» Topic: Tree FarmingBonner & Partners

Monday, 22 January 2018

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Tree Farming

This topic contains 8 replies, has 4 voices, and was last updated by  Bill Bonner 4 years, 9 months ago.

Viewing 9 posts - 1 through 9 (of 9 total)
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  • #17622

    DOUG T.
    Member

    I live in an area heavy in pine and hardwood forests, with a vigorous forestry industry around. The property price of timberland is depressed in the area. Taking this sites suggestions for long term real estate investments that can be put in a trust as a transgenerational family business, I am considering purchasing some timberland and getting into thebusiness as a sideline. I have absolutely no experience in the industry or farming in general, but plan on contracting the harvesting to loggers when needed and replanting to continue the process for future generations.

    Does any member have any experience or advice?

    #27265

    HENSE E.
    Participant

    Doug, My family has been growing timber in Alabama for 100 years or more. Feel free to call me at 334-227-8814 or 334-549-3408 to discuss in detail. My contacts are reporting that prices have bottomed, are heading north again, and that cash buyer interest is quickly building. Thanks, Member Hense R. Ellis II

    #27266

    DOUG T.
    Member

    Thanks Hense. I’ll try again to talk to you soon. My preliminary financial analysis is that timberland is too expensive at $2000/acre and will only give an inflation hedge and 2% ROI. Despite land costs being lower than they were 5 years ago, they still seem to be out of proportion to the timber output price if you follow a trendl iine over last 100 years. Maybe even at 4-5 times premium. Timberland price at $300-600/acre would be much more in line with production output for a 10% ROI.

    Seems some of the tREITS are in cash flow problems and are wanting to unload land due to low cash flow from low timber demand. But they sure don’t want to unload at a reasonable price, and with all of the QE, there seems to be a lot of cash chasing a few real assets for an inflation hedge.

    #27268

    HENSE E.
    Participant

    Yes, and my opinion is that the inflation hedge chase is just gettin’ started. Buying timberland now is not that different than buying gold, except. that, with timberland, one at least receives an income from wood production and hunting leases. The last time timberland prices really went north was during the 70’s, which, not coincidentally, was the last time gold prices really went north. As of this week, I am hearing $1400-1500 per acre for the raw dirt, with timber value added atop that. If the housing mkt REALLY has bottomed out, lumber prices should continue to recover from their long term low in the low $200’s per 1,000 board feet. Paper wood prices have already recovered. There are worse places to place one’s cash, but, as always, timberland should only be part of a diversified asset portfolio.

    #27269

    PABLO A.
    Participant

    Hi Dough,

    In case you are interested in a more exotic frontier market, my family is a large shareholder Ecuador’s largest fiduciary trust co.

    Within the trusts that we managed, there is one that focuses on a pure play on teak.

    The trust holds units, equivalent to the trees on the ground and not the land, which makes it a bit more affordable.

    If this is of interest, please let me know and we can schedule a call.

    All the best,

    Pablo Andrade

    #27271

    DOUG T.
    Member

    Today, an article from zero hedge states that timber will be best performing asset class over next 7 years, with annualized returns of 6.5%.

    #27282

    DOUG T.
    Member

    Chris Mayer had an article in Daily Reckoning today that said that Investors should avoid timberland and tREIT.
    Timberland in the South is particularly a bad investment because it is overpriced without a new housing boom.

    #27010

    MSlack
    Member

    As of Jan 1/13, lumber is at a 5 year high, which comes from timber/logs. Housing , new starts, is on the increase, delinquent homes is on the decrease, all of which indicate positive action in the continental USA. However, and this strikes me as a systemic flaw in the basic thinking inherent in the posts above; all the intent in the concept is on placing a bet and hoping the bet is profitable. There is no cash flow in purchasing timber land, just a bet that the cost of land and timber will climb, which means, it’s just betting.
    Why? Why bet at all? Speculate – same thing. Bet on a sure thing – same thing. It’s just betting. Again. . . why?
    With decent cash flow paid for by others, an investment becomes sensible. But to simply bet???? That just gambling.
    Not a good idea, Ahhh but wait, maybe you know more than every one else and can predicte what others cannot? Not.

    #18051

    DOUG T.
    Member

    Hense,
    Do you harvest, bale, and sell the pine straw as mulch? Apparently, it is becoming a very popular landscape mulch, and some experts claim the revenue can match the timber revenue. Estimates of 50-200 bales per acre every other year for 8yo+ farms, and selling for about $15-20/bale. Seems there are some farmers figuring out ways to make exyra revenue instead of it rotting on the ground.

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