More than 10 million kilograms of almonds and 5.5 million litres of olive oil will be produced over the next two months as the Timbercorp almond orchards and olive groves in northern Victoria enter their annual harvesting period.

Around half the almond and olive harvest will be sold in Australia under labels such as Lucky and SunSol for almonds and Cobram Estate for the olive oil. There will also be a major export program. Timbercorp almonds are sold to markets such as India and the European Union, while the largest markets for the Timbercorp olive oil include the United States, Japan and New Zealand.

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In the past few months, eastern Australia has been battered by a series of environmental calamities in the form of the bushfires in Victoria, the continuation of the drought in the southern Murray-Darling Basin and the floods in Queensland. All Australians have been affected to some degree by these terrible events, and Timbercorp has not been immune from them.

The worst of the Victorian bushfires have occurred in the eastern part of the state, which means Timbercorp’s forestry plantations have been largely unaffected. 

Continued below average rainfall and very low river levels, have meant the irrigation water allocations for Timbercorp’s almond, olive and citrus orchards in this area range from 18-35%, which represents historic lows. Our orchard managers have been implementing comprehensive water management plans to minimise the impact of these conditions.

In contrast, northern Queensland has been experiencing very high levels of rainfall in recent months, leading to floods in some parts of the state. Fortunately, Timbercorp’s avocado and mango orchards have not been impacted by the floods.

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As is widely recognised, the global economy is facing momentous challenges and this obviously impacts Timbercorp in a number of ways. In terms of the agribusiness sector, the impact of the current economic situation is mixed. Demand for food is less elastic than other products and Timbercorp’s Projects are based on goods that have strong demand fundamentals and generally involve servicing a combination of domestic and export markets. Therefore, the impact of the global economic downturn on prices is expected to be less than for other commodities.

In the forestry sector, Timbercorp’s wood fibre export program to Japan continues to be executed in accordance with existing contracts. On 27 March 2009, it was announced that joint negotiations between three Australian forestry companies (including Timbercorp) and Japanese buyers had maintained the 2008 price for plantation grown bluegum eucalypt exported from Australia for the first six months of 2009. In light of the current economic conditions, particularly in Japan, maintaining the woodchip price at 2008 levels demonstrates the strength of the relationship between Timbercorp and Japanese customers and the superior quality of Australian hardwood woodchip. Notwithstanding the price maintenance, we have received some requests to delay certain shipments to Japanese customers in the short term to enable them to manage their inventories more aggressively.

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The Timbercorp Board of Directors is well advanced with a major strategic review of the Company, which is designed to build on its strong base. One major objective of the review is to reduce capital intensity and debt, while maximising the benefits of our extensive holdings of horticultural and forestry assets.

The Board believes the best course of action for the future is to transform the business away from its focus on investment management and move to a fully integrated agribusiness company.

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Timbercorp engages Australia’s leading horticultural companies to manage its non-forestry Projects.

OneHarvest, which manages Timbercorp’s Mango Projects in Queensland and the Northern Territory, has been named Woolworths Australia’s Supplier of the Year 2008 for Fresh Produce.

Also, Boundary Bend Ltd continues to receive awards for the high quality of its olive oil, much of which is produced from Timbercorp groves.

The Australian Olive Association has also named Timbercorp’s 2,800 hectare grove near the town of Boort in northern Victoria Australia’s ‘Olive Grove of the Year’.

Timbercorp’s strategic alliance partner in almond production and marketing, Select Harvests, recently completed construction of a new $32 million almond processing facility.

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On 1 July 2008, the Australian Taxation Office (ATO) began applying a revised interpretation of agribusiness MIS, which saw new investors treated as if they are part of a trust for taxation purposes, rather than as participants in primary production as had previously been the case. This interpretation applied to new projects commencing after June 2008 and thus did not apply to existing Timbercorp growers.

The agribusiness investment industry disagreed with the ATO’s position. A test case challenging the ATO’s interpretation was heard by the Federal Court in August 2008.

In December 2008 the Court released a unanimous verdict in favour of the MIS industry. The ATO has stated it will now revert to the pre-1 July 2008 position. Timbercorp is pleased with this decision as it confirms the Company’s position that investors in the Timbercorp Projects are engaged in primary production and should be taxed on that basis.

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One of the many challenges facing bushfire affected communities in Victoria is a lack of materials to re-fence their properties. To address this need the Irymple (Mildura) Rotary Club through connections with the Mitchell (Kilmore) Rotary Club has initiated the collection, bundling and transportation to fire affected areas of posts previously used on grape vineyards in the southern Murray-Darling Basin.

Timbercorp has offered to donate around 15,000 posts which will be amongst the first posts to be transferred to the fire affected areas.

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The Timbercorp website has a new section titled ‘Grower News’. This new resource seeks to keep you up to date with timely and current project information. Information such as project updates, upcoming distributions, projects currently harvesting and any current news will be located in this section. 
 



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