Realising the potential of farm forestry-making money out of farm trees

i m b e r s
Sustainably Managed Australian Regional Timbers
S M A R T
Making money out of farm trees
Summarising the approaches of SMARTimbers
Cooperative in harvesting, processing and marketing.
Realising the potential
of farm forestry
Reviewers’ Comments
“What an excellent document. The most lucid, honest and fact-filled paper on farm forestry I have read in
11 years of involvement with farm forestry. No promises of Farm Forestry Nirvana, just real facts born of
practical experience”
“Your...publication is impressive, exhaustive and comprehensive. I particularly like the approach of ‘this is
how we did it’, as opposed to ‘this is how it should be done’. The business management angle is a good
case for any prospective co-ops”

Published by SMARTimbers Cooperative
Andrew Lang, with chapters by Gib Wettenhall and David Fisken.

Authors. The chapter on capital raising was written by David Fisken. Gib Wettenhall wrote the chapter
on marketing and contributed to the chapter on forming a grower group. Other content and photos were
provided by Andrew Lang. All are currently board members of SMARTimbers Cooperative.
Acknowledgements. SMARTimbers is indebted to the Central Victorian Farm Plantations (CVFP) Private
Forestry Development Committee for vital core operating funding that helped us get though the first
precarious years. And we acknowledge the enduring support of all members of the cooperative, who share
the vision of what farm forestry can achieve. The production of this guide was funded by the Victorian
Department of Primary Industries.
Disclaimer. This publication contains general statements based on experience of farm foresters. The views
and opinions expressed in this publication are those of SMARTimbers Cooperative and do not necessarily
reflect those of the Department of Primary Industries or the State of Victoria. The State of Victoria and
SMARTimbers Cooperative and the employees or directors of those parties do not guarantee that the
publication is without flaw of any kind or is wholly appropriate for your particular purposes, and therefore
disclaims all liability for any error, loss or other consequence that may arise directly or indirectly from the
use of or reliance on any information in this publication.
© SMARTimbers Cooperative 2007.
The Journal of the Department of Agriculture (Victoria), 8 December 1906. Vol IV, Part 12.
A plea for tree planting and tree preservation.
J. M. Reed, I.S.O., Surveyor-General
‘Even to the most casual observer, when travelling over a great part of the State of Victoria, the
absence of tree shelter on farms and grazing properties is very evident. And it is surprising that so many
landowners fail to recognise the great importance of tree-planting. If the authorities of this State, when
disposing of Crown lands, had made compulsory provision for the maintenance of timber growth, or the
planting of trees on a percentage of every holding, it would have been a great benefit, and if farmers could
be made to realise the direct gain to themselves by meeting this requirement, much good would result. The
progress of settlement has necessarily involved the destruction of an immense quantity of timber, and as
our own experience has clearly proved that rainfall conditions are largely affected by tree cover, it may
be accepted that the one cannot be removed without prejudice to the other. Many predictions of ultimate
disaster from the clearing of our timbered lands have been uttered, but, without accepting these, it may be
asserted that nothing but good can result from generous tree propagation.’

Contents
Glossary and definitions iv
Introduction 1
Section 1: The Business Structure 2
1. Economics of farm sawlog production 3
The business case 3
Non-wood products 3
The economics of multi-purpose ‘integrated’
woodlots 3
Persistent myths 4
2. Forming a Grower Trading Group 5
Checklist to consider before establishing a
commercial trading group 5
Group structures 5
Group size, membership benefits and developing
alliances 6
SMARTimbers board meetings and
decision-making process 7
Start-up and external funding 7
Business planning 7
Rules and governance 8
3. Raising Capital 9
Raising equity to fund working capital 9
Using debentures (debt financing) 9
Using syndicates 9
Section 2: The Supply Chain 11
4. Log Supply and Harvest 12
Stand assessment 12
Grading of logs and other roundwood 12
Harvesting options and approximate costs 13
Purchase and processing options 13
Economies of scale, costs, potential points of loss 14
Retention of habitat trees 14
5. Transport and Milling 15
Dimensions and grading 15
Milling recovery 15
Docking 16
Sticking out or racking out 16
Drying and storage 16
Drying costs 17
Agreements 17
6. Operational Issues 19
Forms, agreements and contracts 19
Minimising risks and liabilities 19
Risk and OH&S issues in the chain of supply 20
Insurance: product, product liability, directors’
negligence, dealings with members 20
Member services, training, indemnity 20
Point of sale information, product advice 20
Cost control 21
Invoicing, payment systems, debts and
accounting systems 21
Labelling, tracking, accounting 21
Servicing and dispatching orders 21
Research and product development 22
7. Options for Secondary Product and Other
Value-Adding and Cashflow Options 23
Secondary and defective logs 23
Small-diameter logs 24
Firewood 24
Posts and poles 24
Chipping thinnings and harvest waste (slash) 24
Section 3: The Market Place 25
8. Marketing – Seeking a Marketing Model
Suiting Aspirations of Farm Foresters 26
Raising sugar gum’s profile 26
Targeting architects 26
Marketing officer and kit 26
Well-designed website 27
Branding the business 27
Identifying a market niche 28
Pricing 28
Products 28
9. Certification, Sustainable Forestry
Management and Chain of Custody 29
Costs and benefits of certification 29
Sustainable forestry management in practice 29
A low-cost, AFS-based farm forestry
management plan 30
Chain of custody 31
Appendices
1. References and Resources 32
Websites 32
Reference topics and relevant Victorian or
national authorities 32
Books and papers 32
2. Summary of SMARTimbers Production
and Other Activity Areas 33
3. SMARTimbers Membership Charter 35
4. SMARTimbers Sugar Gum Products:
Recommendations for Use 34
5. Examples of Forms 35
SMARTimbers Harvest Management
Agreement 35
SMARTimbers Joint Venture Draft
Sawmilling Agreement Inside Back cover
Contact US Back cover
Realising the Potential of Farm Forestry iii

Glossary and Definitions
In this guide we have tried to minimise jargon and technical terms. However, here are some terms that may need to be
defined or explained.
association: often used interchangeably with ‘group’,
but in Scandinavia may be equivalent to a
cooperative.
backsawn board: milled with the width roughly parallel
with the growth rings (see also quartersawn board).
bow, spring and twist: the three ways green board can
move out of true when allowed to dry unrestrained.
Sometimes boards will do all three at once.
checking: surface cracks that develop particularly
on the face of backsawn boards exposed to the
weather.
docking: the removal of sections of board that are weak
or unsightly due to dead knots, rot, pith. etc., thus
creating shorts of quality board and unsaleable
reject pieces.
end splitting: the cracking of log ends and board ends
as these parts dry.
farm forestry: in its pure sense, it is multi-purpose
woodlots integrated into the farm layout,
designed and sited to add to farm productivity.
In Scandinavia and northern Europe, a near
equivalent is called family forestry.
feature: the ‘defect’ that may be left in dressed board.
It may be pinhole borer or grub tracks, minor
sapwood, live knots or streaks of gum vein – things
that do not weaken or disfigure the board. Usually
boards full of feature are called ‘feature grade’,
boards with some feature are called ‘standard
grade’, and those free of feature are called ‘select
grade’.
feedstock: roughsawn boards racked out and drying .
gangsaws: there are single-blade saws, twin-blade
saws, and multi-blade saws, or gangsaws. Some
gangsaws also use reciprocating blades similar to
power hacksaw blades.
green: the term used for the log or roundwood after
felling or for the boards shortly after milling .
habitat trees: we use this term to mean ‘trees with
hollows’.
mill logs or sawlogs: while the industry has many
grades of sawlogs, we have one – ‘good enough’,
i.e., worth sending to the mill. These come as larger
diameter and smaller diameter.
milling oversize: our decking is profiled to 85x19 mm.
Since wood shrinks up to 10% as it dries, the
feedstock for this is milled oversize to 106x28 mm.
So after it is air dried, as it goes into the profiling
machine, it will have shrunk to approximately
100x25 mm.
non-wood products: a woodlot produces timber and
numerous other products. Honey, foliage, shelter,
carbon sequestration and environmental benefits
are among them.
on the stump, standing, or stumpage: A way of
expressing the net price the landowner gets for the
logs and other roundwood.
packs: the dressed or profiled product is sent to a job in
strapped, wrapped packs. These can be of whatever
weight, volume or length the order requires.
plantations: commonly used term for mature sugar
gum shelterbelts in south-west Victoria. The new
plantings are being called woodlots.
profiling, dressing, or moulding: removing the rough
surface of the board (dressing) and leaving a
smooth surface, often shaped into other than a flat-
sided configuration (profiling or moulding).
quartersawn board: milled with the width at right angles
to the growth rings (see also backsawn board).
sapwood: the growing part of the log just under the
bark. With many species, it must be discarded, thus
reducing recovery, as it is weaker or prone to borer
or has a contrasting colour. With other species, it is
none of these and is retained. With sugar gum, it
is removed due to being borer prone, although the
colour contrast is attractive, and for internal use it
can be treated inexpensively.
racking out or sticking out: freshly sawn green boards
are laid out in racks and separated by milled
‘sticks’. This allows air to flow over the surfaces,
and allows steady drying.
racks: our racks are normally 5 m long, 1.2 m wide
and about 1 to 1.5 m high. They weigh about 1.5
to 2 tonnes and, if full of 100x25 mm boards, will
contain about 400 linear metres.
recovery: the volume of racked-out board expressed as
a percentage of the initial log.
roughsawn board: the board as it comes off the saw.
Some of our product is sold roughsawn, e.g.,
boardwalk decking, but most is sold dressed.
roundwood: includes large and small logs and small-
diameter straight material.
value-adding: where every dollar spent processing
roundwood returns significantly more than a dollar.
iv Realising the Potential of Farm Forestry

