slide1 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern Un PowerPoint Presentation
Download Presentation
Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern Un

Loading in 2 Seconds...

play fullscreen
1 / 35

Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern Un - PowerPoint PPT Presentation


  • 175 Views
  • Uploaded on

Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern United States. Fred Cubbage, Rafael Rubilar, Jacek Siry - USA Patricio Mac Donagh, Mirta Noemi B á ez - Argentina

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern Un' - solada


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern United States

Fred Cubbage, Rafael Rubilar, Jacek Siry - USA

Patricio Mac Donagh, Mirta Noemi Báez - Argentina

José Sawinski Júnior, Arnaldo Ferreira, Vitor Hoeflich - Brazil

Virginia Morales, Gustavo Balmelli, Gustavo Ferriera - Uruguay

Jose Alvarez, Pablo Donoso - Chile

Speech Presented at the

Southern Forest Resource Assessment Consortium (SOFAC) Meeting

May 30-June 1, 2005, Research Triangle Park, North Carolina, USA

outline
Outline
  • Forests and plantations
  • Rotations, growth rates, harvest ages, and volumes
  • Factor costs and stumpage prices
  • Capital budgeting analyses
  • Sensitivity analyses
  • Conclusions
area of natural and planted forests for selected countries 2001
Area of Natural and Planted Forests for Selected Countries, 2001

Natural

Planted

FAO 2003;natural 97%

wood production for selected countries 2000
Wood Production for Selected Countries, 2000

Industrial Roundwood

Wood Fuel

FAO 2003; 54% wood fuel in the world

forest plantations and sustainable forest management
Forest Plantations and Sustainable Forest Management
  • Important industrial round wood source
    • Represent ~ ¼ of industrial round wood supply
    • Allows us to produce more wood on less area
    • High rates of growth
  • Opportunity to conserve the natural forests
  • Helps soil recovery
  • Issues
    • Requires knowledge and large investment $600-$1000/ha
    • Environmental conversion of natural forests, less benefits
    • Local communities
    • Opposition to GMOs
forest plantations selected literature
Forest Plantations Selected Literature
  • Plantations decrease pressure on natural forests
    • Binkley 1997
    • Sedjo and Bodkin 1997, Sedjo 1991
  • Store carbon, reduce global warming
    • DiNicolla et al. 1997
  • Inadequate for supplanting natural harvests
    • Tomberlin and Buongiorno 2001
    • Cossalter and Pye-Smith 2003
  • Negative impacts on local people, employment
    • Cossalter and Pye-Smith 2003
    • World Rainfroest Movement 2005
area of fast growth industrial plantations
Area of Fast Growth Industrial Plantations

Fast > 5 m3 / ha / yr

FAO 2003, Siry and Cubage 2005

area of fast growth industrial plantations9
Area of Fast Growth Industrial Plantations

FAO 2003, Siry and Cubbage 2005

Fast > 5 m3 / ha / yr

plantation species and representative growth
Plantation Species and Representative Growth
  • Tropical and subtropical plantations
    • Pine: 20-45 m3/ ha/yr
    • Hardwood / eucalypts 30-60 m3/ha/yr
  • Temperate and boreal plantations
    • Picea, fir, pine: 10-20 m3/ha/yr
    • Hardwood: 10-20 m/3ha/yr
  • 70% softwood / 30% hardwood
  • Native forests: 1-4 m3/ha/yr
  • 1 m3~ 1 – 1.2 tons green weight; 0.4-0.6 dry tons
methods
Methods
  • Select countries
    • Southern Cone, USA
    • Argentina, Brazil, Uruguay, Chile, US South
  • Select principal commercial timber species or prospects – exotics and natives
  • Authors’ estimates of:
    • Growth rates, typical current practices, genetics
    • Factor costs and output prices
  • Develop cash flow analyses / spreadsheets
  • Capital budgeting analyses
  • Iterative review by authors and foresters in each country
  • Sensitivity analyses – reserves, land costs, subsidies
returns of plantations 2005
Returns of Plantations, 2005

Land Expectation Value

Internal Rate of Return

8% discount rate; no land cost

returns of plantations 200520
Returns of Plantations, 2005

Land Expectation Value

Internal Rate of Return

8% discount rate; no land cost

returns of native species plantations 2005
Returns of Native Species / Plantations, 2005

Land Expectation Value

Internal Rate of Return

8% discount rate; no land cost

returns of native forests 2005
Returns of Native Forests, 2005

Land Expectation Value

Internal Rate of Return

8% discount rate; no land cost

sensitivity analysis of separate scenarios pinus taeda in southern brazil 2005
Sensitivity Analysis of Separate Scenarios, Pinus Taeda in Southern Brazil, 2005

