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  • Archive for November, 2009

    Brazil invests in forestry for “wood energy”


    2009 - 11.30

    Following on from the RISI report  “Bio energy plantations are the hottest story in Brazil”  article,   looking back ,  wood historically was actually the main source of energy in Brazil, until the mid-twentieth century,  providing more than 80% of its energy demands.  So this news about  managed plantation forestry is in reality a re launch of a former thriving and proven industry.

    Although wood is still is a major source of energy, with approximately 11.6% of the market, the use of wood for energy had actually fallen from 300 million cubic metres in 1970 to 170 million cubic metres in 1997. However, in recent years there has been a reversal of this trend, reaching 220 million cubic metres in 2005.

    The current industrial demand for wood for energy is already greater than supply. The steel industry, the largest consumer of wood for energy, uses only one third of its energy from  charcoal and two thirds  from coal. What is more, 55% of the charcoal consumed in the industrial sector has its origin in the native forest, which is obviously a major concern as regards the environmental effects. The lack of wood supply from planted forests has restricted the growth of the industry which has previously been dependent on this raw material. The result has been a greater pressure still on natural forests. Added to this the increasing consumption of wood for energy generation sectors in agribusiness located in rural areas, drying grain, tea or tobacco, the production of bricks and ceramic industry, in almost all regions of Brazil wood energy demand is soaring.

    Faced with this need to significantly increase the supply of wood from plantation forests, it is vital to refine the productivity techniques within the forestry plantations via increased growth hybrids, improved quality of crop and improved sustainability systems which are carbon neutral. Plantations for energy particularly in Brazil have distinct advantages:

    1) Brazil has climatic conditions that allows high productivity in a short time compared with other countries

    2) The plantations are a renewable source of raw material,

    3) The forestry has a zero balance for greenhouse gases,

    To increase the use of fuelwood as a source of energy on a large scale in Brazil there are several challenges.

    1) Silvicultural training for expansion of forest plantations with genetic material quality, especially in regions with no tradition in the field of wood energy production.

    2) Technological innovations related to traditional uses of wood energy

    3) Taking derivatives of high added value from forest biomass

    4) Public policies that encourage the use and generation of conversion technologies.

    With its recognized expertise in biomass production, the availability of land, mainly in degraded pastures, its historic tradition in bio-energy, Brazil is at the cutting edge of energy generation via the use of biomass, especially from forestry plantations.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    “Timber investment” has double appeal


    2009 - 11.30

    The Chief timber officer at the U.K alternative investment market listed Phaunos Timber Fund,  Liane Luke believes that public awareness of the environmental value of plantation forests is well overdue. “The more plantations there are, the more carbon you’re sucking out of the air. People need to get less sentimental about forests, it’s like growing corn.”

    Put simply, using wood to make energy produces less carbon than burning coal, especially when the trees are replanted, because the trees continue to capture the carbon dixide from the atmosphere as they grow. Phaunus defines part of the sustainable practice of forestry plantations as cutting no more trees than you plant.

    Additionally, because the trees trap carbon dioxide, plantation owners may also be able to sell carbon offsets to polluters who have to meet tough emissions caps under prospective climate laws. The investment apppeal of forestry is therefore twofold…the new rewards to store carbon in trees combined with rising demand for wood to replace coal and natural gas are driving the forestry investments market.

    Referring to timber investments, Caelim Parkes from Westbury, a US manager of alternative investments says, “As uncertainty recedes(referring to carbon offsets) we think it will see substantial growth.”

    The European Union has set goals to get 20 percent of its energy from renewable sources by 2020, fuelling a further wood energy boom. Clenergen, an international biomass company is in the process of creating forestry plantations for export from Guyana to Europe and the United States. Wood energy markets appear to be on the cusp of a being a dominant force in renewable energies.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Forestry standards via the Smartwood Alliance Programme


    2009 - 11.30

    In the South American forestry sector,  the “SmartWood Alliance Program” has developed a generic standard to verify the “Legal Origin Verification”VLO) of forestry products for its end users and investors in forestry. The VLO will be used to assess and verify forest products and will  have legal right under the laws and regulations applicable in its jurisdiction in the forestry industry. The standard will verify all points along the supply chain which use forest products and maintain systems to document and track the chain of custody for the timber.
    Leonardo Martim Sobral of the  Forest Certification Management Institute and Agricultural and Forestry Certification (Imaflora), stated that, with this standard, companies receive a statement of verification and should use the documents to prove that the wood has been verified. “In addition, the company may communicate publicly that they have verification of the legality of origin to their products.”

