Google News Forestry Investment

Forestry Investment Bucks the Trend

20/11/2008

Many leading personal finance blogs in Europe and the US have been buzzing with discussion centred around the question of what are the best alternativeinvestmentsin the current climate. Why are timber and forestry investments cropping up so often? 

Bill Martin of Bullmarket.com reveals that the latest stock to catch his eye is Plumb Creek Timber (PCL) - the largest owner of timberland in the United States. "Earnings have been stunted in recent quarters by the housing slump, but the company sports a strong balance sheet and an asset base that thanks to nature only gets larger and more valuable as time goes by."

Indeed, the unique feature of forestry as an investment is that if demand is down at any point in time, it does not really matter in the long run. If the timber is not harvested right now, the assets only become more productive as they grow.

Greenwood Management, a Dublin-based firm with several offices around Europe, offers forestry investment services to private investors. Spokesman Joe Randall says that there is a lot of interest in forestry, possibly surprisingly to some given the state of the stock markets. 

Randall continued "..but then again, forestry is just so unlike otherinvestment products, it has a fundamental stability. Forestry stocks in the US have been doing really well compared to most other sectors and against the Dow Jones index. In the UK, the latest research from the IPD (Investment Property Databank) shows that forestry has outperformed every other asset class including stocks, bonds and commercial property'. In fact, the IPD UK Forestry Index outperformed equities by a factor of six, returning 31.6% in 2007.

Certainly the global recession is affecting nearly every industry to a degree, and construction is no exception, slowing uniformly around the globe. But what needs to be taken into account is the choice of raw building material: timber is gaining share as the most environmentally friendly and sustainable option.

There is also a growing demand for eucalyptus trees in Brazil to help power the massive steel industry. Brazil's steel industry is led by companies owned by Arcelor Mittal, the world's richest man, and other steel manufacturers there are following Mittal's lead in switching from coke to charcoal. 

This is a boon for the environment in two respects. 

Firstly, coal mining has been a leading cause of deforestation in the region. Alongside cattle grazing and agriculture, coal mining is one of the chief threats to the Paraguay River Basin and the Brazilian Pantanal, the leading hydrographical drainage of the South American continent.

Secondly, powering steel plants with eucalyptus charcoal is carbon neutral because the trees consume more CO2 whilst growing than they exude when burning. The country subsequently earns valuable carbon credits from the Kyoto Agreement. 

Greenwood Management has recently announced that they are setting up eucalyptus plantations in Brazil and establishing a charcoal manufacturing plant. Says Joe Randall: 'we are giving our investors a unique opportunity to help clean up carbon emissions and receive an excellent return at the same time'.

Brazil goes Investment Grade

Brazil goes "Investment Grade"
Brazil is well known as one of the most productive ecosystems in the world.
Over 50% of South America's forests and woodlands are in Brazil, with an estimated 412 million ha (1,018 million acres). Sylvan areas in Brazil are nearly three-quarters as large as the forests of all African nations combined. Brazil's forests cover 49% of the country's land area and are among the richest in the world, yielding timber, oil-bearing fruits, gums, resins, waxes, essential oils, cellulose, fibers, nuts, maté, and other products. In the rainforest, as many as 3,000 different species per sq mi (2.6 sq km) may coexist. However, only a limited percentage of forestland is being exploited, in part because of a lack of adequate transportation. Brazil accounts for 20% of the world's tropical hardwood resources and is one of the leading producers of tropical hardwood products. Brazilian timber is of fine quality, ranging from wood as light as cork to the wood of the Brazilian pepper tree, with a density one and one-half times that of water. By 1991, rapid deforestation during the previous 30 years in the Amazon (from migration, road building, mining, and tax incentives) had caused the rainforest to shrink by an estimated8.5% since colonial times. However, the annual rate of deforestation in the 1990s was 0.4%. The hardwood trees of the Amazon rain forest are of excellent quality, but because of a thriving domestic furniture industry, they are used mainly locally; furniture manufacturing is responsible for 40% of the wood consumption in Brazil. The Paraná pine (Araucaria angustifolia) is in greatest demand. It grows in the southern states in stands that comprise about 420 million trees. A Brazilian ban on log exports has focused exports on value-added products (mostly lumber, plywood, hardboard, and veneers). Policies to develop forest resources have changed recently, and the utilization of native species has become very restricted, mainly in the southern region.
Production of roundwood in 2000 was estimated at 235.4 million cu m (8.3 billion cu ft); sawn wood production was 18.1 million cu m (639 million cu ft) in 2000. Production of paper and woodpulp has expanded considerably since 1975; exports of paper intensified between 1981 and 2000, from 337,000 tons to 1,815,000 tons. The total value of Brazilian forest product exports in 2000 reached $3.22 billion. The Amazon region accounted for 40% of the total Brazilian exports of wood products, while the rest of Brazil accounted for 60% (of which Paraná represented 20%). Exports in 2000 (by their total value) included: wood pulp, $1,601 million; sawn wood, $519 million; plywood, $374 million; fiberboard, $58 million; and veneer, $26 million.
Brazil's production of rubber in 1999 was 55,000 tons; the natural rubber industry, once a world leader, was dealt a strong blow by the development of cheaper synthetics. Forest products like rubber, Brazil nuts, cashews, waxes, and fibers now come from plantations and no longer from wild forest trees as in earlier days.

