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.