D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 1 of 14 21/02/08 This generic farm forestry business plan template is intended to make it easier to prepare your own business plan — for either supporting an application for Commissioner’s Discretion to offset your costs against other income until your assessable income exceeds $20,000 or just in the name of soundly operating your business. The sample data entered into the cash flows is derived from the Farm Forestry Business Planning Tool. The template has been prepared by Farm Tree Systems for the Mount Lofty Ranges Farm Forestry Group. ‘Property Name’ Farm Forestry Business Plan Table of contents Business overview ................................................................................................................................................................ 2 The property .................................................................................................................................................................... 2 The nature of the business ............................................................................................................................................. 2 Capital investment & operating funds .......................................................................................................................... 3 Markets .................................................................................................................................................................................. 3 Firewood ........................................................................................................................................................................... 3 Export woodchip ............................................................................................................................................................ 3 Pine .................................................................................................................................................................................... 3 Hardwood sawlog ........................................................................................................................................................... 4 Forecast expenses cash flow .............................................................................................................................................. 5 Forecast growing costs ................................................................................................................................................... 5 Property costs .................................................................................................................................................................. 8 Forecast income cash flow ................................................................................................................................................. 9 Forecast net cash flow ..................................................................................................................................................... 10 Appendix 1 — Professional advice ................................................................................................................................ 11 Appendix 2 — Industry overview ................................................................................................................................. 12 Globally and nationally ................................................................................................................................................ 12 Regionally ...................................................................................................................................................................... 12 Appendix 3 — Other sources of information used ..................................................................................................... 