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)
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‘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. 2. 3. 4. 5. 6. Establishing plantations Pruning and spacing Non-commercial thinning Firebreak maintenance Weed control 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.
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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 $50/t should be additional profit in the pocket of the grower. All that is needed is an efficient harvesting and marketing system. Export woodchip Unlike the Green Triangle, there is currently no export woodchip industry in this region. However, the viability of developing such an industry is being investigated with prospective investment partners. Should this plantation project not eventuate, existing and future Tassie blue gum plantings should be marketable as firewood. The wood density (firewood marketability) increases with the age of the trees. Pine The current local timber industry is geared to growing and utilising radiata pine sawlog. Pine currently provides the best potential for financial return with least risk. There is every reason to presume that State government forests will continue to supply and maintain these or equivalent markets. Here is a list of some current purchasers.
Purchaser Brownwood Panels SASawmills Recut Industries – Monarto Mt Compass Timber Nuriootpa Product Peeler log Small and large diameter sawlog Small diameter sawlog & preservation Case log Case log
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Hardwood sawlog The majority of farm foresters in this region are committed to developing a strong native timber industry specialising in producing native timber species of potentially high value for furniture and other uses. There will need to be to sufficient resource established to encourage re-investment in processing and marketing infrastructure.
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Forecast expenses cash flow
Forecast growing costs
[Insert your own cost regime into the Growing Costs sheets of the Farm Forestry Business Planning Tool and copy and ‘paste special’ the table into this document as a ‘picture’.]
Sugar gum firewood
Area Inter-row spacing Intra-row spacing Seedling price Labour rate The year MUST be filled in for costs to be included in the cash flow Year Days/ha Labour/ha ($) Materials $/ha 8.0 ha 3.2 m 2.8 m $0.35 /day
Step 1 – Enter the year of the activity Step 2 – Enter the associated costs for that activity
Cost reference table
Sugar gums firewood 2.5-3.5 2.5-3.5 $0.28-0.45 Tassie blue gums woodlot 2.5-3.5 2.5-3.5 $0.25-0.40 Pine forest sawlog 2.5-3.0 2.2-2.8 $0.15-0.20 Wide-spaced pines 4.0-6.0 2.5-3.5 $0.15-0.50
Choose an appropriate cost within the ranges provided
Plants per ha Cost of seedlings
1116 $391 /ha
Hardwood forest sawlog 2.5-3.5 2.5-3.0 $0.28-0.45
Con-tractor $/ha
Mach-inery $/ha
Cost $/ha
Project total
Site preparation
cultivation weed control fencing vermin control other 2002 2002 $220 $90 $220 $90 $1,760 $720 180-250 80-100 180-250 80-100 180-250 90-110 150-180 60-80 250-290 80-100
Planting
planting replanting fertiliser 2002 391 $200 $591 $4,725 200 180 200 80 200
Post planting
insect control weed control weed control browsing other 2003 $110 $110 $880 90-120 90-120 50-100 90-120 90-120 100-130 100-130 60-80 60-80 90-120 90-120
Management
pest control mid-rotation fertiliser mid-rotation fertiliser post harvest clean up 1st pruning lift 2nd pruning lift 3rd pruning lift 1st non-comm thin 2nd non-comm thin 3rd non-comm thin
50-100 150-250 200-500 trees/ha 150-250 200-500 trees/ha range 250-450 200-400 250-350 150-250 50-150 25-75 150-250 200-500 total 150-250 200-500 trees/hr 150-250 200-500 trees/hr range 18-28 18-28 15-26 50-100 30-60 20-40
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Wide spaced pine
Area Inter-row spacing Intra-row spacing Seedling price Labour rate The year MUST be filled in for costs to be included in the cash flow Year Days/ha Labour/ha ($) Materials $/ha 5.0 5.0 3.0 $0.50 $120 ha m m /day
Step 1 – Enter the year of the activity Step 2 – Enter the associated costs for that activity
Cost reference table
Sugar gums firewood 2.5-3.5 2.5-3.5 $0.28-0.45 Tassie blue gums woodlot 2.5-3.5 2.5-3.5 $0.25-0.40 Pine forest sawlog 2.5-3.0 2.2-2.8 $0.15-0.20 Wide-spaced pines 4.0-6.0 2.5-3.5 $0.15-0.50
Choose an appropriate cost within the ranges provided
Plants per ha Cost of seedlings
667 $333 /ha
Hardwood forest sawlog 2.5-3.5 2.5-3.0 $0.28-0.45
Con-tractor $/ha
Mach-inery $/ha
Cost $/ha
Project total
Site preparation
cultivation weed control fencing vermin control other 2002 2002 $200 $90 $200 $90 $1,000 $450 180-250 80-100 180-250 80-100 180-250 90-110 150-180 60-80 250-290 80-100
Planting
planting replanting fertiliser 2002 2003 333 $20 $80 $30 $413 $50 $2,067 $250 200 180 200 80 200
Post planting
insect control weed control weed control browsing other 2003 $70 $70 $350 90-120 90-120 50-100 90-120 90-120 100-130 100-130 60-80 60-80 90-120 90-120
Management
pest control mid-rotation fertiliser mid-rotation fertiliser post harvest clean up 1st pruning lift 2nd pruning lift 3rd pruning lift 1st non-comm thin 2nd non-comm thin 3rd non-comm thin