Realising the Potential of Farm Forestry
Introduction
SMARTimbers Cooperative is based in south-west and central Victoria, centred on Ballarat. Formally launched as a
trading cooperative in 2002, SMARTimbers has about 40 members and currently has about 500 tonnes of logs milled
into various building products annually. These products have earned the investing SMARTimbers members a gross
return of about $130,000 over each of the last two financial years (2005/06 and 2006/07).
The cooperative itself owns no equipment or resource. It ‘owns’ a logo, some registered names, and considerable
intellectual property. It oversees timber processing, markets timber for members, and manages some research projects
in the interests of the members and the wider farm forestry sector. It is essentially a ‘single-desk’ marketing body.
Our initial timber resource is sugar gum (Eucalyptus
cladocalyx), a species that had been commercially
ignored till about 2000 other than for its shelter
value and for limited harvesting for firewood.
This resource of over 3,000 ha of farm shelterbelts
of sugar gum was established from the early 1880s
on the farms and pastoral properties of treeless
parts of western Victoria. Seed was initially sourced
from native forest stands of sugar gum in South
Australia’s Flinders Ranges.
The resource drawn on by SMARTimbers is in the
hands of hundreds of farmers. In most cases, these
mature plantations are the only shelter, shade and
native bird habitat (particularly for hollow-nesting
species) on these farms. Many plantations have been
carefully managed for regrowth following one or
two cuttings over the hundred or so years since they
were planted by direct seeding. The plantations are
usually about 35 m (sometimes up to 70 m) wide
and have usually had no management apart from
removal of dead timber for fuel.
Professional firewood cutters clear-fell some
coppiced or original plantations in our region
annually, and the latter is the source of most of our
sugar gum mill logs. We also manage mechanical
harvesting of small sites (usually of only 1 to 2 ha)
on members’ properties, and in this case, we usually
advise leaving up to 20% of trees on a site standing.
These are the obvious hollow-bearing trees.
The sawlog availability in any year in total in our
region is usually only 1,500 to 2,000 green tonnes.
Mostly these are logs of 3 to 5 metres long. They are
generally from the edges of the plantations.
SMARTimbers has played a significant role
in commercialising sugar gum timber, with one
important outcome being that plantings of new
farm sawlog woodlots of sugar gum (and some
other lower-rainfall species) have suddenly begun.
Since 2002, over 1,500 ha of lower-rainfall (350 to
650 mm) sawlog woodlots – mainly of sugar gum –
have been planted on farms throughout south-west
and central Victoria. At least 250 ha of this is owned
by members of the cooperative.
The commercialising of sugar gum by the
cooperative has been assisted by the fact that the
predominant tall form planted in the original
plantations is self-pruning and straight growing,
with few timber defects, such as gum vein or knots.
It is dense and highly durable, mills well and dries
well. The species is drought tolerant, has few pests,
and grows well on soils of a wide range of pH and
quality. Its few dislikes are waterlogging, high
fertility, and hard frost within the first few years.
Its good growth rate (due largely to its
water-scavenging abilities) and successful direct
seeding made it a favourite of early settlers.
This is the background of SMARTimbers
Cooperative. It is why we have concentrated
on value-adding, and it is why we have had to
develop, basically from scratch, our own approach
to developing the market for what was an unknown
timber. We hope that other grower groups can learn
from our experiences and apply the aspects relevant
to their situations. In particular:
• What the basic traps are in developing a business
of this kind and how to avoid them.
• The great potential for farm forestry here (which
has been realised in many other countries).
• The supply, financial and market requirements
that need to exist for a group to proceed.
• How value-adding can help small-scale forestry
be viable, if the limitations are understood.
• That the keys to success are long-term
commitment by members, a well thought-out
strategy, enough start-up finance, a commitment
to quality, and solid alliances.

Section 1
The Business Structure
From SMARTimbers’ experience, the steps involved in developing the business include:
Form the core group of committed growers
Learn about and establish the supply and demand detail
Research the costs, logistics, and marketplace
Recruit and sign up members
Hunt up adequate and durable financial support for start-up
Look at options and choose a business structure
Develop a constitution or corporate rules
Develop a business plan
Establish a trading name and registered office
Arrange bank accounts and a bookkeeper, and allocate responsibilities and specialities
Work out realistic budgets and financial projections
Begin to develop good working relationships with chain-of-supply partners/alliances
Begin production
Begin trading
Maintain constant feedback and evaluation

1. Economics of farm sawlog production
In countries where there is a widespread family forestry sector, no-one questions the economics of planting trees,
despite the fact that there may be a rotation length of 70 to 120 years. Even landowners with very small holdings
will replant every harvested area (there is often legislation that demands that this be the case). One of the drivers for
forming SMARTimbers was that, to give landowners confidence to plant, it must be demonstrated that the investment
– in land, time and money – would be profitable.
What SMARTimbers has done with the mature resource of dispersed, unmanaged shelterbelts and woodlots of sugar
gum (Eucalyptus cladocalyx) is to show that what had been thought of as shelter and as a firewood resource worth
only about $10 per cubic metre (m3
) on the stump to the landowner, was capable of producing a milled product with
a gross value of over $3,400/m3
of profiled, air-dried decking and thus up to $400/m3
on the stump for larger sawlogs
depending on product (for detail see Chapter 5, Transport and Milling). These figures are enough to make landowners
consider planting sugar gum or other suitable species in multi-purpose woodlots.
The business case
To warrant the necessary annual investment
required to build up a steady and adequate
volume of sawlogs, farm sawlog production must
yield commercial returns. Not all of this return is
necessarily going to come from sawlog or
value-added timber sales. Some part of the return
will be from sale of thinnings and other woody
product. A part more difficult to measure, but still
real for the landowner, lies with the increased farm
productivity, including stock growth rate, reduction
in mortality, improvement in general health and
survival of the newborn animals.
Non-wood products
In the future, returns will increasingly come from
the sequestering of carbon and other non-wood
products and environmental benefits. Non-wood
products might include leasing of honey rights or
the opportunity to use the area for recreation.
Additionally, there will be benefits from planting
that may not accrue to the landowner or investor
directly or measurably. These include increase in
the value of the land and the benefits to the local
economy from work generated or increased tourism
revenue or sale of locally value-added product.
Not every site will yield all benefits. The economic
returns from a particular site will depend on
species, growth rate, woodlot design, management,
final product, the other farm enterprises, form of the
wood product that is sold, amount of value adding,
and the distance to the site at which value adding is
done or the product is sold.
The economics of multi-purpose
‘integrated’ woodlots
The conventional economic treatment assessing
costs and returns for establishment of woodlots of
commercial species on farm assumes that:
• The woodlot displaces the other farm enterprises
totally on the site, and usually assumes the
woodlot is a square or block planting.
• That the cost of establishment has to measure up
to the normal ‘opportunity cost’ measure against
the other uses of the money, such as long-term
bank interest.
• That the primary, or only, income from the
woodlot will be as timber at harvest and that,
for accurate accounting, the compounded
interest on establishment cost and presumed
ongoing loss of annual income from the site has
to be charged against harvest income.
• That the woodlot does not have any
income-positive effects off-site, such as reducing
saline discharge, improving pasture or stock
productivity due to shelter, lifting farm value
and aesthetics, improving traffic access by
reducing waterlogging, or have tangible or
intangible benefit on site, such as honey income,
reduction of pasture insect pests by birds and
bats, or significant carbon sequestration income.
In reality, the landowners in our cooperative
plant when they have surplus taxable income and
when they also have some other cost-share or
subsidy inducement that reduces establishment cost
significantly. They site the woodlots where they get
multiple benefits in addition to timber production
– shelter, interception of saline groundwater
discharge or reduction of groundwater recharge,
habitat linkages, aesthetic benefit, reduction of
winter waterlogging, and so on.
Hence, in the real situation, establishment cost is
reduced, and benefits are going to be realised that
will begin early in the woodlot’s life and usually
will more than offset any interest charge on the
establishment cost. One of the most obvious of
these is that a well-sited and well-designed strip
(50- to 100-m-wide) woodlot, as opposed to a block
or square woodlot, will not displace other farm
enterprises, but will complement them, and should
add significantly to general farm productivity.
The example in the boxed text on page 4 gives
what look like sound financial reasons to participate
in commercial farm forestry. So why haven’t farmers
been planting in far greater volumes?

