Benefits of Forestry

There are many answers to this question, but they are summed up as below: Woodland and forestry investment can be an attractive financial proposition with the underlying returns from timber growth and land, enhanced by the current tax treatment of commercial woodlands for UK taxpayer The UK has an internationally competitive timber processing industry and home-grown timber is processed into a range of products such as construction timber, pallets, packaging and paper. This market has an annual value of around £10 billion. Emerging markets for biomass and renewables are helping to increase demand for timber products and enhance timber prices. There may also be opportunities to enhance returns from the land element of the investment through the introduction of non-timber revenue sources such as wind farm. These investors are attracted to sustainable forestry because the asset class has a low correlation with debt and equity markets, and offers some protection against inflation. Plus, one of the principal attractions of trees is that they can be expected to keep growing regardless of the macro-economic conditions.
  • Land based asset.
  • Long Term Capital Growth
  • Favourable tax status
  • Growing domestic (energy) and export markets (Sawn timber and panels).
  • Predictable growth rates.
  • Low risk.
  • Green investment

Return components

Total forestry return is comprised of five main components: acquisition, biological growth, active management, price trends and forestry value changes.

Acquisition

The day you buy is the day you sell. Purchasing the correct property is of paramount importance. Issues such as species, access, productivity, distance to market and environmental considerations must be taken into account in ensuring one does not overpay at time of purchase.

Biological Growth

Trees continue to grow regardless of the economic climate. This uniqueness of forestry ensures reliable asset appreciation, while lowering investment risks. Harvesting timeline can be scheduled to maximise financial returns in periods of price spikes. Essentially, forestry is not like other crops where upon they are ripe for harvest they must be harvested.

Active Management

Actively managing forestry significantly increases the financial returns from the investment, while at the same time reducing risks. Such management operations typically involve the following:
  • Optimum ground preparation and drainage.
  • Planting of superior planting stock
  • Perimeter fencing to exclude trespass by animals
  • Fire protection
  • Controlling competing vegitation
  • Selective fertilisation where required
  • Formative shaping of broadleaves
  • Obtaining harvest and other necessary Felling Licences on a timely basis
  • Forest road construction
  • Commercial and pre commercial thinning
  • Timber sales
  • Indo Farming
New Forests estimates that there is currently $100 billion of institutional investment in timberland via real estate investment trusts, unlisted funds and direct investments. It expects this to double over the next 10 or 20 years, meaning that institutions will control about a quarter of all timber supply.
While North America, Australia and New Zealand will remain the strongholds for forestry investment, it expects to see growth from emerging markets in including the UK and Ireland.
this to double over the next 10 or 20 years, meaning that institutions will control about a quarter of all timber supply.