    Imaflora explained that “audits shall be conducted on the forestry company premises and encompass a range of areas within the forestry company ranging from  proper approvals and licenses, royalties, harvest rates, compliance with laws relating to environmental protection, fauna, conservation of water and soil sampling standards, health and safety, relationship with the communities and “maintaining a chain of custody system”.

    “The final audit  is aimed at building a more robust forestry standard. The assessment period is 30 days, but this does not prevent new contributions can be sent during any stage of the process, The standard applies to prodcers and traders in forestry as well as individual companies within the supply chain”.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Bio-Energy plantations are the hottest story in Brazil in 2009


    2009 - 11.23

    Bob Flynn director for RISI international timber, recently spoke at the SC Forestry Association’s 41st annual meeting stating in a power point presentation that “Bio-Energy plantations are the hottest story in Brazil in 2009”.

    This presentation highlighted that Brazil has more dedicated commercial wood energy plantations than the rest of the world combined. It  identified that the steel industry is in a major expansion stage requiring more charcoal from sustainable grown sources, whilst the Soya industry also needs fuelwood to dry and process soybeans prior to export,  both industries are  heavily reliant on Eucalyptus. “In both steel and Soya, the industry is being pushed to shift demand from native forests to sustainable plantations. Emerging carbon markets also providing a strong incentives for these industries to replace fossil fuels”.

    European power companies were also identified in the presenation as looking at Brazil for secure long term wood supplies.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Choosing the right forestry investment


    2009 - 11.18

    Q) Are all forestry investments right for me?

    The simple answer may be no! Due to the nature of forestry investments and the variables that have to be considered before looking, it would be wise to size up the benefits in relation to your own personal goals before taking the plunge.

    The main questions to ask yourself are-

    · How long am I prepared to wait?

    · How much land would I have to buy to make it worthwhile?

    · Who do I need to contact?

    · On-shore or Off-shore?

    Q1) How long am I prepared to wait?

    A1) This will be dependant in some part on the area you wish to invest in. Plants and trees use photosynthesis for energy, this means that sugars are created from Co2 in a reaction with sunlight. Species growing in countries with less powerful sunlight and less daylight hours will grow slower than the same species in hotter areas with longer sunlight hours. This may not be a bad thing if you are to grow hardwood trees, as the highest prices are generally paid for slower growing trees with tighter annual growth rings.

    Trees also have a number of different ways that they turn Co2 into sugar. A tree that uses the C4 pathway will actually be more effective at converting sugars from Co2 than a tree that utilizes the C3 pathway only. This will therefore effect the growth efficiency of the tree.

    Even in Northern Europe, fast growing commodity species such as Sitka spruce and pine will take 30 years to reach a marketable size because there is little value attributed to young or even semi matured forestry… this factor will have to be a part of your planning for investing in forestry projects. Most trees in Ireland, Scotland, or Germany for instance will reach a marketable size in a longer period than commodity species in say Portugal or the USA. This could be a useful point to bear in mind.

    Q2) How much land would I have to buy to make it worthwhile?

    A2) This is a question you will have to consider and the answer can actually vary from country to country. To make the forestry investment worthwhile for harvest you will probably need 40 acres and above in the UK for a company to either purchase the land or for you to arrange a harvest with a timber broker.

    However in areas that have more abundant forest land the investment requirement may not be the same and you will probably need to purchase a larger area for it to be attractive for potential buyers. There are always exceptions to this rule, however this is something that would need to be researched on a like by like basis. Forestry properties that are flat, have good road and market access will always be more attractive for a potential buyer.

    Q3) Who do I need to contact?