There are three main reasons.
• First is the substantial real initial cost of
preparation, planting and fencing of from
$1,500 to $2,000/ha, depending on design and
preparation costs. This money has many other
calls from other farm enterprises, off-farm
investment, or simply for family living costs.
• Second is a lack of understanding of, or
confidence in, the market by landowners and
lack of adequate professional support. Farmers
are slowly coming to appreciate the value and
potential income from well-sited and designed
woodlots of appropriate species.
• Third is the lack of high-quality genetics for
many species. It is presently almost impossible
for growers of lower-rainfall hardwood species
to source a supply of even seedlings that have
the necessary characteristics of good form, good
growth rate, and self-pruning.
Persistent myths
In addition, some myths have been allowed to
persist until now, including:
That quality hardwood sawlogs cannot be grown
in small woodlots on farms, particularly in rainfall
below 650 mm. This is demonstrably untrue. The
evidence has been sitting in front of foresters for 100
years in the form of sugar gum in western Victoria
and other species elsewhere.
That the costs of harvesting small-scale,
dispersed sawlog woodlots make them uneconomic.
Clearly, the economics of scale can be an issue,
but producing a quality log and partly or wholly
adding value to it changes everything. Use of more
cost-effective machinery can also improve the
economics of thinning. More imaginative marketing
of secondary products also improves returns.
That the necessary scale of sawlog woodlots must
disrupt regional stream flows and groundwater
recharge. Much bad science and woolly thinking
exists about trees and water. One research- based
view is that, for well-sited and well-designed
dispersed woodlots in country of under 650 mm of
rainfall, impact on runoff and groundwater is only
significant when more than 15% of the catchment
area is covered.
If the whole region was under about 15% cover
of wide-spaced strip woodlots, surface evaporation
would be significantly reduced, meaning late
spring and early autumn rainfall would have more
and longer lasting effect on the pasture or crop.
Overall, the extra transpiration from well-sited trees
spread across enough of the landscape could have a
positive effect on rainfall across the region.
Australian Low Rainfall Tree Development Group sugar gum seed
orchard planted in 2001. Retained seed trees will be selected on the
basis of form, growth rate and self-pruning characteristics.
An average case for a SMARTimbers harvest site – yields, gross and net income.
We harvest sites of 1 to 2 ha using a contractor. An average
1-ha site that has not been previously felled and that has had no
thinning or other management in the 100-odd years since planting
will yield about 300 green tonnes of merchantable timber. This
normally divides up as:
• 60 tonnes of large sawlog (over 40 cm small end
diameter under bark (sedub)), value $75/tonne.
• 30 tonnes of small sawlog(28 to 40 cm sedub),
value $55/tonne.
• 30 tonnes of pole and post straight roundwood,
value $55/tonne.
• 180 tonnes of firewood (includes defect logs and wood
down to 7.5 cm diameter), value $20/tonne.
Gross return to the landowner, if he or she chooses to sell into
our markets, is $11,400. Cost of harvesting and forwarding out is
usually about $4,000/ha. Cost of transporting machinery to the site
can be up to $1,000. Cost of overseeing by the cooperative may
be $400. Net return is $6,000. Up to 20% of trees are usually left
standing on the site as habitat, and the coppicing stumps will be
managed to become a regrowth plantation providing shelter and
another eventual harvest.
Note: These yield figures are approximately what we encounter
on sites worth harvesting in this way. The dollar figures per green
tonne of logs and roundwood are what our members or syndicates
of members might currently pay in mid-2007, or what we would
recommend they seek if selling good sound logs or well laid-out
firewood lengths. First-level value-adding of logs and firewood
would add 20% plus.
We regard these figures as well below what should be possible
with a well-managed sawlog woodlot being established now, both
for yield, quality of log, rotation length, and returns for secondary
wood and non-wood product. They do not reflect income from
carbon sequestration or sale of environmental credits, positive
impacts on general farm productivity, or improvement in farm
value. And they do not include any returns due to value-adding
of sawlog or straight small-diameter roundwood. The 100-
year rotation for these old sites reflects the near-total lack of
management and the disinterest in the trees for anything other
than shelter. We are confident that, with timely thinning and
appropriate stocking rates, the rotation to produce a 40- to
50-cm dhb (diameter at height of breast) sawlog is about 30
years for our region.

2. Forming a Grower Trading Group
In 2002, SMARTimbers formed a trading cooperative with about 35 members, electing a board of seven. Although
that constituted our legal beginning, this step was not taken until the foundation group had scoped specialty timbers
common to our region that could differentiate farm foresters from other, larger industry players. The foundation group
steering committee then commissioned market research, funded by our local private forestry development committee,
Central Victorian Farm Plantations Inc, to identify potential products and markets that might provide a large and
profitable enough niche for our landholder members to sell into.
Checklist to consider before establishing a
commercial trading group
Forest growers considering forming a trading
group will have to consider a range of issues before
making any serious commitment:
• Are there enough growers who have a common
interest in joining up to justify forming the
trading group? Viable overseas groups are
mostly in the range of 50 to 150 members.
• Is there sufficient supply of one or more quality
specialty timber species within the region
that can produce products for which there is a
demand? In the case of sugar gum, the widely
dispersed resource is about 3,000 ha, but only
about 1,500 tonnes of mill logs per year come
onto the market.
• Can the group’s timber be differentiated in
the market by its unique qualities; by some
other quality, such as sustainable management
certification; or by processing into a quality
product? For sugar gum, apart from its attractive
colour and figure, it is its Class 1 natural
durability rating.
• Can the group guarantee consistency of supply
of its selected specialty timber at an adequate
profit? To earn enough to pay a half-time
officer, the group would need to have either a
sustainable annual log supply or a value-added
product with a sale value from $500,000, with
scope for expansion. If selling logs alone, that
may mean 10,000 m3
/year or more.
• Is there adequate government or other funding
support to employ someone to organise the chain
of supply, develop the marketing, and develop
the products? It may take three years of a full-
time, skilled manager’s activity before the group
approaches being economically self-sufficient.
This may mean about $250,000. In our case, we
were able to find about $75,000 in dribs, and
the rest of our development was financed from
trading income and directors’ donated time.
• Is there a core group of members who could
become the directors and who have the vision,
financial resources, industry knowledge, wide
networks, ability to work together, and self-
interest to promote the project’s success?
The foundation group of committed growers who worked to form the
SMARTimbers Cooperative.
• Are there within the region skilled, honest and
well-equipped contractors to harvest, transport,
mill, kiln dry, process, warehouse, and possibly
manufacture a value-added product?
• Is there enough investment capital among
the group’s members to pay for the initial
harvest, transport, milling, storage, processing
and marketing? In our small-scale operation,
we required about $75,000 in our first full
production year. Some of this was not recovered.
• Are there other groups with whom your group
could collaborate to form a more effective and
efficient network or enterprise?
• How long is your group of growers prepared
to put in to properly establish a trading group?
It could take from two to five years to become
a timber trading group with enough volume
and market profile to allow the group to be
financially self-supporting.
Group structures
Once having met the conditions for formation,
a group of landowners and/or investors is ready
to establish a legal structure that provides a
governance framework for managing its trading
objectives. Only two legal structures are satisfactory
for a treegrower group selling products and/or
services with the aim of returning profits
to members.
Trading of any sort is a risky business. Both
company and cooperative structures provide
limited liability, which protects individual members’
personal assets in the event of bankruptcy.

Over several hundred years, common law has
honed these two structures as the shells for
protecting and containing business activity. Other
legal structures, such as incorporated associations
and community advancement societies, are
designed for non-profit-making group activities,
such as running a sporting club. Foundations are
fund-raising organisations established to achieve
a beneficially mutual goal, such as building a
community centre.
In 2002, SMARTimbers formed a trading
cooperative with about 35 members from which was
elected a board of seven. The reasons for choosing a
cooperative instead of a company structure were:
• Cooperatives have a dual nature, serving both
social and economic objectives.
• The prime objective of a trading cooperative is
to provide for the common needs of its producer
members, who are, in the case of SMARTimbers,
primarily landholders with newly established
sawlog woodlots or mature sugar gum farm
plantations or forests. Cooperative mutual aid
is based on members combining and, together,
defining and meeting their shared interests.
• Cooperatives have democratic management
structures where every member gains only one
vote, no matter how large his or her investment.
Companies, on the other hand, are focused on
advancing individual benefit, with voting rights
dependent on the amount of share capital held.
• Profits in a cooperative are distributed to
members on the basis of work done or
transactions made, not on the basis of share
capital held. Cooperatives have reserve
provisions to ensure capital is retained so it
can continue to serve its prime role of
generating activity.
• Reporting and auditing requirements in a
company are more financially onerous, with
monetary penalties rigorously applied for failure
to fill in the correct form within a prescribed time
when, for instance, a director resigns.
• Under international cooperative principles,
cooperatives are expected to have a commitment
to member education and to collaboration with
like-minded organisations.
The major limitation of a trading cooperative
structure is its inability to raise capital from
external investors. Historically, cooperatives have
consistently sought to exclude outside capital that
could prejudice the democratic management by
members as a whole. The very first cooperative, the
Rochdale Pioneers, learnt a bitter lesson when they
were forced by outside investors to make decisions
that led to the closure of their factory.
Cooperatives, then, are restricted to raising capital
by way of calls on shareholdings or debentures
(loans) from members themselves. SMARTimbers
has found an alternative means of raising capital
for primary production ends, such as covering the
cost of timber harvesting and processing, via joint
venture agreements. This is described in Chapter 3,
Raising Capital. This alternative still requires that
the joint venture investors become members of the
cooperative.
Group size, membership benefits and
developing alliances
The scale of a group is critical for generating
cooperative activities, creating a pool of expertise to
manage the cooperative and providing a source of
capital funds. Most successful overseas groups are
in the range of 50 to 150 members (we are presently
38 and entering a membership drive aimed at
increasing to over 60). The large forest management
associations of Scandinavia and Finland are split
into local groups of this size. (See box below for more
information about forest management associations.)
SMARTimbers members pay $100 for 1,000 shares
10 cents paid-up. Members receive an irregular
newsletter, are allowed password access to a
Overseas forest management associations act as a
common trading structure
Membership in a forest management association is generally
either by owning shares (one landowner, one vote) or by paying
a joining fee –often based on the area under forestry – plus
an annual levy or service fee. For some Scandinavian forest
management associations, such fees may account for up to 20%
of the association’s income.
Some North American associations also have advocate, or
non-producer, members. These may be supporter businesses,
individuals or environmental groups. These members do not have
voting rights and will usually just pay an annual fee.
In Sweden and Norway, associations are run more like
commercial companies, with members buying shares that pay
dividends and appreciate in value. In addition to income from
log and roundwood trading, their income comes from the milling
and paper-making enterprises these large associations have
developed over the years as they grew from small, locally based
family forestry groups to become prosperous enterprises. They
also deal in biomass and ‘green’ credits and will usually provide
services to non-members at a commercial rate.
For Scandinavian producer members, the forest management
association will provide services, including managing the sale of
wood, managing harvesting, providing silvicultural advice, planning
and mapping, monitoring of pest animals, and assistance with
paperwork (some of these services may attract an extra fee).
Education of members is regularly delivered through training
sessions and field days.
Overseas forest grower associations show that, once groups
become established and can maintain a viable product flow, they
can provide most of the services, training and extension that
government forestry services in many other countries (including
Australia) supply at greater cost and arguably less effectively.