2020 2027 2007 2008 2009 2007 2008 2009 11.3 10.0 10.9 1.7 1.4 1.0 1350 1200 1313 200 167 125
$180 $300
$30
$210 $300 $1,350 $1,200 $1,313 $200 $167 $125
$1,050 $1,500 $6,750 $6,000 $6,563 $1,000 $833 $625
150-250 150-250 200-500 trees/ha 450 400 350 200 100 50
50-100 150-250 150-250 200-500 trees/ha range 250-450 200-400 250-350 150-250 50-150 25-75
150-250 150-250 200-500 total 2250 2000 1750 1000 500 250
150-250 150-250 200-500 trees/hr 25 25 20 75 45 30
150-250 150-250 200-500 trees/hr range 18-28 18-28 15-26 50-100 30-60 20-40
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Tassie blue gum
Area Inter-row spacing Intra-row spacing Seedling price Labour rate The year MUST be filled in for costs to be included in the cash flow Year Days/ha Labour/ha ($) Materials $/ha 12.0 ha 3.3 m 2.7 m $0.28 /day
Step 1 – Enter the year of the activity Step 2 – Enter the associated costs for that activity
Cost reference table
Sugar gums firewood 2.5-3.5 2.5-3.5 $0.28-0.45 Tassie blue gums woodlot 2.5-3.5 2.5-3.5 $0.25-0.40 Pine forest sawlog 2.5-3.0 2.2-2.8 $0.15-0.20 Wide-spaced pines 4.0-6.0 2.5-3.5 $0.15-0.50
Choose an appropriate cost within the ranges provided
Plants per ha Cost of seedlings
1122 $314 /ha
Hardwood forest sawlog 2.5-3.5 2.5-3.0 $0.28-0.45
Con-tractor $/ha
Mach-inery $/ha
Cost $/ha
Project total
Site preparation
cultivation weed control fencing vermin control other 2002 2002 $200 $90 $200 $90 $2,400 $1,080 180-250 80-100 180-250 80-100 180-250 90-110 150-180 60-80 250-290 80-100
Planting
planting replanting fertiliser 2002 2003 314 $20 $180 $30 $494 $50 $5,931 $600 200 180 200 80 200
Post planting
insect control weed control weed control browsing other 2004 2003 $40 $100 $40 $100 $480 $1,200 90-120 90-120 50-100 90-120 90-120 100-130 100-130 60-80 60-80 90-120 90-120
Management
pest control mid-rotation fertiliser mid-rotation fertiliser post harvest clean up 1st pruning lift 2nd pruning lift 3rd pruning lift 1st non-comm thin 2nd non-comm thin 3rd non-comm thin
150-250 150-250 200-500 trees/ha
50-100 150-250 150-250 200-500 trees/ha range 250-450 200-400 250-350 150-250 50-150 25-75
150-250 150-250 200-500 total
150-250 150-250 200-500 trees/hr
150-250 150-250 200-500 trees/hr range 18-28 18-28 15-26 50-100 30-60 20-40
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.
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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’.]
Yr % of costs applicable to forestry 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
Noxious weeds 30%
Fire-breaks 80%
Rates 30%
Insurance 100%
Track-work 80%
Vehicle 30%
Interest 30%
Comments
For example, 30ha of forestry in 100ha property
Nox wds
F'breaks
Rates
Insurance
Trackwork
Vehicle
Full annual cost for property $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Pro rata deductible costs used in the cash flow sheet $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
-
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.
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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 Sugar gum firewood Sugar gum firewood Sugar gum firewood Sugar gum firewood Sugar gum firewood Sugar gum firewood Sugar gum firewood Tassie blue gum Tassie blue gum Tassie blue gum Tassie blue gum Tassie blue gum Tassie blue gum Tassie blue gum Wide spaced pine Wide spaced pine Wide spaced pine Wide spaced pine Wide spaced pine Wide spaced pine Wide spaced pine Wide spaced pine Wide spaced pine Comments Area 8.0 8.0 8.0 8.0 8.0 8.0 8.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Operation Incentive Clear fell Year 2002 2012 Yield/ha
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.
160
$/unit $250 $55
Incentive Clear fell
2002 2012
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.
230
$350 $20
Incentive T1 Clear fell
2002 2020 2027
80 450
$250 $16 $40
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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 Establishment & management costs
Sugar gum firewood Tassie blue gum Wide spaced pine
Property costs
Sugar gum firewood
Revenue
Tassie blue gum Wide spaced pine
Total
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
-$7,205 -$880
-$9,411 -$1,800 -$480
-$3,517 -$600
$2,000
$4,200
$1,250
-$12,683 -$3,280 -$480 -$7,750 -$6,833 -$7,188
-$7,750 -$6,833 -$7,188 $70,400 $55,200
$125,600
-$1,050
$6,400
$5,350
-$1,500
$90,000
$88,500
-$8,085
-$11,691
-$28,438
$72,400
$59,400
$97,650
$181,236
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18 20 20 20 22 20 24 20 26 20 28 20 30 20 32 20 34 20 36 20 38
-$20,000
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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]
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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.
Oceania Africa Sth America Russian Fed Europe C& N America Asia 0 Neufeld 1996 50 100 150 200 World sawn timber consumption (m 3 x 1,000,000) 250 2010 (projected) 1993
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
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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.
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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
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