Significant acknowledgement for Finnish Forestry

“Significant acknowledgement for Finland´s forestry”
Jan Heino Forestry Director for FAOMr. Jan Heino, M.Sc. (For.), Director General of Metsähallitus (58), has been chosen Assistant Director-General and Head for the Forestry Department of the United Nation’s Food and Agriculture Organization (FAO). The office of the Assistant Director-General is located in Rome, at the FAO’s head office.
“The appointment shows significant acknowledgement for Finland’s forestry sector and the country’s high competence in forestry, which are respected around the globe,” says Mr Juha Korkeaoja, Finland’s Minister of Agriculture and Forestry. “Finland has been very active in the FAO and other international forestry matters, and we are pleased that the FAO has expressed confidence in Finnish forestry competence, something which Jan Heino has demonstrated during his career.”
Director General Heino resignes from the service of the State forest enterprise Metsähallitus at the end of June this year. Public applications for the position of Managing Director of Metsähallitus will be accepted in June. The Finnish Government will appoint the Managing Director, and in the interim, Director of Forestry Hannu Jokinen will act as Managing Director.
Heino sees his appointment as an important honour for Metsähallitus as well, where he has been Director General since 2000. During Heino’s time at the helm, Metsähallitus has developed strongly in response to the new demands of the State Enterprise Act, and the market orientation of this state enterprise has further increased.
“Metsähallitus is in good shape and has strengthened its position,” says Heino. “At the end of last year the state, which owns Metsähallitus, thoroughly examined its future prospects. The new strategic decisions approved by the Government concerning the use of state forests provide a solid foundation for Metsähallitus’s operations and future development.”
Heino has previously acted as chairman of the Committee on Forestry, under the FAO, as well as chairman of the FAO’s European Forestry Commission. Metsähallitus has internationalised rapidly during Heino’s time in its service. He has held a key position in co-operating with European state-owned forestry organisations and was named chairman of the recently established European State Forest Association EUSTAFOR in Brussels. “With this new appointment I will now have to abandon that post,” says Heino.
Work reaches the four corners of the earth
The FAO was founded in 1945, and with 189 member states, it is the UN’s largest specialised agency. The FAO collects data on agriculture, forestry, fisheries and nutrition, provides guidance and carries out development work worldwide. The FAO has an important role in realising the development goals of the UN’s Millennium Declaration and the 2002 World Summit on Sustainable Development. In forest matters, important FAO tasks include monitoring global forest reserves, promoting national forest programmes and supporting the work of the UN’s Forum on Forests.
Heino’s most important task will be to lead the FAO’s Forestry Department and its network of experts. Approximately 120 people work in the Forestry Department, but the extensive network also encompasses offices on different continents and development projects, including forestry experts, plus other personnel of this expansive organisation.
Heino considers the promotion of all aspects of sustainable forestry a central factor in reducing the global scourge of poverty and hunger.
“At the forefront are the creation of national forestry policies as well as functional national forest programmes that are tailored to each country in question. That is the basis from which the forestry sector will really take off, which, in turn, will result in positive development for society as a whole.