dedicated members’ menu on the SMARTimbers
website, and can invest in joint ventures in log
purchasing and processing that are managed by
the cooperative. The cooperative manages some
log harvesting for members. The cooperative has
provided advice and training and has organised
field days in, for instance, thinning, pruning,
portable milling and the preparation of forestry
management plans.
Members in a trading cooperative are expected
to actively participate in trading their group’s
products or in buying any services on offer.
SMARTimbers has found we work best with firms
and people who have a small enough turnover that
our scale matches theirs and the volume of our
business is still significant to them. Market research
has found that small-scale (up to 5 employees) and
medium-scale (5 to 20 employees) architectural
firms provide a good fit for our marketing
approaches as they and their clients have a high
degree of interest in and empathy for sourcing
traceable, local farm forest products and unique,
different specialty timbers.
As well as building alliances with businesses
up and down the supply chain, SMARTimbers
encourages membership from other like-minded
groups. The cooperative offers an associate
membership for an annual fee of $50, which
provides information about our approach to
harvesting, processing and marketing and a
newsletter.
Equipped by several years of practical experience,
SMARTimbers contributes to the development
of state and federal timber industry policy
and research priorities as a ‘public good’. The
cooperative has developed links with tertiary
institute furniture design courses, with research
bodies, and with industry bodies. As part of the
cooperative’s marketing strategy, we continually
promote farm-grown timber to builders, architects
and landscape designers.
SMARTimbers board meetings and
decision-making process
The SMARTimbers Board meets monthly or bi-
monthly depending on time of year, with meeting
dates decided about six months in advance. Full
minutes are always kept and financial reports and
sales reports are presented at each meeting. All
board members can contribute items to the agenda.
In most meetings, there is discussion on operational,
policy, development and marketing issues. Between
meetings, contact between board members occurs
as necessary by phone or email. Actions decided at
meetings are followed up at subsequent meetings.
Day-to-day issues are normally handled by the
appropriate board member.
To this time, of our 38 members, about 11 have
been board members. Board members are not yet
remunerated for attending meetings. The extensive
‘public good’ activity of board members and the
cooperative through our set-up years has always
been at the individual’s expense.
Start-up and external funding
A small amount of start-up funding was available
through the regional private forestry development
committee, Central Victorian Farm Plantations Inc,
($12,000) and the Victorian Department of Primary
Industries ($7,000). Other core funding to help with
start-up and initial development was impossible
to get. In 2003/04, we gained an New Initiative
Development Project (NIDP) in-market experience
scholarship from the now federal Department of
Agriculture, Forestry and Fisheries ($34,000). Some
further significant operational funding has also been
granted by Central Victorian Farm Plantations Inc.
As a consequence of being commercial structures,
neither trading cooperatives nor companies qualify
for most government or philanthropic funding,
which is generally aimed solely at non-profit
groups. The mutual nature of cooperatives has,
however, led to some government funding for
SMARTimbers when it could be established that the
goals for which money was sought would benefit
farm foresters as a whole.
Funding is available, however, for specific
purposes – particularly where it can be shown
to benefit the farm forestry sector as a whole. A
director has gained funding assistance to visit
overseas farm forestry trading cooperatives, as no
useful models were available in Australia. Industry-
sector research funds have enabled market surveys
for the testing and adapting of SMARTimbers’
single-desk marketing model utilising an integrated
supply chain to deliver high-value processed
products to defined market segments.
While a foundation is an inappropriate structure
for a commercial operation, it may be a suitable
entity to create to apply for funding for specific
research or development projects, at arm’s length
from a cooperative or company. An example would
be research to add important knowledge about
the technical characteristics and performance of a
farm forestry group’s selected specialty timbers.
The foundation would require a separate board of
directors and associated accounting and reporting
Business planning
SMARTimbers spent some time in its first full year
developing core principles and a business plan. As
the saying goes about the need for planning: if you
don’t know where you’re headed, you may end up
somewhere else.

Two specialists from the Cooperatives Federation
of Victoria assisted SMARTimbers’ directors in
putting together a business plan. It was entirely
adequate for the early years of the business and
cost about $2, 500 and two weeks of the directors’
combined time. The business plan covered all the
main issues of:
• Company description and industry analysis.
• Target market.
• Competition.
• Marketing and sales strategies.
• Operations.
• Management and administration.
• Long-term development.
• Exit planning.
While we have not referred back to the plan often,
its main use at the time was to make us seriously
think our way through all aspects involved in
trading and examine our actual business case more
systematically. The existence of a well-presented
business plan has also proven critical for eligibility
for some subsequent funding applications.
SMARTimbers has focused on maximising returns
to landowner members, while minimising risk. In
particular, SMARTimbers has managed to survive
the start-up period on limited funding by:
• Using contractors to do all work, which offers
expertise and reduces capital costs.
• Taking incremental steps and thereby minimising
risk.
• Marketing via a qualified person working on a
commission-only basis.
• Maintaining clarity about what we do by
restricting our product range. This also serves to
minimise processing costs.
• Passing profits back to members promptly.
The business plan identified that, for
SMARTimbers to employ a manager full time plus
all on-costs, the cooperative would need an income
of about $100,000/year from all sources. To make
this from our 10% commission on sales and other
income, it would require a gross turnover of about
$1 million annually (our turnover is rising through
$130,000/yr). SMARTimbers’ income is principally
from the commission on sales. We have been able to
generate some additional income through charging
management fees on projects the cooperative
undertakes and from some consulting or advisory
activities. Many overseas forestry cooperatives add
to their wood trading income by contracting, selling
forestry consumables, and providing services to
non-members, among other things.
Rules and governance
It is obviously critical that the rules of the
cooperative or group are established from the
beginning and that the core principles are closely
followed. SMARTimbers has simply adapted the
standard rules for cooperatives on notification
and running meetings, such as quorums and
keeping minutes. The rules cover qualifications
of membership and election of directors at annual
general meetings. Calls on shareholdings, transfers
and resolution of disputes are all part of the
cooperative rules.
While it is to tempting to run meetings informally,
this corrupts decision-making, leading to confusion
and dispute over what was actually decided. Clear
governance processes and good documentation
of policies and actions avoid the tyranny of
structurelessness, where the loudest voices hold
sway: the antithesis of democratic processes. Tried
and true governance processes, such as sticking
to an agreed agenda and canvassing all opinions,
clarify the decision-making path for all involved,
smoothing the way and avoiding time-wasting
SMARTimbers has found that maintaining good
contact with the members is time consuming,
and it is one important area in which we have not
done so well, no board member being available to
focus on this role. SMARTimbers has a members’
only section on its website on which it posts board
minutes and policy decisions. Contact by broadcast
email is another communication method, as well
as the more costly process of producing a mailed
newsletter. Cooperative and company rules both
require financial year and directors’ reports on the
cooperative’s activities to be presented at annual
general meetings.
Grower group membership issues.
It is implicit in the concept of any cooperative that all members
will subscribe to a common philosophy and will work for the
advancement of the cooperative’s goals. However, it has to be
assumed that some people may sign up or apply to be
members who will wittingly or unwittingly find themselves at
some stage competing commercially with the group or in some
other conflict of interest.
In the heady early days of developing SMARTimbers, we
skipped across the issue of how much we could obligate all our
members to trade through us. However, the rules did detail how
we could deal with any member who in some way violated the
principles and rules of the cooperative.
To date, this has only happened once. Resolving it was a
stressful and time-consuming business. It illustrated for us why
all members have to be bound to trade through the cooperative
in some way, as is usually the case in overseas examples.
Our advice to other forestry grower groups would be to
have a clear policy about members who are industry service
providers, where those services could compete with the
group’s activities.

3. Raising Capital
A critical issue for SMARTimbers has been the availability of working capital. There are two aspects to this in
our case. Firstly, as a start-up business in an undeveloped market, we have had the unenviable task of having to
simultaneously develop products, markets, and processes. Secondly, the business requires the managing of a series of
value-adding activities that (typical of hardwood processing) involve a lengthy period between expenditure and receipt
of income.
In other circumstances and in more fashionable
industries, raising capital would have been a role
for venture capital. There were a number of reasons
why SMARTimbers did not take this path.
Firstly, there has been a very strong commitment
amongst the initial proponents of SMARTimbers to
the cooperative model and to maintaining control
of all aspects of the business development. This is
tied up with an understanding that development of
the business should occur in a way that encourages
more socially and environmentally sustainable
plantation establishment and forest management, as
well as economic viability.
Secondly, in our original business concept, it
was thought that grower members would finance
the value adding of their own timber and the
cooperative would provide the management for this
process and the expertise to ensure the final product
was marketed effectively and profitably.
While some members have engaged the
cooperative on this basis (and in the long run, as
the market and our management of the value chain
matures, this should expand), to date there have
been some difficulties with this approach.
In this initial phase of SMARTimbers’
development, we have had to acquire logs from
various sources, including from firewood cutters
and from landholders who either are not members
or are members but are not interested in investing
in the value-adding process. This means that there
has to be a reliable and flexible way to pay the costs
of log purchase, transport, sawing, drying, and final
profiling into product. Initially, these costs were
met by direct investment from a few interested
members, singly or as small private syndicates. It
was a complex process tracking the different lots of
timber with the various investment structures, and
accounting and invoicing were costly.
The Board examined the various options for how
processing capital is raised in other industries. We
looked at direct equity injection, capital raising by
debenture issue, and the use of syndicates.
Raising equity to fund working capital
In this scenario, SMARTimbers would be the entity
purchasing logs from growers and managing the
processing, further value adding and marketing.
Profits from the activity of the cooperative would
accrue to the organisation and could be used to
fund other activities (e.g., extension services) and
the ongoing development of the business.
Each member on joining has subscribed to 1,000
one-dollar shares partly paid to 10 cents; under our
rules, the Board may make further calls on these
shares to raise additional capital, up to an eventual
maximum of $900 per member. However, given
our group’s size, this amount of money would be
insufficient to meet working capital needs, and
it would be only available to us once. The Board
felt it would be more appropriate to use capital
raised by a ‘call’ for infrastructure, if and when the
need arose.
It would have been possible to offer additional
shares to members, but the Board could not see
how it could make the proposition sufficiently
attractive to all cooperative members for there to be
an equal sharing of the capital-raising requirement.
Many members had joined the cooperative because
they supported its aims but were unlikely to be
in a position to contribute sufficient additional
extra capital ($4,000 to $5,000 each) to fund these
activities. Also cooperative principles require that
a member has only one vote regardless of the
size of his or her investment – another possible
disincentive for those contemplating contributing
additional funds by buying additional shares.
Using debentures (debt financing)
SMARTimbers could issue debentures, which could
be voluntarily subscribed to by those members
who wished, to raise the working capital required.
SMARTimbers would be the operational entity, and
as per the previous model, SMARTimbers would
also be the owner of the timber. Some proportion
of the profits would be used to provide a return to
the debenture holders, and a remainder would be
retained to continue development of the business.
Debenture issues are often used by clubs, for
example, to build various facilities for the benefit of
members. But in the case of SMARTimbers’ business
activities, the Board could not see how, within
the cooperative structure, it could offer a return
to the debenture holders commensurate with the
investment risk nor how it could easily differentiate
between debenture-holding members and the other
members who had not put up operating capital.

