Saturday, September 17, 2011

Issues and Alternatives for Teak Investors

Teak trees produce valuable wood
Teak is the common name for the tropical tree and wood of Tectona grandis. This popular investment tree is native to south and southeast Asia, but is also planted as an introduced species in Africa, Central and South America. Teak is grown in plantation settings, because its fine wood has a large market and demand. The teak tree can be a very good investment, with high returns, but it may take as much as 30 years for plantation teak trees to be big enough to sell. The yellowish brown wood is used for fine furniture, outdoor furniture, boat decks and other articles, where weather endurance is required. The wood is mostly termite and insect resistant. Other popular uses include wooden bowls, cutting boards, arts and crafts, indoor flooring, veneers and finishing wood. There is an environmental concern, because of past reckless logging of old growth teak, though the majority of teak wood now comes from plantations.

Typical teak plantation in Costa RicaThe market for teak wood is always good, provided one is selling mature lumber from larger trees  (25 to 30 years). The market for lumber from small teak trees is very limited (12 to 20 years) and does not fetch anywhere near the prices paid for large, mature logs and sawn lumber. Many firms offer investments in teak plantations, and some of them are reliable business partners. However, while teak is a high return commodity, it is not a quick return investment. This article will briefly address some of the issues that teak investors should consider, and contrast those considerations with other possibilities.

Teak is not a fast growing tree
Teak trees need relatively good soil in which to grow. They do not do well in poor or infertile soils. If a planter can match the soil and rain conditions found in Burma (Myanmar), they will have excellent results. Similar conditions are known to exist in Costa Rica, Panama and parts of Colombia. The downside of this fact is that other, faster growing trees or crops can be grown in places set aside for teak trees, which sometimes puts pressure on teak plantations that require many years to produce mature trees. It is not uncommon for teak plantation owners to cut down their immature teak trees to make way for other agricultural or housing projects that offer a quicker cash flow solution to the land owner.

Introduced teak is not environmentally friendly
Tectona grandis does not provide any other cash flow while it is growing. There is a limited use of the  leaves in south India and Indonesia as a wrap for steamed preparations, but that is of no commercial value. Many other species of tropical trees have fruits, nuts, honey or resins that can be sold while the trees are growing. Experience in Central America has shown that teak is not that environmentally friendly in regions where it is an introduced species. A common observation by visitors to teak plantations in the Americas is that they are devoid of bird, animal or insect life. Additional issues are the fact that teak trees need good soils that could be used for food production, and the fact that teak is generally planted in monocultures due to the high cost of good land.

Teak can be a profitable investment
From an investment perspective the long time to maturity required by teak trees needs to be considered when investing in their cultivation. Best intentions do not resolve practical problems. For example, will the planter with whom one invested still be alive in 25 to 30 years? Does the company operating the plantation have a continuity plan which the investor can trust? What happens to the trees in the event of a bankruptcy or other form of liquidation? What happens if land prices increase exponentially mid-way through the growth cycle, putting pressure on the land owner? Even if the trees are somehow protected, who will see to future fertilizations, pruning, culling, fire breaks and other maintenance if the original company or plantation owner is no longer active?

Teak tree flowers
It is also worth thinking in terms of insurance. The longer the growth period for a tree, the more  exposure one has to potential natural disasters like fire, pests, floods, droughts or diseases. This risk factor is obviously much smaller with fast-growing tree species that mature in 10 years versus 30 years. As a teak investor one should definitely inquire as to a company’s or plantation owner’s Plan B or insurance. For example, Amazonia Reforestation in Colombia, which does not cultivate teak, has a self-insurance plan that involves planting twice the number of tropical trees for which it has financial obligations, as well as planting a variety of species to reduce risks.
Teak spans a range of colors

This does not mean one should not invest in teak, but rather that it is important to do so with open eyes and a full understanding of the long time commitment required by successful teak plantations. Diversifying so that one has holdings in other, faster growing tropical tree species, as well as teak, makes a lot of sense. Teak is not the only game in town, so having a tropical tree investment strategy that includes other species is a good thing. Teak investments are usually more costly than other tree species, because of the long maintenance period involved, but the payoff is not something one will regret. As with other tropical tree species, it is correct to say that teak trees can be low to medium risk but high return.

