PEFC/02-44-02PEFC/02-44-02

Family Forestry and Forest Owners’ Organisations in Finland

Tartu, Estonia

15th March 2012

Janne Näräkkä, Forestry Adviser

Central Union of Agricultural Producers and Forest Owners MTK

PEFC/02-44-02PEFC/02-44-02

Content of the presentation

• Family Forestry in Finland• Forest Owners’ Organisation in Finland• Forest Management Associations• Jointly-owned forests in Finland

04/22/238 March 2010MTK/Forestry Group

2

PEFC/02-44-02PEFC/02-44-02 33

Structure of Land Use in Finland

Total land area 30 415 thous.ha, forest land area 20 150 thous.ha

Source: Finnish Forest Research Institute

Forest land66 %

Other wooded land9 %

Agricultural land9 %

Other land16 %

PEFC/02-44-02PEFC/02-44-02 4

Who Owns Finnish Forest Land?

Share of forest area, %Private families 62 %

Source: Finnish Forest Research Institute

310 000 private forest holdings - 735 000 forest owners Average size 31 hectares

Entrepreneurs3,7%

Wage & salary earners15,5%

Pensioners19,8%

Farmers

20,4%

Other private2,4%

Forest Industry

8,9%State24,4%

Others4,9%

PEFC/02-44-02PEFC/02-44-02 55

Forest Ownership Structure in Finland(according to an inventory of 2004-2007)

* = according to an inventory of 1997-2007

Source: Finnish Forest Research Institute

85

68 64 60

8

17 21 26

710 9 95 6 5

* COMMERCIALFELLINGS/year

60 MILL. M3

ANNUALINCREMENT99,2 MILL. M3

VOLUME OFGROWING STOCK

2201 MILL. M3

PRODUCTIONFOREST AREA20,2 MILL. HA

0%

20%

40%

60%

80%

100%

Private

State

ForestIndustry

Others

PEFC/02-44-02PEFC/02-44-02 6

Private Forest Ownership in Finland% of forest owners

Source: Finnish Forest Research Institute, TTS9.3.2010/MTKZ:\Keskusliitto\Metsä\Kuvat\ENGLISH\omraken2.pr4

76

58 55

3119 20

24

43 45

6981 80

1971* 1976* 1983* 1990 2003 2009**0

20

40

60

80

100%

0

20

40

60

80

100%

FarmersNon-farmers

* = earlier the percentage of farmers has included also retired farmers**= includes also part-time farmers

PEFC/02-44-02PEFC/02-44-02 7 7

An average age of private forest owners is 60 years

37 4456 53

4845

37 40

15 11 6 8

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

1990 1999 2009 2009ala

-40

40-59

60 -

% of ow ners Average age

1990 54 years

1999 57 years

2009 60 years

An average age of new forest owners is 52 years

Source: Forest owner 2010, Finnish Forest Research Institute

PEFC/02-44-02PEFC/02-44-02 8

Family Forest Owners Main ObjectivesThe Right to Conduct Viable Forestry

Source: Finnish Forest Research Institute21.4.2011/MTKZ:\...\\\tiedostonnimi.pr4

PEFC/02-44-02PEFC/02-44-02

Multiobjectiveowners

RecreationistsSelf-employed owners

InvestorsIndifferent0

5

10

15

20

25

30

35

40% of forest owners

19992009

PEFC/02-44-02PEFC/02-44-02 99

Average size in

Finland 31,2 ha

( Forest holdings with forestry fee )

Average Size of Private Forest Holdings, ha

21

22

27

25

27 25

26 33

34

3332

4638

63

PEFC/02-44-02PEFC/02-44-02 10

Number of Private Forest Holdings by Size Classes 31.12.2008

forest holdings with forestry fee 312 508 units, average size 31,2 ha(all forest holdings over 2 ha 443 740 units, average size 23,6 ha)

Source: National Board of TaxesMTK/21.4.2011L:/.../englisht/metsaloiden_lukumaara.prs

<10 10-19,920-49,950-99,9100-199200-499>500

hectares

0

20

40

60

80

100

120

140

1601000 units

_

PEFC/02-44-02PEFC/02-44-02

PEFC/02-44-02PEFC/02-44-02 11

Family Forestry is characterised by

• Multiobjectivity

→ family forestry incorporates multiple values and functions• Over-generational thinking

→ the needs of future generations are constantly borne in mind and the forest holding is handed down to the next generation in a further improved condition

• Various benefits and services provided to the society

→ e.g. Everyman's Right - the forests and waters are free for everyone to visit and enjoy

