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.