10 Realising the Potential of Farm Forestry
Using syndicates
In this scenario, a group of members band together
and contribute sufficient capital to acquire and
transport logs and fund the required processing.
This model emulates the original SMARTimbers
model of funding by the individual timber owner
with all activity, including marketing, managed by
SMARTimbers. There is capacity to raise significant
funding by grouping like-minded members
together. Because the amount of logs to be processed
is consequently larger, SMARTimbers can more
confidently undertake market development
and promotion and more reliably supply our
chosen markets.
Effectively, the syndicate acts in the same way as
an individual would act. SMARTimbers is engaged
by the syndicate on a fee-for-service basis to manage
as much of the processing and marketing as is
required. The risks are borne by, and rewards accrue
to, the individual members of the syndicate.
A particular form of syndicate used in connection
with SMARTimbers has been the unincorporated joint
venture. The participants in the unincorporated joint
venture have a contractual arrangement between
themselves, setting out the purpose and nature of
the unincorporated joint venture and its mode of
operation. There is also a contractual arrangement
between SMARTimbers and the participants,
engaging SMARTimbers to manage the activities of
the unincorporated joint venture, that is, acquiring
logs and processing them into a form ready to sell.
Unincorporated joint ventures differ from
partnerships in that they are not ‘in business’. In
an unincorporated joint venture, participants come
together for a specific purpose, which is to produce
‘product, not profit’. The individual participants
in the unincorporated joint venture may take their
share of the product and deal with it according to
their own wishes. They may keep it for their own
use, sell it themselves, or engage SMARTimbers to
market it on their behalf.
Provided that the joint venture meets certain tests,
there is specific taxation treatment available for
GST purposes. Information on this tax treatment
is available on the Australian Tax Office website.
Go to www.ato.gov.au and follow the links “For
Businesses: GST Essentials: Groups, branches and
joint ventures”.
The use of unincorporated joint ventures is
currently our preferred model for raising working
capital and for ensuring SMARTimbers can be a
reliable supplier to the market it has invested so
much time, effort and money developing.
Some of the 13 SMARTimbers members who became partners in the
first unincorporated joint venture agreement.

Realising the Potential of Farm Forestry 11
Section 2
The Supply Chain
Some of these steps are only done once; others we will go through with every site:
Set up log specifications and volume requirements
Develop agreements with suppliers/sellers of logs on log specifications, price and loading
Arrange stand assessment and marking, habitat retention, and log separation into grades
Arrange insurance requirement and contractor conformity with occupational health and safety
requirements
Arrange disposal of other possible harvest product (firewood and small-diameter roundwood)
Organise harvesting, loading, carriers
Set up agreement with mill, covering milling and handling costs, log measurement system, recording
of lumber detail
Specify milling dimensions, grading, racking out, rack storage, wrapping
Develop marking/tracking system to record timber lots and monitor lot movement, and reconcile with
job order numbers and sales orders
Arrange drying storage for racked-out timber
Develop agreement with profiling business
Arrange profiling charges and profile specifications
Arrange wrapping of packs of profiled product and dispatch handling and invoicing
Arrange carrier with ability to unload whole packs on job sites with no damage
Develop markets for secondary grades and shorts of roughsawn and profiled timber
Maintain regular communication between selling person, processor, and mill
Maintain excellent detail on costs and profit margins of every stage
Keep detailed records of all activities, contacts and time

4. Log Supply and Harvest
SMARTimbers Cooperative members have built our supply by acquiring logs either from members who have harvested
sugar gum plantations or from firewood cutters. Our business requires that we have a stable and preferably a slowly
growing supply of quality logs. We currently source up to 500 tonnes of large logs a year (over 400 mm small end
diameter under bark (abbreviated as ‘sedub’)), and up to 150 tonnes of our smaller sawlogs (350 to 400 mm sedub).
We have issues of how to ensure supply despite wet winters, how to develop funding systems to allow the volume to
be expanded to 1,500 tonnes/year, how to get better certainty of forward supply, and how to ensure that our logs are
coming from sites that are going to be well-managed post-harvest, including the retaining of habitat trees.
The main sales for forestry trading cooperatives
worldwide are usually of either logs or milled
timber. The economics of trading will depend
either on volume (if a large volume of whole logs is
available) or on value adding, product development
and market development (if the volume of logs is
not large). This section assumes the grower group
will not sell logs but will manage them up the
processing chain, in which case optimal economic
returns rest with selection of logs that will give high
recovery. SMARTimbers Cooperative has found that
it is not easy to make money from milling lower-
quality logs. Many other grower groups have found,
to their cost, that it is not easy to make money from
logs in any form, especially at lower volumes or
where they cannot differentiate their logs in the
market to get a better price.
Stand assessment
Our assessment of a harvest site is usually
significantly different from the way a regular
forester would assess a stand. This is because our
main logs come from sites that have been planted
as wide windbreaks and subsequently not thinned
or managed in any way, except by default. Some
sites have been burnt by wildfire in the past; others
have suffered more recently from a rising saline
watertable or have trees scarred by insect larvae.
Also, the selection and collection of the seed for
these early sugar gum plantings within the native
South Australian stands was clearly hit-and-miss,
so the quality of the mature Victorian stands can
vary widely. Finally, we have the problem that the
biggest trees are on the outsides of the rows, where,
while growing better, they were usually badly
unbalanced in the canopy and hence in the log.
To put it simply, these are not easy trees to deal
with, and yet we have learnt how to make money
from them.
Normally, we cannot choose whether a stand is
to be felled, though we are able to advise. When
we assess a mature stand for a member preharvest,
we mark the trees that are growing on a slant, trees
that are clearly habitat trees that should be retained,
trees that show spiral grain, or trees that for some
other reason will not produce any sawlogs. Our
model is that most of these marked trees are to be
retained standing to be habitat. Others that have to
be felled (they may be overhanging a roadway or
about to fall on a fence) will probably be turned
into firewood.
Grading of logs and other roundwood
Regardless of whether we are managing a member’s
site or buying logs from a firewood cutter, when
logs are on the ground we mark the larger and
smaller classes of logs (we also refer to these as f
irst- and second-grade logs respectively) so that
they can be aggregated in piles (called ‘dumps’),
ideally up on bed logs (logs of the same type
that form the base of the dump and are laid
perpendicular to the direction of the dumped logs).
All our sawlogs, to be worth trucking to the mill,
must be over 2.4 metres long, straight, cylindrical,
and sound and have no significant branch stubs
or excessive taper. Flared butts and irregular ends
are to be cut off. Our maximum length of log is 5
metres, and most logs are 3 to 4 metres long and are
cut in 0.3-metre multiples.
As soon as possible after felling, sawlogs should
have both ends painted with a proprietary wax
emulsion like MobilCer M. At around $65 for 20
litres, this product greatly reduces end-splitting of
logs and poles, thereby reducing the need for later
docking of split board ends.
At a member’s site at the end of harvest, we will
have separate dumps of the sawlogs, a dump of
straight small-diameter roundwood (100 to 280 mm
sedub) suited for posts, poles or specialist milling,
and a series of large dumps of 50 to 150 tonnes each
A member painting the ends of his logs just after harvest.