Timber Investments Could Be Perfect Credit Crunch Antidote

A consortium of financial professionals has issued some advice for hesitant investors during economically troubled times. With the Dow Industrial having just announced its worst performance since the Depression of 1930, investors are understandably uncertain about where to place their money. However, alternative investments - such as forestry - can be just what such investors need.The consortium consists of Mike Flower, an independent financial professional with American organisation Financial Principles, along with nine fellow registered representatives affiliated with Securities America, Inc., one of the USA's largest independent broker/dealers. The very first piece of advice issued by the consortium was to look to the long-term, which of course forestry is all about. "When we identify which assets are earmarked for each goal and examine the history and recovery period of bear markets, investors with a long-term horizon should find some reassurance," said Patricia Hinds, Personal Wealth Manager for Granite Financial in St. Cloud, MN.Smart investing in troubled times is all about returning to basics. A volatile market should not cloud investment goals. Rusty Cagle, President of ASE Wealth Advisors in Greenville, SC, advises looking for alternative investments that are less vulnerable to the fluctuations of the stock market, and forestry investments fit the bill perfectly. According to Cagle many well-run pension funds have an allocation of 15% to 22% in alternative investments such as real estate, venture capital, and timber.

Irish Republic Launches Online Forestry Service

The Irish Republic's Department of Agriculture, Fisheries & Food has launched a new online service, Integrated Forest Information System (IFORIS) Internet.Forestry investors, loggers and other individuals or companies with an interest in forestry will be able to track online the processing of Forestry applications that have been submitted to the Forest Service of the Department of Agriculture, Fisheries and Food. The IFORIS online service also includes digital mapping of grant-aided forestry already planted.The service is an extension of the IFORIS computer system, which was developed for the Forest Service for the processing of forestry grant, pre-approval, and premium applications. Minister of State Tony Killeen commented on the launch of the new service: "The service is the first phase of a planned development for IFORIS Internet. The second phase will enable foresters and forestry companies to submit pre-approval applications online on behalf of their clients. This will streamline administration issues for foresters and the Forest Service."

IFA demands farm forestry strategy and support

IFA demands farm forestry strategy and supportThe Irish Farmers Association has demanded the Government commit to a structured farm forestry plan and provide extra resources where necessary. IFA Farm Forestry Committee chairman Pat Hennessy made the calls after a meeting with Forestry Minister Tony Killeen. According to Hennessy the strategic plan for the forestry sector is being ignored and the industry is operating without any boundaries: "The industry is in crisis, and without strong leadership the afforestation figures will continue to fall year on year and existing forestry will continue to be inadequately supported," he said.Hennessy said farmers are committed to forestry, but are being held back by the Governmentm, in that farmers want to plant and produce quality timber but are prevented from doing so: "[Farmers] are being stopped by the Government. Instead of showing leadership they are impeding the development of the sector by imposing bans on huge areas of land suitable for forestry and providing inadequate support."However, the Irish Government has insisted it is committed to the forestry sector and says Euros 125m is invested every year. Mr Killeen has previously said that the Government is fully aware of the ongoing contribution, and the future potential, of forestry to the economy, the environment and society.

Christmas tree

Christmas Trees- A worldwide demand all year round

Christmas trees are usually planted at more than 2,000 trees are per acre. On average 1,000 to 1,500 of these trees will survive. Maturity for harvest usually is determined after the trees reach six to seven feet in height. Christmas trees often are “baled”, tied or similarly wrapped to protect the branches and retain the shape and overall quality of the tree during shipping. 2-3 seedlings on average are planted for every harvested Christmas tree.
Reports show that North America cuts 40 million Christmas trees annually, with 3 to 6 million trees cut from Canadian Christmas tree farms. This suggests that Canadian share of the North American Christmas tree production can range from 7% to 15%. In 2004 Canada had a production of 3.9 million trees valued at $62 million of which $36.2 million was generated by 2.5 million exported trees. Quebec accounted for over 30% of this production. The New Brunswick Christmas tree industry is reported to have 350 active growers putting to market approximately 0.5 million trees annually which generates revenues around $10 million.
Prices for pine (currently $6-$9 per tree wholesale) are generally lower than prices for Fir ($20-$25 per tree wholesale).
In 2005 the retail market value of the 32.8 million trees purchased in America at the average purchase price of $41.90 was $1,374 million. Almost all trees require pruning management (shearing) to attain proper branch and fascicle (twig/needle) density and a proper cone-shaped Christmas tree shape. Plantation production is the best system for delivering the regularly scheduled pruning, water management and general care necessary to produce the highest-quality product.
It can take up to 15 years to grow a tree (dependant of species and growing conditions) of average retail sale height (6 - 7 feet) or as little as 4 years, but the average growing time is generally 7 years.