14 Insert picture of property (optional) D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 2 of 14 21/02/08 ‘Property Name’ Farm Forestry Business Plan Name — Address — Tel/Fax — Mobile — ABN — TFNs — Business conduct — eg BAS statements & frequency of reporting, tax invoice generation and accounting software/records system Operating account — Accountant — Business overview The partnership/sole operator/company/trust has been operating a forestry enterprise on the property ______ since ____. The property ______ is a __ha property near __________ in the ________ district north/east/south of Adelaide. The property is/is not in a proven forestry region and is managed for the purpose of operating a forestry business, for the planting and tending hardwood/softwood plantations for commercial harvest. An appraisal of the forest industry is appended. The soils are predominantly shallow/deep sands/loams/clays which are/are not well suited for forestry. The nature of the business The business involves: 1. Establishing plantations 2. Pruning and spacing 3. Non-commercial thinning 4. Firebreak maintenance 5. Weed control 6. Harvesting and marketing the wood I/we plan to engage contractors to undertake _______ operations and to do the remainder myself/ourselves. All operations comply with the provisions as set out in the publication Guidelines for Establishing and Managing Commercial Forest Plantations in SA as prepared by ForestrySA I/we intend to sell posts/sawlog/veneer log/firewood as standing timber/grower managed harvesting and marketing/DIY harvesting and marketing. The property has __ ha of plantations established over the past __ years. These plantations are summarised below. The enterprise is planned to provide a major source of income for the partners/sole operator/company/trust prior to and/or after retiring from current employment as ____________. Advice has been provided by ….. professional forester/PIRSA/other. The nature of the advice is _____ and is appended. __-year cash flows have been prepared with the help of the Mount Lofty Ranges Farm Forestry Group farm forestry business planning tool and are summarised below. D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 3 of 14 21/02/08 Capital investment & operating funds The capital invested in land and trees is $____, comprising notional values of about $____ for standing timber and $____ for land. The estimate has been made by one of the partners and substantiated by an independent forestry consultant as laid out in the table below. Pln yr Age Area Tot standing volume Av $/m3 Standing value Land value Total value [Delete the paragraph and table above if not applicable.] A loan/partnership funds/income from other sources is/are adequate to cover capital and operating inputs (see below). Markets Firewood Firewood is a beautiful form of renewable energy and as everyone is acutely aware, the cost of electrical energy keeps rising. Firewood complements other forms of wood production; it is ‘carbon neutral’ and saves our fossil fuels. Approximately 300,000 tonnes of firewood is burnt in Adelaide each year. The recently developed National strategy for firewood collection and use is very supportive of plantation-grown firewood — on the basis that plantations will help alleviate the loss of habitat associated with collecting firewood in native forest. There are two distinct advantages of growing firewood in the Mount Lofty Ranges. Firstly, that wholesale prices in excess of $120/t are paid for premium wood by a number of Adelaide woodyards, are about $30/t more than the Melbourne. Secondly, that the transport costs are about one third of the $30/t that it is currently costing to get wood to Adelaide and Melbourne markets from Deniliquin. This balance of $50/t should be additional profit in the pocket of the grower. All that is needed is an efficient harvesting and marketing system. Export woodchip Unlike the Green Triangle, there is currently no export woodchip industry in this region. However, the viability of developing such an industry is being investigated with prospective investment partners. Should this plantation project not eventuate, existing and future Tassie blue gum plantings should be marketable as firewood. The wood density (firewood marketability) increases with the age of the trees. Pine The current local timber industry is geared to growing and utilising radiata pine sawlog. Pine