UPM wants forests for lease in Finland

Large forest plantations would bring professionalism to wood trade

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Sixten Sunabacka, Head of UPM Forest, North Europe, proposes the establishment of a forest rental system in Finland. He says that such a move would increase the average size of forest holdings.
      Sunabacka sees agriculture as a model. Farmers have long leased out their farmland to each other. Thanks to leased farmland, the average size of individual farms has increased sharply in recent years.
      One of the reasons behind Sunabacka’s idea is the splintering of forest ownership in Finland, and a change in values among forest owners. According to figures put out by the National Land Survey of Finland, the average size of forest holdings of a single owner has been cut in half since the war.
     
The dispersal of forest holdings is seen to make trade in timber more difficult. When each single owner has less wood to sell, the size of areas to be felled declines.
      Forestry machinery needs to be moved around from one place to another more frequently, which raises the costs of felling. When supply exceeds demand, small plots of forest are more difficult to sell.
      Sunabacka is worried about the impact that the values of forest owners is having on the supply of wood to industry. According to a survey by the Pellervo Economic Research Institute PTT, the main concern for many forest owners is to get free firewood from their own forests. Almost as important is the possibility to get a Christmas tree from their own land.
      Income from the sale of wood is only in 8th place, and ranking 13th is to have a profitable investment.
     
“If economic values are to be maintained, structural change is needed in forest ownership. It is high time to react”, Sunabacka says.
      The goal has been set in the national forest programme to double the size of individual forest holdings by 2050. “The structural change should happen together with industrial change.”
     
The starting point in Sunabacka’s model is a ten-year forest plan to be drawn up for each forest holding. In the rental contract it would be agreed that work that was dictated in the forest plan would be done within ten years.
      The rent for the forest land would be set as it is in agriculture. “A field has a certain yield, which determines the rent, which is paid each year onto the bank account of the owner.”
      The rent would not be set for ten years. If the market situation changes, the price could be negotiated according to terms set in the lease.
     
For the system to operate efficiently there should be some kind of a market place. One possibility could be the Forestry Development Centre Tapio.
      Sunabacka says that the tenants would primarily be forestry entrepreneurs, and not wood processing companies.
      “For instance, owners who now have 75 hectares of forest would be able to increase their holdings to about 200 hectares, which would make forestry the entrepreneur’s most important source of income.”
      Forest tenants would need a reliable buyer for the wood. “Some forestry entrepreneurs might be players, but others might seek a partnership with the industry.
      “”I believe that in the rental model the wood market would start to operate more broadly according to the rules of business - that is, with one business competing with the other. The situation in Finland now is that buyers of wood represent business, and sellers, according to the reports, are often hobbyists without business goals for their forest ownership.”
     
At the Central Union of Agricultural Producers and Forest Owners (MTK), forest director Juha Hakkarainen feels that alternative solutions should be considered in the field. One concern linked with Sunabacka’s proposal is the difficulty of knowing changes in supply and demand in advance.
      Hakkarainen feels that leasing a field is different from leasing a forest. “There are so many more values linked with a forest than with a field.”


Previously in HS International Edition:
  Forest money is flowing away from Finland (21.8.2009)

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