Forestry Investments more flexible than traditional funds

Forestry investments more flexible than traditional funds

A stock market expert has published a report that analyses the benefits of specialist exchange traded funds (EFTs), such as those that enable people to make forestry investments.William Wordie, writing for the Press and Journal, claims that forestry investments and other EFTs are growing in popularity because people can spread their investments easily and at a much lower cost than traditional funds.Wordie cites an academic study from 1986 which showed that the vast majority of returns could be explained by asset allocation. ETFs such as timber investments allow investors to easily target an asset class, with more flexibility and accuracy than either an index or actively managed funds. Timber and forestry investments offer investors transparency, efficiency, and above all flexibility:Efficiency comes from with low annual management fees with no hidden costs. There are no fees for buying or selling forestry investments other than those charged by the stockbroker. Transparency comes from the continuous access and competitive bid prices. It is the same as trading single stocks in this respect. Finally, flexibility comes from trading size. A forestry investment is possible from just one share upwards and it's easy to trade shares through a stockbroker. Forestry and timber investments can be included in Isas (Individual Savings Accounts) and Sipps (Self Invested Pension Plans) for tax benefits.

Grants for forestry under threat in Ireland

Forestry grants under threat in Ireland

The Department of Agriculture for the Irish Republic has announced that it will not be approving any new applications for forestry grants this year.The move has sparked fears that eco-friendly initiatives like the Forest Road Grant Scheme, which allows farmers to build access roads to their plantations, will face the chop. It's possible that woodland reconstruction and improvement programmes could also be under threat. A spokesperson from the Department of Agriculture denied that forestry support schemes would be scrapped, despite a recent announcement of 9.1m Euros of cut-backs. A forestry industry source spoke to The Irish Independent to say that the move to restrict forestry funding would damage confidence in the industry, particularly when many growers' plantations approaching first thinning.The source said: "This will have serious implications for the ordinary forest owner who will now be concerned about where funding will come from next year. Particularly worrying is that forestry is a long-term investment with rotations up to 35-40 years, and even longer for broadleaf species."Already, the Government has fallen far short of its 1996 strategy, which set out a target of 20,000ha of plantings each year. Last year, the level of planting stood at 7,000ha, and this year it's expected that it could be even lower, at 6,500ha."

How to maximise forestry investments

How to maximize forestry investments:
Investing in timber may be considered an "alternative" form of investment, but in reality the practice is no different from investing in stocks, bonds or property. Whatever the nature of the investment, one is looking for the asset to provide a healthy ROI over a certain time period. A forestry investor, therefore, should always consider the quality of potential cash flows. For example, if a walnut is worth twice as much as a pine, but is harvested less frequently, the decision to go for pine might seem obvious. However, if a single walnut generates 10 times the cash flow of a single pine, then a walnut harvest could generate five times the return of pine over a 30 year period. So, if pine is worth $100 per tree and there are six harvests in 30 years, the investor would gain $600. If a walnut tree is worth $1000 and is harvested three times in 30 years, the investor stands to gain $3000, making walnut a far more attractive investment proposition. Timber investments also depend on the availability of different types of tree over time. For example, pine trees in Australia are set for exponential growth, so a single tree will likely be worth less money in 15 years than it is today. Black walnut trees, on the other hand are becoming increasingly rare, so their value is increasing.
Species vary from country to country and this of course also affects growth rates, return on investment, and risk.
For an investment in Sitka spruce say in Ireland (although there is very little historical data to base the returns on) the general consensus from qualified and reliable sources such as the report entitled "Growing for the future- a strategic plan for the forestry sector in Ireland" and the Irish unit forestry trust (IFUT) indicate that 5%-7% (including land costs) is achievable anything higher will probably be pie in the sky. Returns from forestry are expressed as real rates of return over and above the rate of inflation. Most speakers at the "Irish Forestry Industry Chain" (IFIC) indicated returns of 5-7% and also it was indicated that returns can be higher if there is no associated land costs.

However in some emerging markets generally located in South America, the longer growing season coupled with fast growing species such as Eucalyptus can produce returns as high as 20%
These returns have been well documented by local government and independent research over a number of years.


Above all if you want to maximize you returns from forestry, Make sure that you deal with a qualified professional using quantified data and not just some undirected unqualified individual.