PEFC/02-44-02PEFC/02-44-02 12

Family forest owners’ priorities

MTK promotes sustainable family forestry in accordance with the following principles:

• Landowners’ constitutional rights are respected• Forest owners have the right and the opportunity to manage

and use their forests in compliance with their objectives• Forestry is economically profitable• Forests are managed in compliance with the principles of

sustainable forestry

PEFC/02-44-02PEFC/02-44-02 13

Finnish forest sector is the backbone of Finnish economy

• Forest sector has always played a key role in Finnish economy• GDP share of the forest-based sector 5.9% (2008), 9.5 bn.€• Employs 77 000 people• Finnish forest-based sector is heavily export-oriented – over 90% of

paper and paperboard is exported and over 60% of sawn wood• 20% of net export revenues comes from forest industry• Forest sector is extremely important in rural areas in many areas 15-

20% of regional GDP comes from forest sector• Gross stumpage earnings (private forest owners) ca. 1.5 billion €

annually – this means ca. 3.600 € / forest holding• Annual variation of stumpage earnings between 1 and 2 billion €

PEFC/02-44-02PEFC/02-44-02 14

Timber balance in Finland

Source: Finnish Forest Reseach Institute

1955 60 65 70 75 80 85 90 95 00 05 10

0

10

20

30

40

50

60

70

80

90

100

110milj.m3

0

10

20

30

40

50

60

70

80

90

100

110milj.m3

Annual total drain

Annual growth

PEFC/02-44-02PEFC/02- -

Wood production is the backbone of sustainable forestry

PEFC/02-44-02PEFC/02-44-02 15

COMMERCIAL ROUNDWOOD FELLINGS IN FINNISH PRIVATE FORESTS 1955 - 2011e

Source: Finnish Forest Research Institute21.4.2011/MTKZ:\Keskusliitto\Metsä\Kuvat\ENGLISH\Mh_yksit55-.prs

55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 10 11e

0

5

10

15

20

25

30

35

40

45

50

55MILL. M3

0

5

10

15

20

25

30

35

40

45

50

55MILL. M3

Year Trend Average

e = estimate

PEFC/02 -44-02PEFC/02 -44-02

80% of domestic roundwood comes from private forests

PEFC/02-44-02PEFC/02-44-02 16

Net Income* from Private Forestsper hectare in Finland 1970-2011e

0

20

40

60

80

100

120

140

160€/ha (at 2008 prices)

0

20

40

60

80

100

120

140

160

*) average net income is the return on forestry capital without changes in growing stock, before financial costs & taxes

e = estimate

Trend

Source: Finnish Forest Research InstitutePEFC/02-44-02PEFC/02-44-02

PEFC/02-44-02PEFC/02-44-02 17

Total Costs of Silvicultural and Forest-Improvement Works, State Loans and Grants

Non-industrial private forests, real prices (cost-of-living index, year 2009)

Source: Finnish Forest Research Institute21.4.2011/MTK z:\...\english\mh-kustannukset.pr4

0

50

100

150

200

250

300Mill. euros Total costs Own input State grants State loans

PEFC/02-44-02PEFC/02-44-02

PEFC/02-44-02PEFC/02-44-02 18

Forest owners’ organisation in Finland

PEFC/02-44-02PEFC/02-44-02 19

PEFC/02-44-02PEFC/02-44-02 20

Background of forest owners’ organisations

• Slash and burn –agriculture and emerging forest industry led to vast decrease of Finnish forest resources in the middle of 19 th century

• In 1859 a first governmental forest management authority Metsähallitus (State Forest and Park Services) was established

• In 1886 first Forest Act was passed aiming at prohibiting the destruction of forests and safeguarding regeneration after fellings

• The fear of decreasing forest resources and the lack of negotiation power towards forest industry led to establishment of forest owners’ first Forest Management Association in 1906

• In 1920’s - after Finland’s independence in 1917 - tenant farmers were given the right to buy the land they had held and managed under their tenancy agreements Beginning of Finnish Family Forestry

PEFC/02-44-02PEFC/02-44-02 21

THE OFFICE OF THE CENTRAL UNION OF AGRICULTURALPRODUCERS AND FOREST OWNERSMaaseudun Tulevaisuus (Newspaper)

THE OFFICE OF THE CENTRAL UNION OF AGRICULTURALPRODUCERS AND FOREST OWNERSMaaseudun Tulevaisuus (Newspaper)

RURAL

ENTREPRENEURS

RURALENTREPRENEURS

LOCAL FARMERS ASSOCIATIONS(383)

LOCAL FARMERS ASSOCIATIONS(383)

