Forest Harvest & Haul Costs – Australia, November 2018

14th November 2018

Margules Groome have developed a quarterly harvest and haulage cost index for Australian plantation operations.

The index includes both softwood and hardwood plantations and is based on actual price indexation mechanisms used by industry (Figure 1).

Although the index is made up of several indicators, the most volatile of which is fuel prices which should be no surprise to those who know. Note the haulage index is slightly higher than harvest due to the greater weighting of fuel prices (because trucks use more diesel and receive less tax credits).

The index shows the spike in harvest and haulage costs in 2007-2008 driven by sharp increases in fuel prices, the impact of high fuel prices during the perfect storm in 2012-2013 which only compounded the problems experienced by the forest industry, followed by the drop-in fuel prices to mid-2016 boosting stumpage returns without commensurate delivered log price increases. In a worrying sign, fuel prices are once again on the rise.

The index is current to June 2018, but the prediction shows continuing fuel price increases. The latest fuel prices of 149-155 cents/L would place the current index above prediction and at its highest point since early 2004. Although notoriously hard to predict, with OPEC constraining oil production one would expect that the upward trend in costs to continue for the foreseeable future. Mill door and wharf gate log price rises will be necessary to maintain stumpage returns.