Our regular cartage contractor loading sugar gum sawlogs bought
by a member from a firewood cutter.
Our harvesting contractor’s forwarder taking out small-diameter
sawlogs from a thinned sugar gum stand on a member’s property.
A standard cargo tri-axle trailer fitted with temporary log bolsters
and therefore able to backload other cargo.
of firewood material. All these will be placed so that
they are not under retained trees, are reasonably
separate from each other, and ideally are accessible
on both sides for easy endwaxing, marking and
loading. Access is an important factor but again
is something that may not be in our control. Any
fence removal and re-erection are always the
responsibility of the landowner or firewood cutter.
Harvesting options and approximate costs
On member’s sites, we use a contractor with a
harvester (a tracked excavator with a single-grip
felling head) and a forwarder (usually a four- or
six-wheel-drive machine with a forestry crane and
grapple able to self-load and transport from 8 to 16
tonnes of roundwood). Mechanical harvesting deals
with all but the trees over about 400 mm diameter
at breast height, and these are chainsaw-felled
by the contractor or his professional feller. These
larger trees are cross-cut by chainsaw to log lengths
suited to the forwarder, usually 4 to 5 metres. The
harvester rapidly does all other smaller-diameter
material to similar lengths and lays these in groups
of common type for later pick-up by the forwarder.
Rates of work may be 0.5 ha/day for harvest and
1 ha/day for forwarding. All-up costs tend to be
around $4,000/ha plus transport of the machinery
to and from the site, and GST. Usually, the returns
from the firewood component alone will cover
the harvesting cost. The beauty of this harvesting
system is that it is fast and relatively safe, and the
disposal of the logs and other roundwood is all
controlled by the landowner in liaison with the
cooperative. With our mature and often senescing
100-year-old sugar gums, safety is a major issue. We
only deal with contractors who are insured, trained,
and compliant with all relevant occupational health
and safety requirements.
Purchase and processing options
When buying logs from firewood cutters, we deal
where possible with sites that will provide at least
two semi-trailer loads of sawlog (55 to 60 green
tonnes, or about 50 to 55 m3
) if we have to float in a
heavy log loader, as normal farm front-end loaders
are neither suitable nor safe for the size of logs
we are buying. On sites where a heavy log loader
is already available, we happily truck out single
semi-loads. Firewood cutters are happy to sell these
larger logs, as they are more difficult for them to
process and handle: a 25-cm-thick disc from a 500-
mm-diameter log is a potential Workcare problem.
For the same reason, they will rarely be interested
in selling us our small grade of sawlogs (300 to 400
mm sedub), as these suit their firewood processors.
In 2006, for larger sawlogs we paid $75/green
tonne (plus GST) over the weighbridge. For sugar
gum, with its green weight density of about 1,250
kg/m3
, this translates to about $90/m3
plus GST.
For the smaller logs, we paid $55/tonne, as these
logs yield a significantly lower milling recovery.
We mostly obtain these from members who are
keen to sell the logs to other cooperative members.
Their alternative for these logs is to sell to firewood
cutters, currently for about $20/tonne.
SMARTimbers began by paying a high price for
logs to attract these logs from firewood cutters.
We temporarily secured the regional market for
these logs, as the local mills were not interested in
competing. However, with the awareness of the

demand for sugar gum products and the drying up
of native forest log supply, the local competition for
mill logs is presently pushing these prices up 10%
or more.
Economies of scale, costs, potential
points of loss
We had been told by various experts that the use
of mechanical harvesters was not viable in small
woodlots (our average harvest area per site is 1 to
2 ha, normal for most sites in Finland and other
Nordic countries). The reality is that, while the
economics of our scale are not as good as for larger
sites, with our value-adding approach it is still
viable to harvest these small areas, provided the
percentage of sawlogs is a high enough fraction
of the total yield. We are generally getting about
60 to 90 tonnes of sawlog, about 30 to 50 tonnes
of straight small-diameter roundwood (100 to 280
mm sedub), and about 200 tonnes of firewood per
hectare. The firewood income normally will cover
the harvesting cost, leaving the member with over
100 tonnes of the more valuable product per hectare.
We have been lucky to find a good harvesting
contractor happy to leave the pine forests and work
for a week on the plains. Our extra costs for dealing
with small sites are the trucking costs for the
harvester and forwarder. We minimise this by using
a local carrier to do the local floating between sites
and by organising three or four sites in proximity
to be done sequentially. The contractor is aware
that we are developing a new system and has done
his best to minimise the costs of transporting his
machinery from site to site.
Retention of habitat trees
On the plains on most farms, the wide plantations
of mature sugar gums are the main bird habitat.
Certainly, they are vital nesting sites for parrots and
many other species between August and January,
are home to bats and native and European bees, and
are a vital feed source for honey eaters and nectar
feeders of every sort during flowering. To clear-fell
kilometres of these mature, hollow-bearing trees
just for firewood, or even for sawlogs, seems short-
sighted in the extreme.
SMARTimbers has developed a compromise
model in which as many as possible of the hollow-
bearing trees are marked to be retained, and small-
diameter trees of good form standing in between are
also marked to be retained, thus allowing a more
continuous retained canopy. This may result in
up to 20% of trees being left, often including some
dead standing trees, or stags. The value of all these
trees is relatively low, as the hollow-bearing trees
are rarely good for sawlogs, and the small-diameter
trees have little volume and thus value even for
firewood. The trade-offs are retained habitat, some
ongoing shade and shelter benefit, potential for
seeding the cleared area for natural regeneration,
and good protection of the coppice against rising
groundwater. For farmers in the region, it is a major
concern that coppice grows back well for a new
rotation to provide shade and shelter for stock.
The trees behind the harvester are marked habitat trees, as are many
of the ones in front.
Cost of time and mileage involved in log supply
organisation is usually significant
We presently aim to annually accumulate and get milled 500
tonnes of first-grade logs at $75/tonne. Loading and freight may
be another $20/tonne. This $47,500 is only the first part of the cost
side. The organisation of this supply, if fully costed, would add
another $10/tonne that has to be recovered or at least recognised.
A trading group providing this service has to build the recovery of
this cost into its harvest service agreement. (See Appendix 5 for an
example of a harvest service agreement.)
In our process of aggregating our log supply from a number
of sites, each site has to be visited numerous times to assess the
number and quality of sawlogs, mark suitable logs once felled or
prefalling, and specify or mark cross-cutting points to give a good
yield of quality logs of adequate length. Logs once felled have
to have their ends waxed or painted to both identify the owner
and reduce end-splitting in drier weather. It is often necessary
to visit at the time of loading to resolve any queries and to make
the snap judgements that are often required. This amount of time
and mileage can mount up and needs to be added to log costs. It
would usually take at least six visits, or up to 20 hours, for a site
that yields several semi-trailer loads. Disposal of firewood and
poles and discussions with members can add up to another six or
more visits.
With mechanical harvesting on members’ sites, where we aim
to leave habitat trees standing, visits and hence time are usually
at this high level. Because we have been dealing with the same
firewood cutters for some years, they are familiar with how we
want our logs presented; thus, this source of logs requires less
time and mileage.

5. Transport and Milling
Conventional commercial-scale logging deals with thousands of tonnes of logs from any one site, uses equipment
worth many millions of dollars, and employs dozens of people felling, snigging, loading and trucking logs, often of
semi-trailer length. However, this is not the only economic scale.
SMARTimbers has shown that the economics are also feasible for a site involving only two semi-trailer loads of
logs, a heavy log loader, and logs of any length between 2.7 and 5 metres. Often only two men are involved. Our
contract mills may employ only two or three people. Economies of scale do clearly work against us, and we have had
to ensure that any penalty is minimised. Some of the penalty can be recovered by better grading and handling, by
marketing of milled timber and by developing secondary products and optimising the returns from them.
The keys to producing best returns from
farm-grown sawlogs are, firstly, to control the
milling to ensure an economically produced
quality product.
The issues with milling are relatively simple.
They can be broken down into:
• Log quality (length, diameter, soundness, taper,
attached bark, and wood quality).
• Log cost/m3
delivered at the mill (cost of freight,
volumes, loading issues).
• Milling cost/m3
recovered (details of milling
contract, recovery percentage).
• Quality of recovered board (variability of
dimension, surface checking, spring, bow and
twist, amount of defect or feature).
• Racking out, or sticking out, of milled board,
quality of strapping, and air-drying options.
In the SMARTimbers Cooperative, we have learnt
valuable and expensive lessons about each of these,
and are still learning. We have found that there are
many and various ways to do it wrong and really
only one way to do it right. There are some scales
of milling that are more forgiving than the scale
at which we operate, but the same basic factors
need to be understood. It all starts with the fact
that the all-up cost of getting a poor log to the mill
is usually about the same as for a good log. In our
situation, where we contract loading and trucking,
we normally would only look at buying or trucking
good logs and then only if the site will yield two
semi-trailer loads or more.
For SMARTimbers, a ‘good’ log is one over 400
mm in diameter at the small end under bark (400
mm sedub), straight, cylindrical, sound, no branch
stubs, minimal taper and 2.7 to 5 m long.
To make money from milling of timber for
sale requires a cost-effective milling process that
can produce accurately sawn boards of various
dimensions while getting the highest recovery of
board from the log.
Dimensions and grading
Log size is one criteria for the possible or economic
dimensions of milled board. With larger logs, it is
possible to cut larger cross-section board, say 200x50
mm oversize or wider, which sells for a premium
per cubic metre. Product profiled from smaller
cross-section board ( up to 150x25 mm) is the larger
part of our trade and a more sensible feedstock size
for milling all but the largest logs into.
Similarly, backsawn board is more common
because it is easier to mill logs to produce this
and tends to give a higher recovery. However,
backsawn board checks more or is more inclined
to cup if it is outside in the weather, and it has a
greater change of width with change in moisture.
Quartersawn board is more appropriate for flooring
and other close-fitted applications where there will
be a problem with a significant cumulative change
in width, for instance across the floor of a room.
Backsawn boards are milled roughly parallel with
the squared-up outside surface of the log, and
quartersawn boards are milled at right angles to the
squared-up outside surface, thus running across the
growth rings.
Milling recovery
A larger mill with main saw blades of a kerf (width
of the blade tip) of 6 to 7 mm will mean, with at
least a 400 mm sedub log, that the highest likely
recovery rate will be about 45% of 25-mm oversize
board, with the balance as sawdust, sapwood and
docked fault. So while a good-quality 1 cubic metre
log may produce up to 0.45 cubic metre of sound
board, a lesser-quality one with more taper or some
heart rot or other problem may only produce 0.2
cubic metre after docking. Both logs will have cost
the same to truck and mill, so the boards from the
worse log cost over twice as much per linear metre
to produce.
Our main feedstock dimensions are 100x25 mm
and 150x25 mm, so, to allow for shrinkage during
drying, we have the logs milled oversize to give
greensawn boards of 106x28 mm and 160x28 mm.
Recovery improves measurably from larger logs
when they are sawn into larger-dimension boards
(e.g., 150x50 mm), with smaller-dimension boards
also milled from the log as expedient.
If everything goes to plan, our cost per cubic
metre cube of milled board recovered (graded for
size, sticked out, strapped and wrapped) is $450 to
$550 – not including the cost of logs, freight to the
mill or GST. Every percentage point improvement in

