Comparatively Low Market Risk
Global Forestry Investments
The outlook for timber as an asset class in terms of global forestry investments is still promising. A number of big institutions invest in global forestry projects as a hedge against other more riskier investments, because of the steady and consistent growth of the trees themselves.
As can be seen from the diagram there is year on year massive growth apart from a slight blip in 2001.
Where Can I Find Good Global Forestry Investments?
The traditional forestry investment market has been for Brazilian Teak, but interest in the sector and a demand from the market for faster growing hard woods has prompted a diversification and we now have a number of forestry investment companies that have plantations of a wider variety of timber such as acacia, bamboo and robinia in Latin America, The Far East and Europe too.
What is driving global forestry investments?
Because of the relentless demand for timber in the West and in the developing world there is a push for more and more wood to be available, so savvy investors are making global forestry investments to take advantage of the demand. China being one of the fastest growing economies and populations is actually importing 7 times as much timber as it did a few years ago, for wood products, paper and pulp. With such strong demand governments and companies are pushing for solutions to these requirements.
There is a worldwide need for timber as it is ecologically sound to produce and depending on the species, grows at an exponential rate from whenever it is planted. It is traded as a commodity on the stock markets and also drives things like the costs of housebuilding, paper, cardboard boxes (to carry all the electronic products we buy!) and fencing. Wood Resources International has suggested that internationally the supply of timber will move into deficit, such that demand will outstrip supply over the next decade or two.
With such an unquenchable thirst for timber, we need a sustainable way to try to meet supply demands. In the same way that food production has become industrialised, we may look to that model for an answer. So instead of a mixed timber woodland with a variety of other plants and bushes planted alongside, we have an orderly row upon row of timber in plantations instead.
Natural woodland and tree-farmed plantations are quite different in their aims. Global forestry investments are best made in managed plantations because the growth of the trees, and therefore the returns, are managed tightly in order to reach their goals. A natural forest with standing timber may be cut for wood, but the demand for wood has prompted illegal logging to take place in some countries, which has negative environmental and societal consequences.
A timber plantation can be managed in such a way that wayward or spindly trees get cut out of the rows at an early stage, prompting only the best and true growing trees to survive until they are felled. Also managed global forestry investments can yield more than 10 times as much timber as a natural forest, so you can see the appeal of such plantations. By breeding the right seedlings, and carefully nurturing each tree as it grows into the right shape by pruning and harvesting, the forestry managers can achieve the expected levels of growth. I wish you luck in your search for global forestry investments to suit your needs.