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9.0 IMPACTS OF LAND-USE CHANGE ON FORESTRY AND WOOD PROCESSING

Key points

• Gains in new establishment and forest-tending employment opportunities will be exhausted by 2005 in the scenario used in this analysis, as replanting and new planting levels stabilise.
• Large, permanent increases in harvest-related employment of over 400 FTEs, and total household income over $18 million, are forecast in the scenario used, once new forests begin to be harvested (in 30 years time).
• Establishment of local processing plants could increase employment and household income by a further 87%.

9.1 Introduction

Land-use change from farming to forestry will provide employment and hence gross household income opportunities which will, in part, offset the losses associated with the reduction in the total area farmed during the first rotation. Once forest harvesting commences it is expected that employment and household income opportunities will exceed those lost from the displaced pastoral land-use.

The relevant employment and income indices per 1000 hectares of planted forest are summarised in Table 9.1. These can be directly compared with the losses per 1000 hectares from farming summarised in Table 8.1.

Significant factors include the following.

1. The silvicultural operations on any block are completed 10 years after planting. Unless a reasonably even rate of planting occurs over a period of years, the requirement for forestry labour will be lumpy
2. The employment required for the silvicultural operations does not increase in proportion to the total forestry area planted, as silvicultural operations are required only for the first 10 years after planting. Thus, the silviculture-related labour demand increases to a maximum at year 10 of the planting scenario, and thereafter remains constant (assuming a constant planting rate over time) until harvest age is reached.

Table 9.1 Forestry employment and income indices per 1000 hectares of forest planted

Silvicultural operations	Direct FTEs		Indirect FTEs	Total gross household income ($ million)
Planting year (Yr 1)	10.2		1.25	0.32
First prune/thin (Yr 4)	14.1		2.14	0.43
Second prune (Yr 6)	10.0		1.5	0.31
Third prune/thin (Yr 8)	11.8		1.8	0.36
Fourth prune (Yr 10)	3.65		0.6	0.11
Total/1000 ha	49.75		7.29	1.53
Harvesting operations (year 29)
Roading	7.1		8.9	0.57
Logging	140.0		50.0	7.89
Transport	67.5		32.5	4.18
Total/1000 ha	214.6		91.4	$12.64

Notes

1. Only part of the resource is assumed to receive four-lift pruning
2. Processing employment and household income cannot be expressed in terms of per 1000 hectares planted, as it is dependent on the size and type of facility developed on a regional scale not directly related to this study.
3. Assuming that harvested areas are replanted, the silvicultural FTEs will be additive to the harvest FTEs once harvesting commences.

The employment generated in the first 5-6 years of this scenario will not be in full-time job units, although expressed in this analysis as Full-time Equivalents. Until the full range of planting and silvicultural operations is demanded in the forest in any one year, the employment will tend to be seasonal and concentrated over the planting and releasing periods.

The employment opportunities are high at forest harvest, requiring a total of 306 FTEs (direct and indirect) per 1000 hectares harvested. This requirement is exclusive of any in-District wood processing facilities.

Historically, employment generated by most forestry-related operations attracts a higher proportion of male employees than female employees, owing mainly to the physical nature of the work involved. It is expected that this trend will occur in the WDC area for forestry work generated under the scenario discussed in this study. However, indirect employment associated with industry servicing and retail activities generated by forestry will offer greater equity of opportunity for both genders.

9.1 Base scenario for land-use change (forestry impact)

Discussions with existing and intending forest owners in the WDC area indicates a 'most likely' rate of land-use change to forestry under current economic conditions as follows.

	Area to be planted	(ha)
1995	3500
1996	2500
1997-99	2000	p.a.
2000-24	1600	p.a

Over the 30-year planting period, this totals 52 000 hectares replacing 400 400 LSUs currently being farmed. (This amounts to approximately 25% of the area currently being farmed in the District.) The employment and income indices for the base scenario are presented in Table 9.2.

The silvicultural labour requirements build up to a peak in year 2002 and then fall away to a constant requirement of 79 FTEs by year 2009. This build-up and fall-off is owing to the higher planting rate in the early years. Had the planting rate been constant at 1600 hectares p.a., the static silviculture employment requirement would have been reached in year 2004.

From the commencement of harvest employment requirements increase hugely, particularly with in-District wood processing. (Table 9.3 provides the employment and income indices without wood processing facilities in the WDC area.) After the early planting is harvested, employment requirement for the base scenario levels out at about 1160 FTEs by about the year 2035 inclusive of all direct and indirect employment and replanting of harvested areas. This requirement is approximately 50% of the current FTE workforce in the WDC area.