REGIONAL FOREST OWNERS’UNIONS (8)

REGIONAL FOREST OWNERS’UNIONS (8)

REGIONAL FARMERS UNIONS(14)

REGIONAL FARMERS UNIONS(14)

154 784 MEMBERS

FORESTOWNERS

FARMERS

FUR BREEDERS´ASSOCIATION

FUR BREEDERS´ASSOCIATION

The Organization of MTK 2011

FOREST MANAGEMENTASSOCIATIONS (FMA) (103)

FOREST MANAGEMENTASSOCIATIONS (FMA) (103)

Effective organisation of forest owners is the key

PEFC/02-44-02PEFC/02-44-02 22

Organization of Private Forest Owners

which have 633 000 Forest Owners which have 633 000 Forest Owners

Members of Forest ManagementMembers of Forest Management

Associations 310 000 Forest Holdings,Associations 310 000 Forest Holdings,

Forest ManagementForest ManagementAssociations Associations 103103

Regional Forest Owners’ UnionsRegional Forest Owners’ Unions

8 8

Forestry Council of the CentralForestry Council of the CentralUnion of Agricultural ProducersUnion of Agricultural Producersand Forest Owners (MTK)and Forest Owners (MTK)

MTK’s Forestry BoardMTK’s Forestry Board

9 members9 members

42 members42 members

Protection of forest owners’ interests at all levels:

- local

- regional

- national &

international

PEFC/02-44-02PEFC/02-44-02 23

Forest Policy Organisation:

Central Union of Agricultural Producers and Forest Owners (MTK)

• A national central organisation of private forest owners

• to look after the private forest owners' interests in timber trade

• to influence forest policy legislation

• to guide the activities of the Regional Forest Owners' Unions, to protect the interests of the Forest Management Associations and to develop co-operation between forest owners

• MTK has no position to oblige FO Unions or FMAs – all co-operation is based on voluntariness

PEFC/02-44-02PEFC/02-44-02 24

Forest Policy Organisation:

Regional Forest Owners’ Unions• Regional central organs for local Forest Management

Associations• to promote private forestry and to protect private forest

owners' interests• to guide and develop the activities of the Forest

Management Associations and co-operation between forest owners

• to provide guidance and to assist in marketing of forest products

• The Unions are mainly financed by Forest Management Associations’s membership fees.

• MTK and Forest Owners’ Unions are not granted any state subsidies

PEFC/02-44-02PEFC/02-44-02 25

Forest Management Associations

PEFC/02-44-02PEFC/02-44-02 26

Forest Policy Organisation

Forest Management Associations

• Currently 103 associations covering the whole country and every municipality fusions decrease the amount of FMAs

• Employ 1000 officials and 620 permanent forest workers

• Employ also high number of contractors and entrepreneurs

• Forest owners’ service organisation on local level:

• to promote forest management and utilization as well as other objectives that the forest owners have for their forest ownership

• to promote the profitability of forestry

• to offer training and guidance in forestry to forest owners

• to protect the interests of private forest owners by giving them professional assistance

• practical organizer of group certification

PEFC/02-44-02PEFC/02-44-02 27

Forest Policy Organisation

Forest Management Associations• FMAs are working in a close co-operation with the forest owners in all

matters related to forests:• forest management services (harvesting, regeneration, ditching

etc.)• training and planning services• timber sales services

• 80% of the forest management activities in private forests are carried out by FMAs

• 70% of preliminary planning of timber sales• Mandatory forest management fee for holdings over 4 hectares ca.

25 – 30 million €/year for FMA advisory services = ca. 12% of FMA’s total annual turnover

PEFC/02-44-02PEFC/02-44-02

PEFC/02-44-02PEFC/02-44-02

The Purpose of Forest Management Associations

• FMA law (534/98, 1§) :• FMA is the union of forest owners, the purpose of which

is… • to advance the profitability of forestry practiced by the

forest owner and • to advance other goals forest owners have on their forestry

and• to advance economically, ecologically and socially

sustainable forest management and use

In this order!

PEFC/02-44-02PEFC/02-44-02

Forest Management Associations

• FMAs are voluntarily founded unions, administrated and funded by forest owners

• Law (1998 / 534) and act (1998 / 1227) about the FMAs regulate the operation of FMAs

• The members are, unless they decline the membership, forest owners who have the tenure right to a forest located in association’s territory and who are under the obligation to pay the forest management fee (forest area more than 4/7/12 hectares)

• The operation of FMAs divided into two blocks: acitivities financed by forest management fee and business activities have to be separated!