    A3) There are two primary ways to get involved in forestry investments, the first being “managed forestry”, the second being “agroforestry”. There are many benefits to both types of forestry investment. In real terms, managed forestry investments will be specifically managed by a forestry professional. It will likely be a project which identifies commercially valuable species in mixed forestry stands and allows the more valuable species adequate room for growth whilst thinning out weaker , less valuable trees that may stifle the growth of the higher value trees. You will require a forestry consultant for this type of project.

    Agroforestry is more in line with agriculture (hence the term “Agro”forestry). Monoculture trees will be planted over a dedicated area. Agricultural or degraded land will be identified and forestry land will not be purchased for this type of exercise. Agroforestry plantations are primarily seen in places such as Portugal, New Zealand, Australia, Brazil, Morocco and Spain to name but a few. This type of farm forestry will require a professional agronomist and / or tree care expert with contacts, and a working background in agriculture.

    Q4) On-shore or Off-shore?

    A4) Returns vary around the globe and by species, each dominated by local supply, deficits, product values, and end user demand. Good multipurpose trees allow a number of alternative markets, whilst high value timber trees are dependant on size, straightness, strength, as well as demand. In Europe, forestry has been performing rather poorly compared to other global areas. Returns in the US have hovered around 16% over the past 30 years, whilst in Brazil returns have exceeded 20% annually recently. In Europe these returns have been historically lower achieving a rate of around 7%. There may also be problems investing in other countries such as market stability, possible corruption and other issues to contend with, so finding someone trustworthy to run your projects ought to be high on your agenda.

    After you have run through all the other questions you should be able to come up with a number of answers to help you consider the finer details of your forestry investment choice. If at this stage you are still unsure about investment levels, the thought of engineering your project and the investment lifetime, it would probably be advisable for you to look at either a low level forestry investment fund or growth plan that can enable you to exit at stages within the lifetime of the investment.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    US forestry and wood markets gain strength


    2009 - 11.18

    According to the latest report from International Wood Markets Group entitled “Wood Markets 2010 – the five-year outlook for North American solid wood products”,  there is now a growing price rise momentum in forestry end products.  The report  suggests sweeping prices are being driven by increased demand and subsequent surges are predicted to ” take the lumber market by surprise”.   Housing start up projects are very much the foundation of the demand rises and theses start ups are forecast to increase in number from 575,000 to approximately 700,000 by the 2010. This will be followed by an even greater increase when the ” single digit “ family home demand drives demand to above 1. 5million homes by 2013.

    The figures continue to suggest further strength in forestry investments due to the  demand for lumber with US and Canadian sawmill operating capacities forecast to increase from an average of  50% in 2009 to  a staggering 90% by 2013.

    “The prospects of higher prices will be welcomed by all players in the North American lumber sector” commented Wood Markets President Russell Taylor.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Forestry licences boost plantation investments


    2009 - 11.18

    In Indonesia, a tranche of new forestry development  licences is expected to increase the supply of logs by almost 40 percent  to 18.5 million cubic meters according to the forestry minister.

    Bedio Santosa, director of forest development said.  “More than 300,000 hectare of production forests can be harvested next year. That will amount to an additional five million cubic meters of log supply”   He went on state that about 60 percent of logs from HTI planations (in which concession holders have to replant) would likey supply the paper and pulp industry with the reamainder going to supply wood based industries.  There are five sources of logs that Indonesia recognises:  HTI,  natural forests,  plantation grown forestry,  land cleared products and community based forestry.

    Indonesias government has been involved in a number of forestry investment campaigns to increase the capacity of HTI and HTR following the drastic reduction in its natural forest resources. The production of timber from  natural forest has declined from 25 million cubic meters to just over 7 million cubic meters.  The new licences being issued by the government are indicative of the aggressive strategy they have been taking to develop new forestry plantation sites for logging.   The ministry for forestry has issued data which states that the total area of HTI sites is 4.2 million hectares.  These forestry plantations are  capable of producing almost 14 million cubic meters of plantation sourced timber per annum.  Furthermore the plantation sites are forecast to continue to expand and reach 5 million hectares by the end of 2009.