Estimated gross household income generated by forestry increases from about $2.5 million p.a. during the first 28 years to be in excess of $40 million p.a. after harvest commences (on the assumption that 60% of the wood harvested is processed in the WDC area). This is equivalent to an increase of more than 55% on the current level of District household income (estimated at $72 million), and is exclusive of the actual value of the wood itself (i.e. gross household income related to forestry is independent of future log price - provided of course that the forest is actually harvested).

The wood processing assumptions are detailed in subsection 2.6 of Appendix 1. In summary, the assumptions made include the establishment of a large-scale sawmill processing 550 000 m³ p.a., and a medium-density fibreboard (MDF) mill processing 150 000 m³ p.a. of logs plus residue from the sawmills. The total wood processed as logs would amount to 700 000 m³ p.a. which is estimated to be 63% of annual harvest at a level of 1600 hectares p.a..

However, it is also noted that at 1995 approximately 30 000 hectares of forest are already in existence in the District. The wood output from this area will greatly add to the future harvest of the plantings under the base scenario, and the level of in-District wood processing would reduce to about 40% of total annual harvest. The labour demand for this level of processing is estimated at 430 direct FTEs and a further 155 indirect FTEs (a total of 585 FTEs) generating a total of almost $20 million p.a. of gross household income.

Without wood processing located in the WDC area (Table 9.3), forest harvesting in the steady state of 1600 hectares p.a. reduces labour requirements and gross household income related to forestry by approximately 50%.

Table 9.2 Summary of forestry related household income(assumes sawmilling and MDF processing in the Wairoa District)

Table 9.3 Summary of forestry related household income(excludes sawmilling and MDF processing in the Wairoa District)

Year	Total Direct FTEs	Income from direct FTEs ($millions)	Total Indirect FTEs	Income from indirect FTEs ($millions)	Total FTEs	Total all forestry income ($millions)
1995	36	1.01	4	0.12	40	1.13
1996	26	0.72	3	0.08	29	0.81
1997	20	0.58	2	0.07	23	0.64
1998	70	1.88	10	0.27	80	2.15
1999	56	1.51	8	0.21	63	1.72
2000	79	2.12	12	0.31	91	2.44
2001	69	1.86	10	0.27	79	2.13
2002	106	2.82	16	0.42	121	3.24
2003	88	2.36	13	0.35	101	2.71
2004	95	2.54	14	0.38	109	2.92
2005	87	2.34	13	0.35	100	2.68
2006	86	2.29	13	0.34	98	2.63
2007	81	2.16	12	0.32	93	2.48
2008	81	2.16	12	0.32	93	2.48
2009	79	2.12	12	0.31	91	2.44
2010	79	2.12	12	0.31	91	2.44
2011	79	2.12	12	0.31	91	2.44
2012	79	2.12	12	0.31	91	2.44
2013	79	2.12	12	0.31	91	2.44
2014	79	2.12	12	0.31	91	2.44
2015	79	2.12	12	0.31	91	2.44
2016	79	2.12	12	0.31	91	2.44
2017	79	2.12	12	0.31	91	2.44
2018	79	2.12	12	0.31	91	2.44
2019	79	2.12	12	0.31	91	2.44
2020	79	2.12	12	0.31	91	2.44
2021	79	2.12	12	0.31	91	2.44
2022	79	2.12	12	0.31	91	2.44
2023	827	36.60	332	9.98	1159	46.58
2024	613	26.74	240	7.20	853	33.94
2025	521	22.19	197	5.90	718	28.09
2026	513	21.97	196	5.87	709	27.84
2027	509	21.86	195	5.85	704	27.71
2028	449	18.61	162	4.84	612	23.45
2029	435	18.24	160	4.79	595	23.02

9.2 Net impact of base scenario land-use change(includes agricultural losses and forestry gains)

The net impact on employment and gross household income for the land-use change under the base scenario assumptions are presented in Table 9.4 (this is the same as Table 8.4).

The net change with local wood processing facilities is summarised as follows.

1. The gross household income stays relatively static over the first 10 years, and thereafter decreases evenly to a maximum of $6.75 million p.a. below the current District household income (-9.4%).
2. Once harvesting at a static state of 1600 hectares is reached (about year 2028, or 34 years out), the net increase in District gross household income is approximately $32 million p.a. (44% above current District income), requiring over 900 additional FTEs.
3. Without wood processing facilities, the nett change to District gross household income at year 2028 is approximately $13 million p.a. (+18%), requiring about 350 additional FTEs (see Table 9.5). The base scenario analysed excludes the possibility of wood processing facilities being developed in the District before the year 2023. This may occur, depending on available wood volumes from existing forests (at 1995) and in the expectation of additional volumes from the year 2023 onwards. This would offset farm employment and income losses at an earlier time.