currently provides the best potential for financial return with least risk. There is every reason to presume that State government forests will continue to supply and maintain these or equivalent markets. Here is a list of some current purchasers. Purchaser Product Brownwood Panels Peeler log SASawmills Small and large diameter sawlog Recut Industries – Monarto Small diameter sawlog & preservation Mt Compass Timber Case log Nuriootpa Case log D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 4 of 14 21/02/08 Hardwood sawlog The majority of farm foresters in this region are committed to developing a strong native timber industry specialising in producing native timber species of potentially high value for furniture and other uses. There will need to be to sufficient resource established to encourage re-investment in processing and marketing infrastructure. D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 5 of 14 21/02/08 Forecast expenses cash flow Forecast growing costs [Insert your own cost regime into the Growing Costs sheets of the Farm Forestry Business Planning Tool and copy and ‘paste special’ the table into this document as a ‘picture’.] Sugar gum firewood Area 8.0 ha Sugar gums -firewood Tassie blue gums -woodlot Pine forest -sawlog Wide-spaced pines Hardwood forest -sawlog Inter-row spacing 3.2 m 2.5-3.5 2.5-3.5 2.5-3.0 4.0-6.0 2.5-3.5 Intra-row spacing 2.8 m Plants per ha 1116 2.5-3.5 2.5-3.5 2.2-2.8 2.5-3.5 2.5-3.0 Seedling price $0.35 Cost of seedlings $391 /ha $0.28-0.45 $0.25-0.40 $0.15-0.20 $0.15-0.50 $0.28-0.45 Labour rate /day Year Days/ha Labour/ha ($) Materials $/ha Con-tractor $/ha Mach-inery $/ha Cost $/ha Project total Site preparation cultivation 2002 $220 $220 $1,760 180-250 180-250 180-250 150-180 250-290 weed control 2002 $90 $90 $720 80-100 80-100 90-110 60-80 80-100 fencing vermin control other Planting planting 2002 391 $200 $591 $4,725 200 180 200 80 200 replanting fertiliser Post planting insect control 50-100 weed control 2003 $110 $110 $880 90-120 90-120 100-130 60-80 90-120 weed control 90-120 90-120 100-130 60-80 90-120 browsing other Management pest control 50-100 mid-rotation fertiliser mid-rotation fertiliser 150-250 150-250 150-250 150-250 150-250 post harvest clean up 200-500 200-500 200-500 200-500 200-500 trees/ha trees/ha range total trees/hr trees/hr range 1st pruning lift 250-450 18-28 2nd pruning lift 200-400 18-28 3rd pruning lift 250-350 15-26 1st non-comm thin 150-250 50-100 2nd non-comm thin 50-150 30-60 3rd non-comm thin 25-75 20-40 Cost reference table The year MUST be filled in for costs to be included in the cash flow Choose an appropriate cost within the ranges provided Step 1 – Enter the year of the activity Step 2 – Enter the associated costs for that activityD:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 6 of 14 21/02/08 Wide spaced pine Area 5.0 ha Sugar gums -firewood Tassie blue gums -woodlot Pine forest -sawlog Wide-spaced pines Hardwood forest -sawlog Inter-row spacing 5.0 m 2.5-3.5 2.5-3.5 2.5-3.0 4.0-6.0 2.5-3.5 Intra-row spacing 3.0 m Plants per ha 667 2.5-3.5 2.5-3.5 2.2-2.8 2.5-3.5 2.5-3.0 Seedling price $0.50 Cost of seedlings $333 /ha $0.28-0.45 $0.25-0.40 $0.15-0.20 $0.15-0.50 $0.28-0.45 Labour rate $120 /day Year Days/ha Labour/ha ($) Materials $/ha Con-tractor $/ha Mach-inery $/ha Cost $/ha Project total Site preparation cultivation 2002 $200 $200 $1,000 180-250 180-250 180-250 150-180 250-290 weed control 2002 $90 $90 $450 80-100 80-100 90-110 60-80 80-100 fencing vermin control other Planting planting 2002 333 $80 $413 $2,067 200 180 200 80 200 replanting fertiliser 2003 $20 $30 $50 $250 Post planting insect control 50-100 weed control 2003 $70 $70 $350 90-120 90-120 100-130 60-80 90-120 weed control 90-120 90-120 100-130 60-80 90-120 browsing other Management pest control 50-100 mid-rotation fertiliser 150-250 150-250 150-250 150-250 150-250 mid-rotation fertiliser 2020 $180 $30 $210 $1,050 150-250 150-250 150-250 150-250 150-250 post harvest clean up 2027 $300 $300 $1,500 200-500 200-500 200-500 200-500 200-500 trees/ha trees/ha range total trees/hr trees/hr range 1st pruning lift 2007 11.3 1350 $1,350 $6,750 450 250-450 