Most of the half million hectares of forest established by the small forest owner and investor through the 1990's, is managed or will be managed intensively with the principal aim of producing a high value pruned butt log. This rate of establishment and high level of investment is expected to continue well into the new millennium.

WHY PRUNE

1. Profitability: At today's market prices, a good pruning regime can produce logs worth $20,000 to $30,000 per hectare more than a regime without pruning. (If we can prove the pruning was of a high standard, thereby eliminating much of the risk for the log buyer, the returns could be very much greater - but more about that later.)
2. Market risk: An old and well-established axiom pervades most of our business - a quality product can be used in high or low value end-uses, a low value product has at best only low value end-uses. This has been brought home during the depressed log market following the Asian crisis. Knotty log grades were either not saleable or experienced major drops in price, yet pruned log demand has remained buoyant and prices are still high with good logs selling at up to $210/m3 at mill. Many tropical and temperate countries have the land resource and conditions to grow huge amounts of industrial grade (unpruned) wood. If 'carbon accreditation and trading' becomes a reality, this could further fuel major new planting programs of 'industrial' plantations. Conversely, the world's old natural forests, the major source of knot-free-timber, are becoming exhausted. The future principal supply of other than re-manufactured knot-free-timber must come from pruned forests. Few countries carry out extensive pruning (examples are; New Zealand, Chile, Australia to a lesser extent, and in Japan 10% of the cypress estate is pruned). In summary, there would appear little competitive advantage in growing unpruned plantations, but pruning produces a knot-free timber for which there is strong demand, a diminishing supply and a wide range in end products.
3. Targeting quality: If you are growing radiata pine, there is one more very good reason to prune. As investors, most of us are hoping to harvest on a rotation of around the 24 - 30 years. What will the wood be like?

   Unfortunately, the greater portion of he stem; the top half tapering into a core and extending down to the stump, will be wood largely suited to low value end uses - packaging, low strength structural and pulp. It will be low in density, low in strength, have stability problems, low in surface hardness and inevitably very knotty. The potentially higher value wood (suited to appearance and higher strength structural uses) is mostly confined to the outer wood of the butt log. This wood is higher density, stronger, more stable, has greater surface hardness and is even much more easily preservative treated. Pruning is a large investment activity and this precious potentially high value wood is its sole target. Without pruning, it can only be at best knotty structural timber or suited to re-manufacture. Pruning means the outer wood's inherent advantages can be realised.

WHAT ARE PRUNED LOGS WORTH

There are two relevant answers. The first comes from the current domestic and export log markets. It is wise to pause here and acknowledge that not all pruned logs have significant added value over unpruned logs, and when the buyer is aware of this, the price is reduced accordingly. However, the market has been paying up to $210/m3 for the best pruned logs (at mill). Unpruned log prices range around $60 to $100/m3 at mill. But it remains risky buying pruned logs. Logs of very different quality can look the same. If the pruning was really late then the log may only have the same inherent value as a very branchy unpruned log (ie worth very little). If the buyer can be assured of the effectiveness of pruning (for instance via Pruned Stand Certification) then the increased value resulting from the pruning can be paid to the owner with much more confidence. If this is not the case, then the buyer must keep a major part of the potential log value for insurance against the risk of the log having low inherent value. This brings us to our second answer. What could a miller pay for a pruned log if the miller knew about the effectiveness of the pruning operation. This answer is easily obtained either via a sawing study or sawing simulation package. Let us look at a couple of externally identical logs 'sawn' using the processing simulation package TreeMAPS (Sawn to a CANT sawing pattern with a modern technology mill, domestic lumber prices and reported nett log value after milling & drying). The answer to our second scenario is that if the miller knows just what he is buying then the log price paid to the owner can be considerably higher then is currently the best case. In the above example, another $100/m3.

WHAT IS THE COST OF PRUNING

There is quite a lot of variation depending on access, ground conditions, branch sizes, competitive forces and so on. Typical costs on a tree basis would be; low prune - $0.8, medium - $1.2, high - $1.2. The relative cost of pruning versus other growing costs is illustrated in the charts. With the cost of land included, pruning can end up from 18 - 22% of the total compounded cost. The cost of pruned stand certification is well under 1% of the growing cost.

How does the economics of pruning compare with not pruning

Here we focus our attention on butt logs only as the remainder of the stem can be much the same whether or not pruned. The commercial success of three scenarios is illustrated in the figure. For the unpruned butt logs, most scenarios end up costing the investor. Pruning poorly or alternatively, attracting a poor price for pruned logs can be even worse. However, pruning on time and marketing appropriately to return the current day high log price is highly profitable.

This figure shows the discounted net revenue per cubic metre of butt log for: not pruning, pruning either poorly or marketing well pruned logs poorly, and effective pruning with appropriate marketing. A realistic range of current day log prices and costs were used. All costs and revenues were discounted to present day at an 8% discount rate. All pruning associated costs, pruned log stumpages and 40% of all other growing costs were assigned to the butt logs.

Does re-manufacture make pruning redundant

Several NZ corporates have reduced or stopped pruning and talk of adding the value at the end of the rotation with processing (we might seriously wonder at NZ's competitive advantage in labour costs and technology to successfully achieve this). However, corporates who grow forests and also own processing plants have the luxury of choice as to where to invest. Most small forest growers/investors don't and adding value can only mean investment in growing a high quality crop. What are the consequences of this shift in emphasis by some of the larger forest growers? Probably good news. Less competition in supplying high value sawlogs and with half million hectares of intensively pruned plantation estate, the private investor has potentially all the market clout of a corporate. It has become a popular notion that New Zealand needs to stop being a commodity producer and add value by processing on-shore. However, the reality can be one of spending $100 to improve value by $50. There seems little appreciation that pruning trees to carefully thought through specifications and supporting the sale of the final pruned logs with exact quality specifications is adding real value. On the contrary, returns are real and substantial. It is also well within our capability and takes advantage of our very special climate, land base and knowledge base. An interesting case study presents itself with the NZ Mouldings Co Ltd. in Mosgiel. This company buys in timber, processes and produces around 4,500 m3/month of both full length clear and finger-jointed boards and moulding stock for the USA market. Prices over the last year have ranged from 1/3 more to double for full clear versus the clear finger-jointed product.

What about other factors such as resin pockets

Resin pockets, resin staining, thinning damage and internal checking can all influence quality and the inherent value of a pruned log. A certain level of incidence of these defects are anticipated and if there incidence is abnormally high, these may have to be factored into price negotiations. For resin pockets, there are known site and regional variations.

Are there other ways of providing 'pruning effectiveness' information at time of log sale

Yes. A sawing study provides answers but won't usually provide DOS information by lift. Sawing studies can be very expensive to carry out and few professionals can claim to undertake one with confidence. Also, the sample logs need to come from locations over the entire stand surface in just the same way plots are located anywhere in the stand. This requirement is often impossible to meet. Destructive sampling can be carried out extensively but is destructive and expensive. New scanning technologies have been and are being developed and may be useful particularly at a mill or log processing yard. However at these locations, they won't help with documenting and managing the pruning operations, establishing a stand's quality for planning purposes, valuation purposes, and estimating log quality for log allocation and log sales prior to harvest. Measuring a sample of young trees at time of pruning is simple, cheap and very effective.