Racking out, with three different racks of sugar gum being built on base frames,
showing stick spacing and the sorting table in the background.
Wrapped racks of milled sugar gum at the mill, with
sugar gum logs about to be sawn.
recovery brings that figure down. Every extra bit of
defect needing to be docked out takes it up.
SMARTimbers has found by experience that, with
our log quality and at our costs, our break-even
milling recovery is between 35% and 40%. We are
steadily working to identify how to lift our actual
recovery toward 50%, while cutting costs through
improvements in efficiency.
Docking
Freshly sawn boards should be docked of obvious
fault in the mill. This docking of fault from the
boards from poorer logs and from those of lower
diameter can often cause recovery to drop down
below 30% before the boards even go into further
processing. The defects docked at the mill are those
due to pith, knots, gum veins, rot, and so on (we are
fortunate in that sugar gum is generally knot-free,
being self pruning, and has little kino, or gum vein).
But at least what is in the racks should then be clear
wood of good value. However, if the operator at the
mill is not careful, this may not be the case. Another
10% can be lost at further processing, due to further
docking of defect resulting in the creation of less
saleable short boards under 1 m long.
For SMARTimbers, unless timber is to be sold
green from the mill in an agreed as-it-comes quality,
thorough docking to our specifications takes place
at the mill. To achieve the quality of high-grade
building product we want to produce, we need
all the defective timber docked out, including
sapwood, any bad knots or insect damage, and any
undersize sections. It is far cheaper to do this at the
mill than after profiling.
Sticking out or racking out
In a professional mill, the sawn board is promptly
sticked out in racks and strapped up so the whole
rack is held together for transport and air-drying.
The quality of the sticking out and strapping and
the way the boards are laid out in the racks are
important to reduce the incidence of twisting,
cupping, or springing during drying.
We now specify even-sized sticks to be used
(usually 25x40 mm x 1.2 m long), at a spacing of
300 mm, with the end sticks to be doubled-up and
at the very end of the racks. We specify that each
rack contain only one dimension of timber and that
(ideally) no board with sapwood inclusion goes
into the rack. For smaller board widths like 75x25
mm and 100x25 mm, we require that quartersawn
boards are separated into their own racks (as we
will only kiln dry quartersawn board for flooring or
panelling). We also specify that full-length boards
make up the bottom one or two layers at least. Our
racks are either 4 m or 5 m long (lengths of racks can
be important for maximising drying kiln loads).
We aim to have the logs milled before the hot
summer winds begin and the racks immediately
loosely wrapped in black plastic, to minimise
surface checking.
Drying and storage
Once timber is milled and racked out, it needs
to be dried for from six months to a year to
bring moisture content down to below 17%.
SMARTimbers’ product at sale has to be at or
below a specific moisture content. Freshly sawn
sugar gum timber is about 35% to 40% moisture
content (many less dense eucalypt species have
green moisture content of up to 80%). For timber
that goes into decking, it makes a difference what
time of year the installation occurs. For a wintertime
job, 17% may be acceptable. For a summertime job,
moisture content less than 15% would be necessary

Sticked-out racks may weigh 1.5 to 2 tonnes green and require
specialist machinery to load and unload. It is important that any rack
contains just one dimension of timber and, ideally, that strapping can
be tightened as the timber dies and shrinks.
SMARTimbers members with air-drying racks of sugar gum
roughsawn feedstock in a member’s farm shed, the first storage
option we tried.
and ideally closer to 12%. The critical thing is how
shrinkage will affect the final quality of the job.
When we have freshly sawn timber stocks coming
into summer sales, we have to do pre-drying to
bring timber moisture down to 17% or less.
If we have 6 months for 25-mm-thick board to dry
over summer sticked out within its loose black
plastic wrapping, the moisture content at the end
of that time will be adequate for most external
installation jobs.
The storage needs to be controlled; hot drying
winds particularly need to be shut out. Adequate
volumes need to be held in stock of this air-dried or
seasoned timber. In the case of SMARTimbers, this
means that we need to be consistently about
six months ahead of our demand.
We have tried a number of ways to manage this:
kiln drying, storage in farm sheds, storage outside
under plastic wrap. To minimise freight cost and
storage charges, it appears that storage of racks
outside at the mill loose-wrapped in black sheet
plastic is a cost-effective option, with drying rate,
surface checking and general quality assessed
as being as good as with racks stored in closed
air-drying sheds.
Drying costs
Costs of air drying are the lowest. Pre-drying (from
40% to 17%) requires extra freight and handling
plus perhaps $50/m3
, and full kiln drying down to
10% will cost from $100/m3
depending on board
thickness. As thickness increases from 25 mm,
the time for drying to a particular moisture level
becomes significantly longer, and costs of drying
per cubic metre increase.
Agreements
An agreement in writing should be developed
for sending logs to a conventional mill. It should
specify all the issues discussed. The mill may have
a basic form that covers this. The agreement should
specify in writing things as obvious but possible to
overlook as whether boards are to be milled to an
exact cross-section dimension, such as 100x25 mm,
or to an oversize dimension, such as 106x28 mm
that allows for shrinkage during drying (a sample
agreement is in Appendix 5).
Learning experiences with sawmills
At the beginning, in 2002/03, we relied on the expertise of a
family sawmill. The miller knew as little as we did about the
markets and options for sugar gum. He was used to working
on clear, lower-density native forest logs and milling them into
structural beams and framing timbers. At the time, we assumed
that our main market would be the furniture industry and
particularly table tops and bench tops. We supplied the logs, and
he milled them, mostly into these quite large dimensions – up to
300x40 mm. Generally, the racks he made up for us would be of
boards of a range of widths and thicknesses. So one section of a
rack might be all 35 mm thick but of widths from 150 to 250 mm.
Another section of the rack would be all 30 mm thick and mostly
150 mm wide.
Unfortunately, the outcome was that any kiln drying was
complicated and that accessing a board of a particular dimension
was more laborious and hence costly. Added to this was the fact
that, until you got it out, you didn’t know if it was long enough.
Though we did not realise it at the time, this first milling experience
was a very costly lesson, as most of this timber is still in our stock;
and while the investment of hundreds of hours of time may have
been worthwhile, the $40,000 in cash outlay will take many years
to realise. However, this larger-dimension milled timber
has potentially doubled in value over this time due to our
marketing work.
With a change of mill and a greater log volume, we immediately
improved the sticking out and grading and greatly reduced our
feedstock size range, as we had realised our market lay with
decking production.

6. Operational Issues
SMARTimbers has steadily developed its operating system over the past four years. During this time, we have had
to develop a set of written forms and agreements for contractors detailing parameters of log specifications, milling
specifications, and obligations between contractors, SMARTimbers members and the cooperative. We now have good
control over or understanding of most issues, from standing trees to the final buyers. All of these we have developed to
suit our own needs. Nothing was there to suit our value-adding approach when we started.
For any group developing a working chain of
supply, it is critical that key things are covered that
will allow the group to trade without continual
nasty surprises. For instance, it is vital that all
dealings with contractors, carriers, processors
and buyers are covered by written agreements
or contracts. Even when relations are cordial, a
written agreement should be in place clarifying
expectations, responsibilities, obligations and
costs. Agreements must also be developed to
make clear the relationship between the group
and the members. All overseas forest management
associations require a signed agreement before any
work commences on a member’s property. These
sorts of forms should be in place early in the piece.
It is a crucial part of doing business.
Forms, agreements and contracts
We now have simple agreements with various
supply-chain businesses. These include:
• Firewood cutters for log supply, specifications
and price.
• Landowner members to clarify our agent role
and where responsibility lies for collection of
money and liability for injury.
• Firewood cutters for firewood tendering and
removal off a member’s land.
• Our main sawmill for specifying processing
specifications and cost.
• Members who were investing in the purchase of
logs and processing.
Most overseas forest grower groups have a very
organised system for covering every eventuality.
One part of this is to have full plans for every forest
site of every member. Another is to have agreements
that cover every job that the association does for the
member. We see this as the model that we have to
work towards here.
Minimising risks and liabilities
There are a number of nightmare scenarios for any
new group marketing a product. One is that some
product sold and installed does not measure up
in some aspect of quality and the product has to
be removed and replaced at the seller’s cost. We
have avoided this situation to date, partly through
providing a good standard of product and partly
through sending product use recommendations
with any supply (see Appendix 4). But a number
of times, there have been complaints, and these fall
into a number of categories:
• A product quality is different to what is expected
(examples are that decking is supplied in
random lengths when set lengths were expected
or that it has some feature whereas a sample was
of select grade).
• Product quality is variable (examples are some
decking timbers warp before installation or
decking dries differentially after processing,
resulting in minor variations in width).
• Installation is careless (examples are that
flooring is laid on a badly sealed slab resulting
in warping or cladding is nailed up before it had
time to adjust to the drier ambient conditions
and subsequently shrank).
• For some reason, we are unable to supply to suit
the volume or timing.
We strongly recommend that any group strive
from the beginning for a constant good quality
of product and develop some comprehensive
product notes to suit all situations, thus avoiding
the majority of problems. As in our case, you may
want to deal in a timber species you have to learn
all about yourselves, as you find no one else has
information on how it performs or has done the
necessary testing for data or specifications that
architects and builders will need. Other ways to
minimise product problems are by rationalising and
limiting the product line to what will readily sell
into some niche market.
John Reed, the cooperative’s manager from 2003 to 2005, discussing
our product’s performance with the site manager of a large project.

