Landcorp - Crown Ownership Monitoring Unit

Note 25 – ForestsA – NATURE OF ACTIVITIESLandcorp’s exotic forests are managed as an ancillary activity to farming. Land is allocated for forestry use when it is considered better suitedto forestry than for pastoral farming. Factors included in this decision include the viability of pastoral farming and land development activity,soil types, local climate and erosion control.Forests are considered economically viable where the forest stand is at least two hectares in size. Forests over 20 years of age are consideredharvestable, with prime harvest age around 25 years. The age of Landcorp’s forests are shown below:Group Group Parent Parent2010 2009 2010 2009Hectares Hectares Hectares HectaresForest ageLess than 10 years 2,118 1,975 1,543 1,46110 – 15 years 445 843 379 80115 – 20 years 842 426 842 42620 – 25 years 544 606 543 605Greater than 25 years 894 880 882 868Total Forest Area 4,843 4,730 4,189 4,161Financial risk management strategies relating to forestry are discussed in Note 36.B – VALUE OF FORESTSThe change in the value of forests owned by Landcorp during the year was due to:Group Group Parent Parent2010 2009 2010 2009Note $000 $000 $000 $000Forest value at beginning of year 8,648 9,805 8,092 8,978Costs capitalised to the forest crop 1,452 1,204 1,295 933Value change due to:Growth 9 1,179 1,070 1,167 1,054Valuation change 55 (2,241) 64 (2,082)Book value of forest felled 9 (588) (1,190) (588) (791)Book value of forest sold – – – –Forest Value at End of Year 10,746 8,648 10,030 8,092Forest valuations at 30 June 2010 were provided by P F Olsen Ltd. A before-tax market discount rate of 12% was used, based on the size ofLandcorp’s forest stands and market prices for timber sales.During 2009/10 Landcorp Farming was allocated 42,434 New Zealand Units (“carbon credits”) for sections of its post-1990 forests(refer Note 27). In the event that these forest areas are harvested, a liability equivalent to the decrease in carbon will be incurred.Forests are classified as current if they are intended to be harvested within one year.Group Group Parent Parent2010 2009 2010 2009$000 $000 $000 $000Current 1,200 1,200 1,200 1,200Non-current 9,546 7,448 8,830 6,892Forest Value at End of Year 10,746 8,648 10,030 8,09275