2250 25 18-28 2nd pruning lift 2008 10.0 1200 $1,200 $6,000 400 200-400 2000 25 18-28 3rd pruning lift 2009 10.9 1313 $1,313 $6,563 350 250-350 1750 20 15-26 1st non-comm thin 2007 1.7 200 $200 $1,000 200 150-250 1000 75 50-100 2nd non-comm thin 2008 1.4 167 $167 $833 100 50-150 500 45 30-60 3rd non-comm thin 2009 1.0 125 $125 $625 50 25-75 250 30 20-40 Cost reference table The year MUST be filled in for costs to be included in the cash flow Choose an appropriate cost within the ranges provided Step 1 – Enter the year of the activity Step 2 – Enter the associated costs for that activityD:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 7 of 14 21/02/08 Fencing repairs are/are not required _____. New fencing is/is not required _______. The total time inputs required for the enterprise range from __–__ days per year, pending the operations planned. Tassie blue gum Area 12.0 ha Sugar gums -firewood Tassie blue gums -woodlot Pine forest -sawlog Wide-spaced pines Hardwood forest -sawlog Inter-row spacing 3.3 m 2.5-3.5 2.5-3.5 2.5-3.0 4.0-6.0 2.5-3.5 Intra-row spacing 2.7 m Plants per ha 1122 2.5-3.5 2.5-3.5 2.2-2.8 2.5-3.5 2.5-3.0 Seedling price $0.28 Cost of seedlings $314 /ha $0.28-0.45 $0.25-0.40 $0.15-0.20 $0.15-0.50 $0.28-0.45 Labour rate /day Year Days/ha Labour/ha ($) Materials $/ha Con-tractor $/ha Mach-inery $/ha Cost $/ha Project total Site preparation cultivation 2002 $200 $200 $2,400 180-250 180-250 180-250 150-180 250-290 weed control 2002 $90 $90 $1,080 80-100 80-100 90-110 60-80 80-100 fencing vermin control other Planting planting 2002 314 $180 $494 $5,931 200 180 200 80 200 replanting fertiliser 2003 $20 $30 $50 $600 Post planting insect control 2004 $40 $40 $480 50-100 weed control 2003 $100 $100 $1,200 90-120 90-120 100-130 60-80 90-120 weed control 90-120 90-120 100-130 60-80 90-120 browsing other Management pest control 50-100 mid-rotation fertiliser 150-250 150-250 150-250 150-250 150-250 mid-rotation fertiliser 150-250 150-250 150-250 150-250 150-250 post harvest clean up 200-500 200-500 200-500 200-500 200-500 trees/ha trees/ha range total trees/hr trees/hr range 1st pruning lift 250-450 18-28 2nd pruning lift 200-400 18-28 3rd pruning lift 250-350 15-26 1st non-comm thin 150-250 50-100 2nd non-comm thin 50-150 30-60 3rd non-comm thin 25-75 20-40 Cost reference table The year MUST be filled in for costs to be included in the cash flow Choose an appropriate cost within the ranges provided Step 1 – Enter the year of the activity Step 2 – Enter the associated costs for that activityD:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 8 of 14 21/02/08 Property costs [Insert your own cost regime into the Property Costs sheet of the Farm Forestry Business Planning Tool and copy and ‘paste special’ the table into this document as a ‘picture’.] The noxious weeds budget makes provision primarily for ______ control. Firebreak maintenance involves chemical firebreaks/ploughing/bracken control/slashing. Plantations are/are not to be insured until they are old enough to be salvageable after fire. Yr Noxious weeds Fire-breaks Rates Insurance Track-work Vehicle Interest Comments Nox wds F'breaks Rates Insurance Trackwork Vehicle % of costs applicable to forestry 30% 80% 30% 100% 80% 30% 30% 2002 -$ -$ -$ -$ -$ -$ 2003 -$ -$ -$ -$ -$ -$ 2004 -$ -$ -$ -$ -$ -$ 2005 -$ -$ -$ -$ -$ -$ 2006 -$ -$ -$ -$ -$ -$ 2007 -$ -$ -$ -$ -$ -$ 2008 -$ -$ -$ -$ -$ -$ 2009 -$ -$ -$ -$ -$ -$ 2010 -$ -$ -$ -$ -$ -$ 2011 -$ -$ -$ -$ -$ -$ 2012 -$ -$ -$ -$ -$ -$ 2013 -$ -$ -$ -$ -$ -$ 2014 -$ -$ -$ -$ -$ -$ 2015 -$ -$ -$ -$ -$ -$ 2016 -$ -$ -$ -$ -$ -$ 2017 -$ -$ -$ -$ -$ -$ 2018 -$ -$ -$ -$ -$ -$ 2019 -$ -$ -$ -$ -$ -$ 2020 -$ -$ -$ -$ -$ -$ 2021 -$ -$ -$ -$ -$ -$ 2022 -$ -$ -$ -$ -$ -$ 2023 -$ -$ -$ -$ -$ -$ 2024 -$ -$ -$ -$ -$ -$ 2025 -$ -$ -$ -$ -$ -$ 2026 -$ -$ -$ -$ -$ -$ 2027 -$ -$ -$ -$ -$ -$ 2028 -$ -$ -$ -$ -$ -$ 2029 -$ -$ -$ -$ -$ -$ 2030 -$ -$ -$ -$ -$ -$ 2031 -$ -$ -$ -$ -$ -$ 2032 -$ -$ -$ -$ -$ -$ 2033 -$ -$ -$ -$ -$ -$ 2034 -$ -$ -$ -$ -$ -$ 2035 -$ -$ -$ -$ -$ -$ 2036 -$ -$ -$ -$ -$ -$ 2037 -$ -$ -$ -$ -$ -$ 2038 -$ -$ -$ -$ -$ -$ 2039 -$ -$ -$ -$ -$ -$ Full annual cost for property Pro rata deductible costs used in