Table 9.4 Summary of employment FTEs and household income change- base scenario, local wood processing included

Table 9.5 Summary of employment FTEs and household income change- base scenario, no local wood processing included

9.3 Change of Planting Rate Assumptions

All macro analyses conducted in sections 8.0 and 9.0 of this study relate to the base scenario planting rate. Actual planting rates may be different. Table 9.6 summarises the nett effect on employment and gross household income of a 10% increase in the planting rate assumed in the base scenario. (A 10% decrease in planting rate can be considered by reversing the plus/minus signs in this table.)In summary terms, a 10% increase in planting rate will reduce gross household income by up to $0.7 million p.a. until forest harvest begins, and increases income by approximately $1.3 million p.a. thereafter.

Other parameters of change can be analysed using the computer spreadsheet model associated with this study which is available from MAF Policy.

9.4 Average Rate of Forest Harvesting

This study assumes a higher rate of planting in the first five year period 1995-99. Under this assumption, a higher rate of early harvest from 2023-27 is assumed in the study, and has led to higher employment and household income generation over this period. Alternatively, an average harvest rate could have been applied in all years irrespective of some trees being older than 28 years when harvested. On the basis of 52 000 hectares planted over 30 years, this would allow an average harvest area of 1733 hectares per annum. This was not specifically done in the analysis, as it is not known what effect other mature forest areas in the District/region would have on any average rate of harvesting, and because of the diversity of forest ownership, possible market outlets, and the effect of very reduced planting rates in the period 1988-92. However, in order to provide data on employment and household income under an average harvest area scenario of 1733 ha per annum, a separate computer run was made; results are summarised in Tables 9.7 below. After the initial 10 year period, the employment and household income levels are similar between the base scenario and the average harvest area scenario.

Table 9.6 Sensitivity of Base Scenario to A 10% Change in Annual Planting Area, No Wood Processing

Year	Rate of land-use change (ha p.a.)	Cumulative gains from forestry		Cumulative losses from farming		Cumulative nett change (parentheses indicate -ves)
		Employment (FTEs)	Household income ($ millions)	Employment (FTEs)	Household income ($ millions)	Employment (FTEs)	Household income ($ millions)
1995	350	4	0.12	2	0.07	2	0.05
1996	250	3	0.10	3	0.11	0	(0.01)
1997	200	2	0.05	4	0.15	(2)	(0.10)
1998	200	8	0.20	5	0.19	3	0.01
1999	200	6	0.16	5	0.23	1	(0.07)
2000	160	9	0.23	6	0.26	3	(0.03)
2001	160	8	0.20	7	0.29	1	(0.08)
2002	160	12	0.31	8	0.32	4	(0.01)
2003	160	10	0.26	8	0.35	2	(0.09)
2004	160	11	0.28	9	0.38	2	(0.10)
2005	160	10	0.26	10	0.41	0	(0.15)
2006	160	10	0.25	11	0.44	(1)	(0.18)
2007	160	9	0.24	11	0.47	(2)	(0.23)
2008	160	9	0.24	12	0.50	(3)	(0.26)
2009	160	9	0.24	13	0.53	(4)	(0.29)
2010	160	9	0.24	13	0.56	(4)	(0.32)
2011	160	9	0.24	14	0.59	(5)	(0.35)
2012	160	9	0.24	15	0.62	(6)	(0.38)
2013	160	9	0.24	16	0.65	(7)	(0.41)
2014	160	9	0.24	16	0.68	(7)	(0.44)
2015	160	9	0.24	17	0.71	(8)	(0.47)
2016	160	9	0.24	18	0.74	(9)	(0.50)
2017	160	9	0.24	19	0.77	(10)	(0.53)
2018	160	9	0.24	19	0.80	(10)	(0.56)
2019	160	9	0.24	20	0.83	(11)	(0.59)
2020	160	9	0.24	21	0.86	(12)	(0.62)
2021	160	9	0.24	22	0.89	(13)	(0.65)
2022	160	9	0.24	22	0.92	(13)	(0.68)
2023	160	116	4.66	23	0.95	93	3.71
2024	160	86	3.41	24	0.98	62	2.43
2025	0	73	2.84	24	0.98	49	1.86
2026	0	72	2.81	24	0.98	48	1.84
2027	0	71	2.80	24	0.98	47	1.82
2028	0	60	2.31	24	0.98	36	1.33
2029	0	59	2.27	24	0.98	35	1.29

Note: Figures are subject to small rounding errors.

Table 9.7 Summary of employment FTEs and household income change, average harvest area 1733.33 ha p.a.

Note:- The slightly increasing forestry employment between 2023 and 2032 is a result of the increase in planting area (replant) from 1600 to 1733 hectares.

_______________________________________________________________________

Contact for Enquiries

Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Phone: +64 4 894 0675
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