to inject considerable funding to this research. Currently they commit around $1.7 million to research on a voluntary basis.

The owners of New Zealand’s major forest companies have largely thrown their collective weight behind the implementation of a forest levy, as they see benefits of research for their businesses. These companies may have the most to gain from a levy, but they will also be contributing by far the largest proportion of the levy monies. A forest grower’s levy will benefit all forest growers.

Forest research funding – past and future

Historically, much of New Zealand’s forest research has been funded by government. Currently the total direct sciences spend for forest research is around $25 million per annum, and covers many research areas. Scion, (formerly the Forest Research Institute), is the major research provider. The voluntary subscriptions and efforts of those growers who join either the NZFOA or the NZFFA have, for many years, complimented government funding. In addition, in recent years funding has come out of FIDA, a fund set up as partial compensation for the incomplete dissolution of carbon credits in the initial stages of the ETS.

FIDA funds have now disappeared, and the government has made it plain that future research funding for forestry will be much reduced, and be highly contestable. Unless the forest sector is prepared to step up and backs its own science, research activity will definitely decline. The industry will not develop to its potential, and its international competitiveness and profitability will be at risk.

What’s in it for farm foresters and small scale growers?

A more productive and profitable corporate forestry sector is good news for all growers, large or small, because it means an active, healthy industry, with plentiful resources and infrastructure, and sound marketing strategies. An active research sector also provides nation-wide industry-good benefits to all growers, not just the members of industry organisations.

The levy will also support research into alternative species, environmental protection, fire protection, bio security and forest health, and new harvesting techniques – all important to all forest owners, whatever scale they operate at. The proposed levy governance structure (see below) in fact gives representatives of small forest owners a very significant influence over levy expenditure, which can only be good news for farm foresters.

Levy governance and how the levy would be spent

If the levy gets the go-ahead following the referendum, a seven-member Forest Growers Levy Trust Board will be established. This board will be made up of an independent chairman, two representatives of small scale forest growers, and four others voted by all forest growers. The Board will represent a coherent industry voice for organising priorities and lobbying government. It will administer the levy fund and be responsible for its allocation. To govern the research spend, a research committee, with a terms of reference, will be set up under the board. Between 60-70% of the levy funds will be used for overall science funding. The remainder would be spent on wood promotion through NZ wood, programmes run by NZFFA and FOA, and about 10% for levy administration and collection. All the detail of potential levy expenditure may be read on the forest-voice website under the “Plantation Forestry Work Plan.”

The levy rate and collection

A compulsory levy will be collected on all harvested forest products, excluding firewood. Collection would be done in a similar way to that of other levies, at the point of sale, or if ownership does not change, when a log enters a mill or is accepted onto a wharf for export. The levy rate will be 27cents/tonne increasable to 30c/tonne over the first six year levy period. The total forest harvest in New Zealand, in 2012, was 25 million tonnes, giving a total potential levy collection of around $6.75 million/year at current harvest levels.

The referendum

The Commodity Levies Act controls the establishment and administration of levies. The Act has strict rules about representation, voting and transparency. A forestry levy must have grower support comprising more than 50% of the area, and 50% of the growers. A ‘grower’ for the purposes of the forestry levy will be anyone with over four hectares of forest. A substantive consultation and vote must be conducted every five years. The agreement of small growers is very important to get the levy vote across the line.

In order to vote growers need to register and vote now on the website http://www.forestvoice.org.nz or request a voting pack by calling 0800 500 168.

In conclusion

The mention of a producer levy does not always sit well with farmers, but there are plenty of successful current examples – NZ Kiwifruit Growers, the Foundation for Arable Research, Horticulture NZ and the Deer Farmers Association – so farm and small scale foresters can take good lessons from these. It is crucial that the forest industry gets this levy in place, in order to provide a basis for future growth, cohesion within the industry, and have a united political voice.

The NZFFA and FOA believe that a forest levy will not just benefit large-scale foresters. Small growers stand to gain just as much proportionally from having a unified and healthy prosperous forest industry that realises its huge potential.

ENDS

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