26 March 2001 Speech Notes

Farm Forestry, Napier

Ladies and Gentlemen: thank you for inviting me to your conference today.

You are part of a thriving industry.

New Zealand has a well-established forestry industry that contributes 4% of national GDP and in the December 2000 year earned $3.57 billion in exports ? 12.8 percent of New Zealand's total exports for that year. Forecasts show the wood supply available from New Zealand's planted forests could to increase from the year-ending March 2000 harvest of just under 18 million cubic metres, to 28.6 million cubic metres by 2003. This represents a 58 percent increase in just 3 years. The greatest increases are in regions such as Northland (298%), Tairawhiti/Hawkes Bay (265%), and the Southern North Island (380%).

New Zealand has a well-established wood processing industry. It currently consumes around 13 million cubic metres of wood annually, with the balance of the harvest (6 million cubic metres or 32 percent) being exported as logs. However by 2003 the industry will have an additional 9.6 million cubic metres of logs available to export or to process into added-value products.

Exporting unprocessed logs will continue, because they are an important part of the export product mix. In its September 2000 forecasts, MAF projected that log exports would stay at around 30% of the harvest through 2003, possibly rising to 35% by 2005. This means that as more wood becomes available for harvesting, a greater volume will be available for on-shore processing, because log exports are not expected to rise much above the 30 ? 35% level in the medium term. Hypothetically, the wood available for on-shore processing over this period could support, for example, 7 new sawmills (about the size of, say, Waipa) and 4 new MDF plants (about the size of, say, Nelson Pine).

Investment in wood processing has fallen off in recent years and will not currently be enough to process anywhere near all the additional wood available for on-shore processing. For the period 2000 to 2005 publicly announced new wood processing investments total $531 million compared with $1.27 billion for the 1994 to 1999 period. MAF estimates there is potential for a further $1.5 billion of investment in wood processing over the next five years or so.

The extent of the commercial uptake of such opportunity will critically depend on the comparative advantage of locating such investment in New Zealand.

The dominance of large companies in new planting has given way to individuals and groups of smaller investors. These include farmers, individual investors, Maori forestry interests and additional foreign participants.

In 1994, it was estimated that more than 14,000 forests were less than 100 hectares in size, and many were individually owned. That hasn't been re-surveyed since then.

It is possible that, by 2005, one-third of the forest estate will be owned by small scale growers.

Sixty four percent of the planted forest estate is owned by 13 major organisations (with considerable off-shore investment), each owning more than 20,000 hectares. There will continue to be rationalisation of forest holdings among existing companies as well as sales of forests allowing new entrants.

Some integrated companies are reported to be considering divesting their forest assets, which show a poorer return on capital than their processing operations. They would secure access to the wood resource through long-term contractual arrangements.

Some forestry companies are already approaching woodlot owners with a view to securing long-term supply contracts.

Individual owners, and the Farm Forestry Association, need to be prepared for these approaches by fully understanding the complexities of negotiating such contracts to get the best deal for the grower.

Many of the issues the sector faces in relation to the increasing availability of wood are also relevant to Farm Foresters. I understand that about 800 of you will harvest your wood within the next five years.

The Government has entered into a partnership with the forest industry to address these issues through the development of a Wood Processing Strategy. A Steering Group is overseeing the work and the Farm Forestry Association is represented on this group through the FFA president. The issues being attended to as part of the strategy include * Transport Infrastructure * Resource Management Act implementation processes * Skills & Training * Biosecurity * Research, Science & Technology * Trade Access * Trade Enhancement * Certification * Investment Promotion * Climate Change

The Farm Forestry Association has applied for and won funding from the Sustainable Farming Fund for a project looking at "farm forestry for economic and environmental sustainability" ? a review of existing farm forests in different NZ sites to generate model for use by other farm foresters. This is to be commended. I view the fund as a particularly important way to encourage community-based innovation.

Research is essential, no matter what industry you are in, and I commend the Farm Forestry Association for moving in this area.

Other areas you will need to work on include the certification of sustainably managed forests and what that means for small growers, especially the cost, as well as issues associated with climate change. Carbon credits will affect small growers and the Farm Forestry Association has to watch that process carefully

But your industry, like other agricultural, horticultural, and silvicultural industries in New Zealand, are under threat ? often from our own fellow citizens.

Yesterday, I spent four hours at Auckland airport.

The MAF Quarantine staff there do an incredible job at dealing with people coming into our country and intercepting smuggled products. The figures are horrific.

While I was there, exotic fruit carrying live fruit fly and conifer seeds potentially carrying diseases were intercepted and confiscated.

Lat year, 1.8 tonnes of seed was confiscated in 4500 seizures. Nursery stock ? about 12 thousand units ? were confiscated in 734 seizures. Another 16 tonnes of fruit fly host material has been taken from passengers.

On top of that, 8.5 tonnes of meat and poultry products were taken off passengers. A third of that was undeclared. Two thirds of it came from countries with foot and mouth disease.

On top of that, there were 168 seizures of live animals, including dogs and live eggs. In one case, a pet rat escaped on the plane, and it had to be stripped and fumigated.

And despite all our experience in the past year with the varroa bee mite, people are still trying to smuggle in queen bees.

All that is coming in with passengers. Tonnes more material is seized from screening of the mail system. We are the only country in the world to screen 100 per cent of inward mail.

MAF Quarantine staff have a difficult job. They are often dealing with people from other cultures, whose grasp on the English language may not be a secure one. Worse are the passengers who come off planes grossly intoxicated. MAF Quarantine staff are Kiwi Host accredited and trained to deal with people.

They all know the critical importance of their work and I am sure they are carrying out their duties to the best of their abilities. You should know that we are screening 38 per cent more passengers than a year ago; that to cope with the increase in high-risk flights when Britain got foot and mouth disease, all leave was cancelled; all off-site training was cancelled; all development work was cancelled as all hands pitched in to ensure our quarantine standards were kept up. The new funding package Cabinet gave me after one week in the job will allow quarantine staff numbers to increase 25 per cent, and make New Zealand the only country to x-ray and screen with detector dogs 100 per cent of incoming passengers and baggage.

But for all the furore about foot and mouth disease, it is not the only threat to our country.

You will be aware of the many pests and diseases that could lay waste to our forestry industries ? among them Asian gypsy moth, painted apple moth, and pitch pine canker.

The risk of Asian gypsy moth has recently been re-assessed. Research suggests it is not actually the huge threat to our pine plantations as previously feared. Nor is it a huge threat to our native forests. But it would be devastating to many other Northern Hemisphere species.

Pitch pine canker would be devastating to our pine industry.

This fungus is widespread internationally and causes wounding and bleeding on the pine tree's stem. It's caused widespread damage in overseas nurseries. If it was found in New Zealand, it is likely to be extremely difficult to eradicate.

The most likely way it would come here is through the smuggling in of pine cones ? like the ones I saw being intercepted yesterday ? or through pine needles or pine bark, all of which are prohibited imports.

Our quarantine rules are there for a reason. We don't want these pests, diseases, and other nasties to make it here.

It requires all of us to work together. We all make a difference. Those few seeds you might think of bringing in after an interesting trip to forests overseas could have a devastating effect on industry here.

This is a long-term issue. Biosecurity and the importance of border control measures will not become less important when ? or if ? Britain gets its foot and mouth disease outbreak under control. We have lived with foot and mouth as a threat for a long time, from trading partners a lot closer than Britain. It is not the only disease in the world. There are others as bad, and there are pests as bad.

We must all be eternally vigilant.

Thank you.

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