the cash flow sheet For example, 30ha of forestry in 100ha propertyD:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 9 of 14 21/02/08 Forecast income cash flow [Insert your own cost regime into the Revenue sheet of the Farm Forestry Business Planning Tool and copy and ‘paste special’ the table into this document as a ‘picture’.] Plantation name Comments Area Operation Year Yield/ha $/unit Sugar gum firewood 8.0 Incentive 2002 $250 Sugar gum firewood 8.0 Clear fell 2012 160 $55 Sugar gum firewood 8.0 Sugar gum firewood 8.0 Sugar gum firewood 8.0 Sugar gum firewood 8.0 Sugar gum firewood 8.0 Tassie blue gum 12.0 Incentive 2002 $350 Tassie blue gum 12.0 Clear fell 2012 230 $20 Tassie blue gum 12.0 Tassie blue gum 12.0 Tassie blue gum 12.0 Tassie blue gum 12.0 Tassie blue gum 12.0 Wide spaced pine 5.0 Incentive 2002 $250 Wide spaced pine 5.0 T1 2020 80 $16 Wide spaced pine 5.0 Clear fell 2027 450 $40 Wide spaced pine 5.0 Wide spaced pine 5.0 Wide spaced pine 5.0 Wide spaced pine 5.0 Wide spaced pine 5.0 Wide spaced pine 5.0 Obtain expert advice in interpreting your growing conditions and selecting yields and values. Don't fall in to the trap of thinking you will always get the fastest growth rates and best prices. Make sure you manage your forest well in terms of: -weed control -thinning on time -pruning on time Plant a large enough area to warrant harvesting and make sure that there is good access for harvesting machinery.D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 10 of 14 21/02/08 Forecast net cash flow In comparison with the early up-front expenditure for establishment and the on-going tending costs, the income stream from the forestry is ‘lumpy’ by the very nature of forestry operations (as illustrated in the table). The long lead-time till from establishment to profitability highlights the need for external incomes for the owners during the early stages of the enterprise. Year Property costs Total Sugar gum firewood Tassie blue gum Wide spaced pine Sugar gum firewood Tassie blue gum Wide spaced pine 2002 -$7,205 -$9,411 -$3,517 $2,000 $4,200 $1,250 -$12,683 2003 -$880 -$1,800 -$600 -$3,280 2004 -$480 -$480 2005 2006 2007 -$7,750 -$7,750 2008 -$6,833 -$6,833 2009 -$7,188 -$7,188 2010 2011 2012 $70,400 $55,200 $125,600 2013 2014 2015 2016 2017 2018 2019 2020 -$1,050 $6,400 $5,350 2021 2022 2023 2024 2025 2026 2027 -$1,500 $90,000 $88,500 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 -$8,085 -$11,691 -$28,438 $72,400 $59,400 $97,650 $181,236 Establishment & management costs Revenue -$20,000 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,0002002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 11 of 14 21/02/08 Appendix 1 — Professional advice [Include the reports from any professional advice you may have sought about property, forest value, site suitability, costs, yields, values and returns] D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 12 of 14 21/02/08 Appendix 2 — Industry overview Globally and nationally Despite short-term setbacks to economic growth in the Asian region, demand for timber products is still expected to almost double in the next 15 years. As local timber supplies in the South East Asian countries decline and demand increases, Australian forest growers could well be in an enviable position, being so close to a major developing market. Australia’s forest resources consist of hardwood forests (mainly native forests) and softwood forests (mainly pine plantations). There are 40.7 million ha of native forest in Australia, but only 12.1 million ha are managed for wood production, of which less than 1% is harvested each year. In 1989, around two thirds of log removals in Australia were from native hardwood forests, with the remainder coming from softwood plantations (NAFI 1990). Over the last few years, softwood has overtaken hardwood production, and the trend is expected to continue with softwood dominating timber supply by the year 2020. Although Australia exports hardwood woodchips, we still import far more forest products than we export and this trend is increasing. In 1994/95 there was a $2 billion trade deficit in forest products (ABARE 1995); this equates to