    Acccording to Bedio Santosa,  the ministry had issued licences for nearly 12million hectares of HTI but there was still some delay in processing the approvals at regional levels.   He said.  “As the production of logs from the natural forests is declining, we’ve accelerated the development of HTI and HTR to meet demand from forestry-based industries.”

    Indonesia has 3.6 million hectares of HTR forests of which nearly 3 million he tatres are located in Java. The domestic demand for logs in 2008 was 80 million cubic meters with the supply of legal logs being less than 30 million cubic meters from HTI and HTR  and natural forests.  Opportunities are therefore emerging  for  large scale foresty investment in the region.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Private forestry investment encouraged by government


    2009 - 11.17

    In Angola, the government plans to regenerate the country’s 18 provinces industries by transforming the forestry and timber industry. This was announced by the Agriculture deputy minister for forest resources area, André de Jesus Moda.

    Speaking at a public presentation in Germany, Andre de Jesus Moda stated that, under his responsibilities regarding forests exploration, the government has drafted an overview of the current situation for a  sustainable renewal of the forest resources.

    The deputy minister said that the Ministry of Agriculture has drafted a programme targeted  for the establishment of industries of timber exploration and a  transformation in the country, specifically aimed at encouraging national and foreign private sectors to invest in forestry.

    According to the minister, governmental action needs to have as a goal  the renewal of the rural economy and the economic and commercial world.  as well as the eradication of hunger, and the reduction of unemployment.

    A number of saw mills, seven in total,  were purchased by the Angolan Government at an estimated cost of  Euro 45.000 each, under the project entitled  “Boost Forests Exploration and Semi-Transforming industries in the Rural Area”.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Environmental benefits from Forestry investments


    2009 - 11.17

    Investments into  forestry and timber infrastructure on a global scale  is being highlighted as a vital element for the worlds climate control.   The news from the United Nations Environment Programme stated that countries which make investments into their own natural environments will likely be rewarded in future years. The report went on to say that deforestation should be highlighted as one of the major priorities as the depletion of forests accounts for almost 20 percent of the world’s carbon emissions.

    The study, unveiled with less than 3 weeks to go before the Copenhagen Summit for Climate Change, at which the world’s leaders will attempt to agree a global strategy to address the problems and find policy solutions for the  limitation of climate change.
    The Reduced Emissions from Deforestation and Forest Degradation (REDD) scheme was developed to encourage developing and emerging countries through an expanded carbon market, if they take measures to reduce deforestation.

    The scheme intends to expand the plan to include protection, restoration and sustainable management of forestry. By such means, sustainable forestry would be vital as a way to prevent deforestation.

    Pavan Sukhdev from UNEP said, “REDD, as well as ecological restoration, need to be given a bit of a fillet through the Copenhagen process. These are the first two steps on the ladder. When these get going then a lot else will fall in place.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Water consumption of eucalyptus forestry plantations


    2009 - 11.16

    A forestry investment body in Minas Gerais,  a region of Brazil,  has recently conducted a series of studies into the consumption of water in eucalyptus plantations.

    The data showed that, from  an annual precipitation rate of 1299.0 mm,   57.1% (741.0 mm) was taken up by eucalyptus trees in the process of transpiration (which is the transfer of water from soil to atmosphere from absorption by plant roots and rhizomes), 9.8% of the total rainfall (128, 0 mm) was evaporated (evaporation is the direct transfer of water from the surface of plants and soil to the atmosphere). Between 0.5 to 1.3% (16.9 mm) were taken directly from the soil surface and 31.8% (414.0 mm) infiltrated the soil and replenish the water course.

    The conclusions drawn were that transpiration of 741.0 mm per year or 2.3 mm per day is similar to other forest species and perennial crop species and therefore,  the information generated suggests that groves of eucalyptus trees do not consume excessive quantities of water.

    The total of  evapo-transpiration (the sum of transpiration through evaporation), was 869.0 mm or 2.38 mm per day.  Because there was a surplus of 414.0 mm per year (31.8% of the rain event) the eucalyptus does not dry the soil).  This surplus is not used by plants during the year and was used to replenish the stream.  Furthermore, the maximum variation observed in the flow of the stream was 8.0% during the study period, indicating that the replenishment system of the stream was well regulated.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here