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Winter, it’s not the favoured season in the forestry calendar, good for planting trees but just plain awful if you’re converting trees into logs. Having said that, June has given us the highest export log prices for the first month of winter since 2021 with prices generally flat from May at around $115/m3 for A grade. This is welcome relief for those on the spot market as there was a general expectation for a reduction with higher foreign exchange and lower in-market sales prices. Longer term fixed price deals now play a large part in the private woodlot sector with a significant number of owners opting for certainty rather than chasing rainbows with monthly spot prices. Longer term pricing mechanisms have also provided some certainty to the harvest contractor base with more consistency around future work programs. The good news is that the in-market log inventories in China have reduced again in May by around 150,000m3 to 3.35Mm3, although uplift from port has also reduced to slightly over 60,000m3/day, down 10,000m3/day from April. There’re no surprises with the reduction in uplift as the Chinese construction sector (or what’s left of it) historically slows during their hot season, however, this will be met with reduced supply from NZ courtesy of our wet season and lower spot pricing. The tariff can is still being kicked down the road and reports are that engagement from China has dwindled in recent weeks. Where this will land is anyone’s guess and it’s hard to see any sort of resolution in the short term. If you look at China with your macro glasses on, there are some interesting stats starting to emerge. China’s trade surplus surged to a record of $US165 billion in the first quarter of 2025, up 350% from $US47 billion for the same period on 2024. Much of this is thought to be due to the growth of e-commerce and tech but it does show the economic powerhouse that China has become when compared to a US trade deficit of $US425.5 billion for the same period. Federated Farmers obviously wanted something to talk about at the Fieldays and launched an attack on forestry with a very misleading ‘Save our Sheep’ campaign. The Fed’s and their broken record have pointed to forestry as the reason that the sheep flock has reduced from 70 million in 1982 to 25 million today. This is some pretty brave logic considering that total exotic forested area is still less than it was in 2002 when sheep numbers had already dropped to 38 million. Maybe, just maybe it’s not economic to farm sheep in some regions anymore and people are destocking and changing their choice of crop as a result? Just a thought, why are beef numbers not dropping, maybe beef is a better value proposition than sheep in those regions? The campaign may not have read the room well and has raised more than a few eyebrows with farmers who understand the importance of forestry and the ETS to their farm cashflow and values. Canterbury farmer, Richard Holloway penned an excellent article which has been published by various media outlets and provides a very balanced farmer view of the issue. Since the government introduced restrictions on land use earlier this year (as a result of the Fed’s lobbying), billions have been wiped off farm values nationwide, especially affecting those in marginal areas and those looking toward succession planning. Let’s be very clear, none of us want to see farm conversions into permanent carbon sinks, however, the new legislation has made it difficult for those wishing to convert to a timber crop and utilizing the ETS as a method of obtaining regular cashflow during the growth cycle. Speaking of which, NZU prices are creeping up slowly and are now at a 2-month high with current spot prices around $56.50/NZU. The next government auction is on the 18th of June, and all eyes will be on whether there is a full, partial or any clearance and the effect this will have on the spot market. Nothing to see in domestic markets, which are generally pretty soft however, with continued and consistent reductions in the OCR and more favourable lending conditions there would be some expectation of a rebound in domestic construction. To add to that, construction costs have eased with the Cordell Construction Cost Index (CCCI) indicating a 0.3% rise in Q1 2025 which is well below the long run quarterly average of 1.0%. So, in summary, it’s getting cold and wet, and prices are average – nothing unexpected for the beginning of winter. Planting has started in most regions and although numbers are down this year it will still be a sizable season which I’m sure Federated Farmers will equate to another 10 million sheep removed from the national flock. Next, they’ll be blaming the invasion of Ukraine on pine trees. Marcus Musson, Forest360 Director.  

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