Risk and OHS issues in the chain of supply
The harvesting contractor we use has all the proper
occupational health and safety compliance, training
and public liability insurance. We use a contractor
for mechanical harvesting of members’ sites mainly
so risk of personal injury is minimised. At other
points, we look for the lowest-risk way to manage
that stage of the supply chain. Similarly, the carriers,
the sawmills and the profiler we use all run very
professional workplaces with good compliance with
industry standards.
Insurance: product, product liability, directors’
negligence, dealings with members
The cooperative rules specify that the cooperative
will be suitably insured and particularly that the
directors should be adequately indemnified. While
the members of a cooperative are not liable for the
cooperative’s product, the directors can be. The
options for insurance are described below.
Professional indemnity: to guard against instances
where the group may be found to be at fault in its
dealings and the directors could be held liable. This
cover is required by the cooperative’s rules.
Product liability: where the product or product
advice is found to be at fault. This cover is hard to
obtain and expensive, and the risks can be actively
minimised to a considerable degree.
Product insurance: cover for fire, flood, damage or
theft. To date, we have looked for ways to minimise
risks. If a syndicate was involved in a major volume
of milled timber, it had product insurance cover.
Public liability: where the group is negligent in
some way and a member, a contractor, or some
member of the public is injured. This insurance is
essential for many groups to minimise commercial
risk. Some groups may be able to get cover under an
umbrella scheme.
Cost of either professional indemnity or public
liability insurance can be over $2,000/year at
lower levels of cover. Higher cover and higher-risk
activities would increase this figure. Not-for-profit
groups may be able to find lower cover costs than
for-profit groups.
Member services, training, indemnity
Overseas forest grower associations show that,
when groups become established and can maintain
a viable product flow, they can also provide
most of the services, training and extension that
government forestry services supply at great cost in
other countries. The associations are responsive to
the grower members’ needs and are usually more
able to provide the services, extension and training
that is needed when it is needed. Examples of
such associations can be found in the countries of
Scandinavia and also in Europe and North America.
One of the obligations of a well-governed group is
to protect the members from liability costs involved
in dealing with the group in whatever way,
including during training and group activities
Point of sale information, product advice
We began with the concept that we would sell
kiln-dried timber to furniture makers, and the final
product would have a swing tag that would not
only identify the timber as coming from us but also
enable us to track the plot of trees it came from.
Case study: issues with product
It may be instructive to expand on how we have dealt with
complaints about our product. They are usually relatively minor;
and although there have been a number of instances, each of
them has been different.
1. In 2004, we made our largest sale to date to a university.
This was worth about $20,000, mainly for decking for some
outdoor areas. We received a call that, on the pack being opened
and unstrapped, it was clear that some timbers had begun to twist
badly. Our manager at the time and a director went immediately
to the site (a three-hour drive each way) and met with the site
manager. It was clear that, although several timbers had twisted
unacceptably, the rest were okay and being installed with no
problem and that the actual installers were quite happy with the
timber. We trucked up a new pack within a few days and finally
recovered what was not used. It appears that this was a total
aberration and that the timbers had been milled from one of the
sugar gum logs with spiral grain that we normally would not mill.
The same university has since made another larger purchase.
The cost to us of dealing with what turned out to be only 10 lengths
of faulty decking was at least $500.
2. Another site had problems that were more to do with
communication. The customer had wanted select-grade decking
of a set length, while we sell decking packs of random length with
the occasional feature, and it is up to the builder to cut to length.
This allows us to sell at a lower price per linear metre and suits
most sites. Again, within days, the marketing person and a director
visited the site and worked out a solution acceptable to t
he customer. Cost to rectify – 80 km travel plus two people for
three hours.
3. Another job used kiln-dried cladding on an exposed exterior.
The builder installed the cladding in dry weather, leaving no
expansion room, sealed the outer surface, and then found, with the
onset of wet weather, that the cladding timbers expanded enough
to cause buckling. The building owner was understandably upset.
A director visited the site, we talked with the architect, and the
builder accepted that the error was his. We sold them some extra
timber, and the job was fixed mainly at the builder’s expense.
Cost to rectify – 60 km travel plus one person for four hours.
The key points in dealing with all these and other situations
are to have a fast and effective response and to be clear from the
beginning about the product you are selling – including knowing
how it glues, expands, and is best attached, as well as the options
for how it can be treated .

Rack showing end paint, sticking out, steel strapping, and mill’s rack
number and roughsawn dimension.
Wrapped packs of profiled stock in store, labelled with job code,
owner, dimension and linear metres.
Market realities swung us towards selling air-
dried decking and cladding and subsequently also
kiln-dried flooring and panelling. Over three years,
we have developed professional, quality marketing
publications and comprehensive product use
recommendations. A major part of our product and
group information is now on our website (www.
smartimbers.com.au). The cost of this elaborate
site has been covered by some specific funding and
would otherwise have been beyond our resources.
Cost control
Cost control is everything for SMARTimbers. Our
aim is to maximise returns to joint venture members
or individual log owners. This means good logs cut
to 0.3-metre multiples, accurate sawing to maximise
recovery, end sealing of logs, specification of only
a few feedstock sizes, minimal losses through
docking, good sticking out into suitably sized
racks, drying under cover on level ground, good
durable labelling, and accurate tallying of total
linear metres per rack. Added to this is a good price
for the sawing and handling in the first place. If
any one of these actions had to be highlighted, it
is accurate milling for best recovery. A difference
of 10% recovery will be the difference between a
comfortable profit and a distressing loss.
Invoicing, payment systems, debts and
accounting systems
To have a small operation like SMARTimbers
continue to be profitable requires as tight an
accounting system as possible. Bad debts are not
able to be absorbed. Payment from creditors needs
to be expedited. We now require payment up front
for most orders and a 25% deposit for other orders.
At the same time, we undertake to pay accounts
promptly to all contractors.
Our system is quite cumbersome and inefficient.
We are working on improving our invoicing and
accounting and trying to eliminate the inefficiencies.
Labelling, tracking, accounting
Groups like SMARTimbers may have timber lots
going through the supply chain that are owned by a
number of individuals or syndicates. There are real
issues involved in the systems of durable labelling
of logs, racks and packs. It is necessary to develop
a numbering or labelling process that can track the
timber though transport, milling, drying, profiling
and freight contractors, so that every log owner gets
the full return for their timber and no confusion of
ownership arises.
SMARTimbers has slowly developed a tracking
code system in partnership with our millers and
profiling contractor. We still have some way to go,
and our system is still very manual. The barcode
readers and other electronic systems used in far
larger timber businesses do not suit our chain-of-
supply partners and are very expensive, but some
simpler version of these may be the best solution.
Whatever process is used, it needs to allow simple
and quick accounting and accurate tracking of
product through our supply chain, possibly for
timber owned by a number of members side by
side at any one point. The timber lot identification
system has to be compatible with the lot numbers
of processed stock held in the profiling business
and with the job number and account number of an
order. In our development, not having an adequate
system for all this led to higher accounting costs,
which significantly but unnecessarily added to the
cost of the overall process.
Servicing and dispatching orders
A group with a relatively small volume can
rarely afford to have a mass of processed product
waiting for sale in some store. We have developed
a relationship with our contract profiler where
this business stores a substantial number of racks
of timber – up to 40 m3
at any one time of various
dimensions – at the profiler’s premises. As orders
come in, processing is done in batches of 2,000 to
4,000 linear metres (lm), (a 5-metre-long rack of
100x25 mm boards is about 400 lm).

(Left) Early days of supply from a member’s
shed to the profiling business and to
other small orders, in this case, 250x40-
mm lengths of sugar gum for a stair
manufacturer.
(Right) The team at the profiling business
with a pack of our 85x19 mm
flooring ready to wrap and load. The
profiling business is a critical business in
SMARTimbers’ chain of supply. They hold
substantial sugar gum feedstock, profile
to our order, pack and dispatch – for a
reasonable charge.
David Fisken, a SMARTimbers director,
explains the intricacies of our supply chain
to Dr Rosemary Lott (left), Joint Venture
Agroforestry Program, and Philippa Noble,
Department of Primary Industries. We are
continually working to better understand and
improve the economics of value adding at
our scale.
The order of perhaps 1,000 lm is packed and
dispatched, and the balance is wrapped, labelled,
and held as stock for the next few orders. The
timber is processed in this way to minimise the cost
per linear metre of processing. The set-up cost for
the profiling machine is about $150, and it makes
sense to spread this over a larger order. Processing
orders under 500 lm is not cost-effective if they have
to bear the set-up cost. The cost of profiling, for
example, 85x19 mm decking can rise from a base
of 35c to 40c/lm up to closer to 75c/lm for small or
fiddly jobs requiring set lengths.
Research and product development
For some groups, the timber they try to put into
the market may have as little technical information
known about it as our main species, sugar gum.
Our experience was that a large part of the time and
effort involved our first few years was expended
discovering the technical data, bringing material
together, organising further testing, and taking
samples to builders and architects.
It did mean that we had a timber that was, for
a while, exclusive to us until we had marketed it
well enough that other opportunistic operators
discovered it and began to undercut us in selling
into the demand we had begun to create. The real
danger is that others will provide second-quality
material and make a bad name for the whole
species. The way past this is to develop a distinctive
brand, become known in the market for quality and
supply, and use certification or some equivalent.

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