Tree Talk with Peter Harington Woodmetrics Regional Manager

Like most commodity markets farmers are familiar with, the log market seems to have been characterised by long periods of frustration, interspersed with short periods of excitement and anticipation.

Recent years have certainly been no exception with the log market. The last two years have certainly been good ones, culminating in record prices in the first quarter of this year – peaking in April with record highs.

Since April, we have seen some quite dramatic falls from this lofty height – which has had everyone worried. We have seen new entrants into the market with the USA and Canada motivated to supply the Chinese log market by the high prices.

While there has been a certain amount of despair, it is worth noting the prices this winter are actually almost the same as last winter, which were followed by a steep climb through last summer. Sure enough, this month it is clear the downward adjustment has stabilised and all indications are that the prices will climb through the next few months.

The winter drop-off in price is usually related to a stock build-up in China from the high production in Russia in the early months of the year.
Already, the price in China has increased as the stocks which built up during winter are starting to dissipate. This should reflect an increase at wharf gate prices in New Zealand starting in September. Unfortunately, the currency exchange rate will absorb some of these increases.
Having spoken to a number of log traders recently, the general consensus is that the log price will climb through the summer as it did last summer. However, most are of the opinion that the dizzy heights reached last summer may not happen this time as last summer the influences of speculative trading distorted the market above its natural level.

Speculators tend to only get burnt once.
At Woodmetrics, we are watching this trend closely as we endeavour to put clients' forests out to tender on a rising market as early as possible in the dryer weather.

It has been a good couple of years so far and everyone in the industry is hoping it continues and the seasonal fluctuations continue to be just that – and the fundamentals around the Chinese log market continue to be stable.