• FMA law and FMA act order among other things the purpose, membership, operation area, decision making procedure, forest management fee, use of funds and release of membership

• Law also orders how FMAs are allowed to operate in timber markets and in timber harvesting

PEFC/02-44-02PEFC/02-44-02

Forest management fee• Forest owners are entitled to services of FMA by paying the forest management fee• Fee is legal, tax-like payment which tax authority collects from forest owners and accounts

to FMAs• Forest owner does not have to pay the fee if his/her forest area is under 12 hectares in

Lapland province, under 7 hectares in Oulu province and under 4 hectares elsewhere in Finland

• Forest management fee consists of basic fee and hectare fee:• Basic fee: 70 % of the average stumpage price /m3 of whole country from last 3 years • Hectare fee: FMA can decide. Depends on the geographical location of the FMA. At

highest can be 1,5 % -11 % of the average stumpage price /m3 of whole country from last 3 years

• For example for 30 hectare forest holding in Southern Finland around 100 €/year• ~310 000 holdings pay the fee total 25-30 million euro/year

• Fee is decided for each year separately• Fee secures that all forest owners in all parts of Finland have the equal right to get advisory

and forest management services • Important for small FMAs, for bigger associations not that relevant anymore

PEFC/02-44-02PEFC/02-44-02

Share of timber trade total volume done by FMAs

1.4.2011/MTKZ:\...\Kuvat\MHY\Tulos10\valtak-%_koko-maa.pr4

28,732,7

34,836,138,6

36,537,339,838,840,441,4

4642,841,3

45,242,9

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 100

10

20

30

40

50%

0

10

20

30

40

50%

Tiedot puuttuvat: 1995 Åboland ja Nyland 1997 Åboland ja Österbotten 1996 Åboland, Nyland 2000-2003 ja 2008 - 2009 ja Österbotten Åboland

PEFC/02-44-02PEFC/02-44-02

PEFC/02-44-02PEFC/02-44-02

Amount of Forest management Associations

PEFC/02-44-02PEFC/02-44-02

Renewal of Forest Management Association law

• Renewal of FMA law is mentioned in the governmental programme of the current government

• Purpose: secure level playing field for different actors on forest service markets obligatory forest management fee criticized by other service providers

• Forest owner’s freedom of choice another central element:• Should forest owner be automatically member of FMA?• Easier requirements for resigning from the FMA membership• Forest owner’s right to choose FMA

• The Minister of Agriculture and Forestry will give his recommendation in coming months and some changes are inevitable

• In case obligatory financing will be abolished then also society’s requirements for FMAs have to be removed!!!

PEFC/02-44-02PEFC/02-44-02 36

played a central role

Source: Finnish Forest Reseach Institute

1955 60 65 70 75 80 85 90 95 00 05 10

0

10

20

30

40

50

60

70

80

90

100

110milj.m3

0

10

20

30

40

50

60

70

80

90

100

110milj.m3

Annual total drain

Annual growth

PEFC/02-44-02PEFC/02- -

Finnish forestry has been a success story – FMAs have

Future?

PEFC/02-44-02PEFC/02-44-02 37

Forest owners’ perceptions of Forest Management Associations

PEFC/02-44-02PEFC/02-44-02PEFC/02-44-02PEFC/02-44-02

• 5%

• 9%

• 7%

• 11%

• 2%

• 10%

• 5%

• 7%

• 9%

• 7%

• 6%

• 5%

• 6%

• 5%

• 7%

• 4%

• 6%

• 7%

• 4%

• 4%

• 19%

• 23%

• 19%

• 18%

• 18%

• 24%

• 15%

• 28%

• 25%

• 22%

• 30%

• 37%

• 34%

• 38%

• 30%

• 36%

• 29%

• 36%

• 27%

• 39%

• 39%

• 25%

• 32%

• 28%

• 42%

• 24%

• 45%

• 22%

• 33%

• 29%

• 1%

• 1%

• 2%

• -

• 1%

• 2%

• -

• 1%

• 2%

• -

• 0 % • 20 % • 40 % • 60 % • 80 % • 100 %

• TOTAL, 2009

• TOTAL, 2010

• < 19 ha, 2009

• < 19 ha, 2010

• 20-49 ha, 2009

• 20-49 ha, 2010

• 50-99 ha, 2009

• 50-99 ha, 2010

• 100+ ha, 2009

• 100+ ha, 2010

1 = Not important at all 2 3 4 5 = Very important Can’t say

How important you see Forest Management Association for your private forestry?

