Forestry and timber update – November 2019
Timber Market Report
Following an extended period of price rises and increased activity, both UK and foreign timber markets appear to be seeing a slight price reduction of between 10 – 20% on the headline figures reported in 2017/2018. This global slowdown has predominantly been caused by a large volume of timber flooding the sawmill market. Across Europe a combination of catastrophic wind blow and beetle infestation have resulted in significant areas of Sitka Spruce being harvested and reaching the market much sooner than anticipated. As a result, the domestic markets have been placed under pressure which has slowed production and in turn the demand and price for the raw material.
The requirements for hardwood/ firewood and biomass products are still sought-after but with the mild winter in 2018/2019, buyers’ stocks are generally high which have reduced demand through the summer. However, with winter on its way stocks are starting to move and these buyers are concerned about the lack of available timber on the market. This is similar with the fencing mills/ manufacturers who are also concerned for their supplies of ‘small round wood’ products which are used in the production of fencing etc. As a result, there are signs of an upturn in prices for these products.
While softwood prices are lower than last year, they are still considerably higher than two years ago. As the sawmills clear the backlog of timber which will be helped by the traditional spring upturn demand for sawn product the mills will start wanting to secure their raw material for the mill so we would expect to see prices rising accordingly in the start of the new year (2020).
However, with continued political uncertainty, no one can predict how the markets will respond going forward.
Growth in new woodland creation (NWC) has predominantly been driven by the English and Scottish government ambitions targets for afforestation across the country. With the Scottish government achieving its target of 10,000ha per year of NWC and has now set new ambitious target of 15,000ha per year by 2025. The English government has similar ambitions wanting to plant some 11,000ha per year but are significantly underachieving. The development of a Forestry investment zone (FIZ) in Cumbria and talk of a similar zone being created in Northumberland this should help in removing some of the issues that are stopping new woodland creation happening in the North of England.
We are seeing a strong demand for afforestation land both sides of the border, driven by many factors but in particular the attractive grant funding available through current CAP options. This demand has caused marginal hill and upland land to increase if there is viable afforestation potential.
Previous years have seen woodland creation to be a profitable exercise for landowners and this is still seen to be the case. However, it is worth noting that some establishment costs have increased in recent months which has reduced profit. With the Scottish government recognising this they have just increased the funding rate on deer fencing from £6.80 to £7.60. The grant schemes can still be cash positive when establishing the woodland and then five years of annual maintenance grant payments.
Managing your existing woodland
It is always worth reviewing current woodland management practises in order to maximise objectives. Davidson & Robertson are increasingly involved in bringing woodland into active management as clients realise the variety of benefits provided, whether as part of a commercial portfolio or a small on-farm plantation.
Creating a Woodland Management Plan allows access to capital work grants for dealing with issues such as invasive weed control, road building and respacing dense scrub woodland. It also allows a strategic approach to managing the woodland in order to deal with client objectives which may include silvicultural enhancement, development sporting potential or maximising income potential.
Iain Kyle is the firm’s Forestry Manager and has over 30 years of experience in the forestry industry. Iain combines his knowledge, practical expertise and contacts in order to provide a complete service. Iain can offer an initial no-obligation site visit and visual assessment of woodlands and can be contacted on 07783 197103 or email IK@drrural.co.uk.