Land Expectation Value

Internal Rate of Return

8% discount rate; $2500/ha land cost

sensitivity analysis of separate scenarios pinus taeda in southern usa 2005
Sensitivity Analysis of Separate Scenarios, Pinus Taeda in Southern USA, 2005

Land Expectation Value

Internal Rate of Return

8% discount rate; $1400/ha land cost

biological political and financial risk
Biological, Political, and Financial Risk
  • Biological
    • To date, exotic plantations bear less risk than natives
    • Fewer native predators and pathogens
    • Introduced biological and chemical controls
    • Ants huge problem, other disasters possible, but rare
  • Political – US > Chile > Uruguay > Brazil > Argentina
    • Environmental regulations
    • Government stability
    • Favorable investment climate
    • Subsidies
  • Country risk (Economist Intelligence Unit 2005)
    • Ranking of 100 countries in developing world
    • Chile 4th, Brazil 51st, Uruguay 65th, Argentina 97th
conclusions exotic plantations returns
ConclusionsExotic Plantations Returns
  • 10% to 24% base IRRs w/o land costs
  • Results similar to Sedjo, 2001
  • Add new information on reserves, land, & subsidies
  • Land in reserves decrease IRRs < 1%
  • Subsidies increase IRRs about 2%
  • Land purchase costs and sale without inflation at end of rotation decreases IRRs ~4-11%
  • Good land costs higher in Brazil, Chile
  • But possible land appreciation costs
  • Possibility for much greater returns in S America
  • Early investors with cheap land costs have profited most; more difficult now
conclusions native species plantations
Conclusions Native Species Plantations
  • Best 5 had 4% to 10% IRRs – Aracauria, Nothofagus, P taeda
  • Prosopis had returns <1%
  • Less than exotics; better than natural stands
  • Growth of ~4-5 m3/ha/yr seems to be key
  • Assumes similar stumpage prices to exotics
  • Grow in area that exotics will not
  • More certain growth rates
  • Better for small farms and agroforestry
  • Erva mate good returns, but limited market
conclusions natural stands
Conclusions Natural Stands
  • 97% of Americas
  • Little information on inputs, prices, management
  • USA best, at 4% to 8% IRR for natural stands
  • Tropical and subtropical natural stands
    • Few commercial timber species: 0-20% of stand
    • Estimated returns very speculative
    • Unmanaged tropical stands likely a financial loss
    • Selective management - returns of ~2% IRR
    • Perhaps perfect management can yield 4% IRR
    • Less survival risk, more commercial species risk
    • Low IRRs, but not very negative LEVs, even at 8%, since there are few inputs
  • Preliminary, tentative conclusions
conclusions forestry sector prospects
Conclusions Forestry Sector Prospects
  • Economic development opportunity – Forest sector GDP
    • 3-4% Brazil, Chile
    • 2% USA
    • 1% Argentina, Uruguay
  • 2 new pulp mills each in Chile and in Uruguay
  • Many sawmills and panel mills
  • Modest expansion everywhere
    • Most need and greatest prices – Chile & Brazil
    • Large supply, low prices – Argentina
    • New supply, unknown markets – Uruguay
    • Stasis or slight declines – U.S. South
  • Least risk in most developed markets/countries
conclusions33
Conclusions
  • Data poor, especially for South America
  • Exotics in S America have higher returns than native species and USA species
  • Plantations require large amounts of capital
  • Native plantations have lower returns, but some IRRs approach stock market and other assets
  • Degraded subtropical stands have low to negative returns
  • Better management key to make natural species profitable at all
the bottom line
The Bottom Line
  • Plantations profitable but costly to establish
  • Forest reserves decrease returns modestly
  • Land costs decrease returns greatly
  • Current Southern Cone forest owners achieve high profits, but with land opportunity costs
  • Management beats neglect in natural forests
  • Nonmarket and social values important for broader analysis
  • Regulation, incentives, certification, payments for environmental services may be key to subtropical forest retention
  • Need much more research!
slide35

Comparative Timber Investment Returns for Selected Plantations and Native Forests in South America and the Southern United States

Fred Cubbage, Rafael Rubilar, Jacek Siry - USA

Patricio Mac Donagh, Mirta Noemi Báez - Argentina

José Sawinski Júnior, Arnaldo Ferreira, Vitor Hoeflich - Brazil

Virginia Morales, Gustavo Balmelli, Gustavo Ferriera - Uruguay

Jose Alvarez, Pablo Donoso - Chile

Speech Presented at the

Southern Forest Resource Assessment Consortium (SOFAC) Meeting

May 31-June 1, 2005, Research Triangle Park, North Carolina, USA

SOFAC_PLANTATIONS_30MAY2005