PEFC/02-44-02PEFC/02-44-02PEFC/02-44-02PEFC/02-44-02

• 3%

• 4%

• 3%

• 4%

• 1%

• 5%

• 4%

• 3%

• 4%

• 3%

• 7%

• 7%

• 6%

• 9%

• 6%

• 4%

• 8%

• 11%

• 9%

• 6%

• 28%

• 23%

• 29%

• 18%

• 28%

• 27%

• 25%

• 22%

• 32%

• 28%

• 42%

• 46%

• 38%

• 49%

• 43%

• 44%

• 48%

• 48%

• 37%

• 45%

• 15%

• 16%

• 14%

• 14%

• 18%

• 18%

• 15%

• 16%

• 12%

• 16%

• 5%

• 3%

• 10%

• 6%

• 3%

• 3%

• -

• 1%

• 7%

• 2%

• 0 % • 20 % • 40 % • 60 % • 80 % • 100 %

• TOTAL, 2009

• TOTAL, 2010

• < 19 ha, 2009

• < 19 ha, 2010

• 20-49 ha, 2009

• 20-49 ha, 2010

• 50-99 ha, 2009

• 50-99 ha, 2010

• 100+ ha, 2009

• 100+ ha, 2010

1 = Very bad 2 3 4 5 = Excellent Can’t say

What grade would you give to Forest Management Association for defending forest owners’ interest?

PEFC/02-44-02PEFC/02-44-02PEFC/02-44-02PEFC/02-44-02

• 28%

• 26%

• 23%

• 30%

• 35%

• 26%

• 24%

• 23%

• 28%

• 18%

• 48%

• 49%

• 53%

• 44%

• 45%

• 51%

• 52%

• 49%

• 41%

• 52%

• 9%

• 13%

• 8%

• 14%

• 10%

• 9%

• 8%

• 19%

• 12%

• 8%

• 6%

• 7%

• 5%

• 8%

• 2%

• 5%

• 9%

• 8%

• 9%

• 10%

• 9%

• 6%

• 10%

• 4%

• 8%

• 8%

• 7%

• 1%

• 10%

• 11%

• 0 % • 20 % • 40 % • 60 % • 80 % • 100 %

• TOTAL, 2009

• TOTAL, 2010

• < 19 ha, 2009

• < 19 ha, 2010

• 20-49 ha, 2009

• 20-49 ha, 2010

• 50-99 ha, 2009

• 50-99 ha, 2010

• 100+ ha, 2009

• 100+ ha, 2010

Certainly yes Probably yes Probably no Certainly no Can’t say

In case law-based FMA fee will be abolished, would you continue your membership in FMA given that the voluntary fee would be the same as current obligatory fee?

PEFC/02-44-02PEFC/02-44-02 41

Jointly owned forests in Finland

PEFC/02-44-02PEFC/02-44-02

Jointly owned forest• Jointly owned forest = forest area which is shared by more than one forest holding

and on which sustainable forestry is practised for the good of joint owners

• The first jointly owned forests were established in 1886 to prevent overcuttings of forests. The majority were and are still founded because of general scattering of land to secure reasonable forest management for all joint owners.

• In Finland there are over 230 jof:s covering over 550 000 ha and there are over 20 000 owners. Average size is 320 hectares ranging from 19 to 85 000 hectares.

• Jof boom going on: 2011 over 50 jof:s were established

• Cirka 4 % of the area of private owned forests in Finland might grow up to 15 %

• State supports by tax relief in timber selling and lower fees when inhereted forest is attached to jof objective is to overcome the problem of small and scattered holdings and improve forest holding structure

• Partners and administrative committee take care of the administration of the jof

PEFC/02-44-02PEFC/02-44-02

Partners

• Approve the regulation, which is confirmed by regional Forestry Centre

• Choose the members of administrative committee

• Approve the annual report

• Confirm the financial statement and admit discharge from liability

• Decide on the use of surplus

• Confirm the plan of action and the budget

PEFC/02-44-02PEFC/02-44-02

Administrative committee

• Organises everyday administration and operation

• Is responsible for forest management plan, the plan of action and the budget as far as it doesn’t belong to the tasks of the Partners

• Decides on timber trade

• Decides on hunting and fishing rights

• Takes care of financial recources and other property of Partners

• Prepares the annual report and financial statement

• Decides on the attachment of new holdings to the jof

PEFC/02-44-02PEFC/02-44-02

The benefits of jointly owned forests

• Economical forest ownership

• Regular and steady revenues from fellings

• Easy choice to old owners and owners who live far away from their forests

• Sustainable forestry (necessity of forest management plan)

PEFC/02-44-02PEFC/02-44-02 46

THANK YOU FOR YOUR

ATTENTION!