How does the Woodmetrics service differ?
The most important key differences that sets Woodmetrics apart are:
1. WOODMETRICS GETS EXPOSURE TO MORE MARKETS
The benefits of marketing a product to more than one buyer are the same for wood as any other product:
more buyers equals more competition; and
different buyers value the same forest differently resulting in different bid prices – one buyer will only provide one price.
No log buyer has access to all domestic and export markets. The question is, which buyer has access to the most valuable mix of markets at the time, or has the greatest need for the wood? The industry norm of selling to only one buyer removes the opportunity for significant gains in value by selling to different markets and through greater bidder competition. Selling to one buyer limits the value of the forest to the value that buyer can extract from their particular market mix.
Plus, buyer differences in harvesting and cartage costs can easily account for a 10% variation in bid prices. And, if logs are being exported, different buyers will have different shipping rates, different exchange rate levels and other factors that can account for another 10%. As a seller, forest owners won’t get exposure to these differences unless they sell their trees through a competitive tender process.
Rayonier Timberlands in the US put this theory into practice by making its own harvesting and marketing division compete for the purchase of its trees. They found that this resulted in a 14% increase in returns.
Private forest owners too have benefited from exposing their trees to more than one buyer. A well known Hawke’s Bay forester saw the value in this approach in 2000 when he presented his pruned stand to two large and well known buyers. The result was that one buyer’s bid was more than 25% greater than the other.
2. WOODMETRICS MARKETS STANDING TREES, NOT LOGS
Stumpage selling is the method of woodsale where trees are sold on stump – ie the value of the forest is determined while the trees are still standing. By selling their trees through a competitive stumpage process, the forest owner is marketing trees rather than logs and leaving the log making, value optimisation and log marketing to the buyer who has paid the top price. It is up to the successful buyer to maximise the value of the log making because they have the best understanding of the markets into which they sell the logs.
3. WOODMETRICS PROVIDES BUYERS WITH BETTER PRE-SALE INFORMATION
When it comes to marketing and selling their trees, some private forest owners operate with incomplete information. The Woodmetrics service is designed to transfer the value that the private forest owner can forego (conservatively estimated at 10%) by providing better pre-sale information. Buyers discount their prices because of a lack of credible and accurate information so the Woodmetrics service aims to reduce buyers discounting their prices and increase competition by marketing better pre-sale information to more buyers. Only with superior pre-sale information will buyers reduce the discount they apply to their purchase bids.
In addition, because Woodmetrics has the experience and expertise, the pre-sale forest analysis is carried out as efficiently and accurately as possible. This results in reduced costs for the forest owner and better prices because the analysis is done for the buyers before they bid.
4. WOODMETRICS OFFERS PAYMENT PROTECTION INSURANCE TO THE FOREST OWNER
Instances of growers not getting paid for their trees are too common. To address the risk of non-payment in the event a buyer becomes insolvent, Woodmetrics is able to offer payment protection insurance - at no extra charge.
As part of the bidder compliance checks that Woodmetrics undertakes before the sale close date, Woodmetrics gets an independent financial assessment of the bidders. Those who qualify (and most do qualify) will be automatically covered by Woodmetrics’ payment protection insurance. Those that don’t qualify aren’t covered. However in the event a non qualifying bidder is the highest bidder on the day, it is still the owners’ call as to whether that bid is accepted.
5. WOODMETRICS OPTION OF DIFFERENT COMMISION STRUCTURES - YOU CHOOSE
Growers can engage Woodmetrics on the basis of a commission that is based on a fixed rate ($) per tonne basis, a fixed percentage rate per tonne, or an innovative shared risk shared gain commission structure. It’s your choice.
The first two options are common in the industry. The shared risk/shared gain commission is where Woodmetrics is prepared to put part of its commission on the line if the reserve price is not met. For additional information please contact your regional account representative.
6. WOODMETRICS IS NOT INVOLVED IN LOG TRADING AND HAS NO COMMITMENTS TO LOG BUYERS
Because Woodmetrics is not involved in log trading and has no commitments to any log buyer, the Woodmetrics service is able to act solely in the interests of the forest owner and is able to provide a completely transparent woodsale service.