Why you should invest in forestry sector?



Jun 30, 2016


Joined Jun 30, 2016
15 10 5
There is exciting potential to transform the forestry sector – promoting its sustainable growth, ensuring large and small-scale growers can exploit compelling opportunities in commercial timber and energy markets, and creating knock-on environmental, social and economic benefits. The following are FIVE important concerns on investing in forestry sector;

1. The demand for timber is increasing.
The demand for timber has been increasing as forest-related product development grows. We expect by 2030 the demand for forestry products will double as the population and development of wood products increases. Even paper recycling efforts have had little effect on demand, and more demand on biofuel push the commercial forestry opportunities and a sustainable charcoal sub-sector. There opportunities outside our boundary if will manage to invest and improve our forestry products like timber, electric and fencing poles and biofuel.

2. Timber is an inflation hedge.
High demand of forestry products in the market like timber, poles, fire wood and others increases the opportunities on forestry sector. Timber increases in value "on the stump" at a greater rate than inflation. According to legendary investor Jeremy Grantham, timber prices in the last century (~1905-2005) have also grown at a rate that is approximately 3% greater than inflation.

3. Timber returns beat stocks.
Measuring returns, timber investment returns exceeded those of the S&P 500 from 1990 through 2007. This excess in return was also provided with less volatility as shown by the Sharpe ratios for the same period underscoring the risk/return benefits of timber over the overall stock market. This investment has the possibility of develop much return than loss (Risk/Return Trade off). This means in this investment the risk is very higher but there a sufficiently of high profits. Though tree can remain with its worth after get burning by bush fire or hazard from natural disaster like earth quake, this tree can be used in paper factory or producing timber and fire wood. The land can be replanted for future profit.

4. Timber has low correlation to other asset classes.
Commercial timberland prices are impacted by a different set of market and economic factors compared with other asset classes. Because prices are not affected by the same factors, timber returns are not correlated to returns of other asset classes, such as stocks, bonds and real estate. The addition of a low correlation timberland asset will increase the diversification of an investment portfolio.

5. Investment in land as an appreciating asset.
Although the land necessary to grow timber stock can be leased, the majority of timber investors prefer to purchase the land. The land supply is limited and demand continues to grow as the population and commercial development expands. Depending on location, some property can be targeted as "higher and better use" land that can be sold to developers at a premium, providing additional appreciation benefits for timber owners. In Tanzania the plenty of good land for tree planting investment available in the Southern high lands regions of Iringa, Njombe, Ruvuma and Mbeya.

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