around 10% of the National Balance of Trade deficit. Imports, largely from Canada, the United States, Malaysia and recently, New Zealand, can largely be substituted if we increase the area of our plantations. The 2020 vision is a blueprint for an industry and government partnership to treble the nation’s plantations forest estate by the year 2020. Regionally About 11,000 ha of pines and more recently about 1000 ha of hardwood plantations have been established in the Mount Lofty Ranges region. Around 10% of the pine plantations are privately owned. The lack of a small roundwood market requires many growers to non-commercially thin plantations in order to produce valuable larger-diameter sawlogs. Despite the limited competition in the sawmilling sector, recent shortfalls in log supply from State Forests has led to stronger demand for log from private growers. The Mount Lofty Ranges Farm Forestry Group commissioned a farm forestry Feasibility Study and is implementing detailed Strategic Plan to foster farm forestry. The publication Investment prospects for forestry in the Adelaide Hills indicates that there is potentially around 170,000 ha suitable cleared land receiving more than 650mm rainfall for timber plantations. In these areas, satisfactory yields for softwoods and Tasmanian blue gum (16–25 m3/ha/yr) plantations should be achievable. The drier fringes or the region are well suited to firewood production. Farm forestry offers small-scale landholders with off-farm income a potentially more viable and sustainable land use; it offers large-scale graziers an opportunity for diversification. Despite more than 300 fires occurring in State-owned forests since 1985, the average annual area burnt has only been 33ha or 0.3% of the plantation estate. Fire insurance premiums of 1% of the standing value have been 0 50 100 150 200 250 Asia C& N America Europe Russian Fed Sth America Africa Oceania World sawn timber consumption (m3 x 1,000,000) 2010 (projected) 1993 Neufeld 1996D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 13 of 14 21/02/08 typical of insurance costs. Other pests and diseases for forests are considered to comparable with other forms of primary production. Government-funded demonstration plantings, species trials and technical support are providing encouragement to small-scale growers. The annual 300,000 tonne Adelaide firewood market provides an opportunity to take advantage of high wholesale prices and low transport costs. Many consumers prefer plantation-grown firewood. A premium price seems likely. D:\Docstoc\Working\ActivePDF\Input\$ASQBusiness Plan template[4].doc.doc Page 14 of 14 21/02/08 Appendix 3 — Other sources of information used [The following publications are generally all available from the Mount Lofty Ranges Catchment Centre, Upper Level, corner of Mann & Walker Streets, Mt Barker. Delete those that you have not used. Add others that you have used.] ◊ Farm Forestry Notes, PIRSA’s fact sheet series on numerous topics ◊ Farmtrees for the Mount Lofty Ranges — a regional agroforestry handbook, PIRSA 178 pages ◊ Farm Revegetation Design – optimising your benefits, PIRSA 50 pages ◊ 2002 FFIS sheet #1 — Introduction, Mount Lofty Ranges Farm Forestry Group 4 pages ◊ 2002 FFIS sheet #2 — Working out what to plant, Mount Lofty Ranges Farm Forestry Group 4 pages ◊ Australian Forest Grower, Australian Forest Growers national quarterly magazine ◊ Agroforestry News, Victorian agroforestry networks quarterly magazine ◊ 2002 FFIS sheet #5 — Being tax effective, Mount Lofty Ranges Farm Forestry Group 1 page ◊ Getting Started in Farm Forestry, Australian Forest Growers 16 pages ◊ Guidelines for establishing and managing commercial forest plantations in SA, ForestrySA 8 pages ◊ Investment prospects for forestry in the Adelaide Hills, Mount Lofty Ranges Farm Forestry Group 8 pages ◊ Farm forestry feasibility study, Mount Lofty Ranges Farm Forestry Group ◊ South Australian farm forestry directions, SA Farm Forestry Coordinating Group ◊ 2002 FFIS sheet #4 — Forest Property Act, Mount Lofty Ranges Farm Forestry Group 2 pages ◊ PlanningSA guidelines on applications to local government for change in land use to forestry