Return on investments in forestry
"A forestry investment on good sites close to ports will generally show a projected rate of return of between 6% and 9%.
That is, a yearly compound increase of 6% to 9% on the value of the investment:
($1,000 + 8% = $1,080 in year one; $1,080 + 8% = $1,166 in year two; $93,756 + 8% = $101,257 in year 60).
Well planned high country plantings would probably achieve rates of return in the range of 2% to 7%."[1]
Any forestry company promising higher return is highly suspect and should be subject to critical investigation.
"The high rates of return promised to investors are not only a consequence of unjustifiably high projections on the yield of timber to be expected, but on equally exaggerated projections on the prices at which such timber could be sold. There are several flaws associated with these figures. One refers to the high base price from which they are projected. Another is the assumption that the base price and its projections apply equally to all the timber to be produced, to the timber from intermediate harvests, as well as from the final cut. Yet another possible flaw refers to the unusually high yearly price increments assumed to take place within the next 20 years, from 5% to 10% a year."
"The base price used by most of these initiatives ranges from 450 to 500 dollars per cubic meter standing in the forest, or as log by the road side. This price can hardly apply, for example, to the production from the first couple of thinnings, scheduled to take place within the first 4 to 12 years in the cases mentioned in this report."
"The products derived from each thinning have in fact their own price structures. They are also meant for different markets and end-uses. These differences are so marked that they could best be considered as different products."
- From Treemail by Julio César Centeno
[edit] The Dutch history
The Dutch teak investment market provides many good examples of astronomical return rates that had to be down-scaled annually in order to keep up with an ever-encroaching reality.
[Now it would be nice if someone could actually provide us with some figures here…]
Scholtens and Spierdijk the case of tropical timber investment funds in the Netherlands.pdf
[edit] External links
- Estimating Returns from Forest Investments From Warnell School of Forestry and Natural Resources
- Analysis tools to examine forestry investments From Warnell School of Forestry and Natural Resources
- Forest Investments: Risk and Return From The Louisiana State University Agricultural Center (LSU AgCenter)