20 comments:

  1. Teak can be an excellent investment, but it does have a long time frame to mature. One alternative to consider is an agarwood investment that mature in just 7-8 years.

    ReplyDelete
    Replies
    1. Thank you for the comment. Yes, that is the point I am trying to make, that as with everything else there are alternatives to teak investments, especially for people who are concerned about the time frame.

      Delete
  2. Noticeable even for starters. This is just brilliant.
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  3. We can work with you in Africa.

    ReplyDelete
  4. We can work with you in Africa.

    ReplyDelete
  5. Dear Dexter, you are very frank and truthful in your article. Teak Plantation is good only when you have knowledge + time. We are in plantation in Africa since 1996 with all sorts of experiences. We are now Planting a new variety (Anirudhdha Cyclic Tissue Culture- patent Pending) which can give 0.4 to 0.5 CBM in 10 years and with 2 to 3 generations. But this has to be cultivated and monitored with extreme care. Only with knowledge, experience and timely application of both the success can be achieved..... We appreciate your article.sincerely....Rajiv Pradhan
    Tel: 00233 26 3623385 / 27 3245132 / 24 5124922

    ReplyDelete
    Replies
    1. Dear Mr Rajiv Pradhan,
      please send us informations over your african land crop investments, we are interested in doing such crops. please email babaveg@gmail.com , regards , Piyush Patel

      Delete
  6. Dear Dexter, you are very frank and truthful in your article. Teak Plantation is good only when you have knowledge + time. We are in plantation in Africa since 1996 with all sorts of experiences. We are now Planting a new variety (Anirudhdha Cyclic Tissue Culture- patent Pending) which can give 0.4 to 0.5 CBM in 10 years and with 2 to 3 generations. But this has to be cultivated and monitored with extreme care. Only with knowledge, experience and timely application of both the success can be achieved..... We appreciate your article.sincerely....Rajiv Pradhan
    Tel: 00233 26 3623385 / 27 3245132 / 24 5124922

    ReplyDelete
  7. Hello we are from Indonesia, we sell a wide range of teak furniture.
    If you are interested please visit Teak Furniture Store
    email me to zoelvyxar@gmail.com

    ReplyDelete
  8. wao... privileged in the discussion of this article on teak tree, greeting just from Obat Perangsang Wanita to you and good luck

    ReplyDelete
  9. Dear Buyer,

    My name Sam from Laos, We are owner of huge hectares of Teak farm in North and Center of Laos therefore we can provide any required quantity.

    Nice to know your!, Please find my teak logs detail below

    1)Description: TEAK ROUND LOGS (Tectona Grandis)
    2)Origin: LAO PDR
    3)Quantity, Sizes, Price per CBM FOB : Hai Phong Port, Vietnam

    QUANTITY PER 40’ CONTAINER APPROX 16 CBM
    60-69 CM @ USD 560.00/CBM
    70-79 CM @ USD 590.00/CBM
    80-89 CM @ USD 620.00/CBM
    90-99 CM @ USD 670.00/CBM
    100-109 CM @ USD 730.00/CBM
    110-120 CM @ USD 760.00/CBM

    4)Total min order : 150 CBM/Time + - 5%
    5)Allowances: 5 cm on Girth and 10 cm on Length
    6)Scaling Method: Girth x Girth x Length/12.56
    7) Port of Loading: Hai Phong, Vietnam

    Example, with teak log girth 105 CM Length 220 CM, will calculate like = (1*1*2)/12.56 = 0.1592 CBM

    Mean girth size 1 Meter length 2.20 Meter, 0.1592 CBM/Piece

    Other terms and conditions:-
    1) This proforma is to be accepted on or After that this mail 15 day.
    2) Confirmed, irrevocable T/T payable 100% (Deposit 50% and After loading 50%) at sign Contract at Laos
    3) -Original Bill of Lading
    -Original Packing List
    -Original Phyto Sanitary Certificate
    -Original Certificate of Origin

    Also I have to do teak wood or sawn any size from 3 inch - 10 inch as well
    Rate final offer to order!!!!!
    FOB : Hai Phong Port, Vietnam
    -Size 3"-4" x 3"-4" = 760 USD/CBM
    -Size 5"-6" x 5"-6" = 780 USD/CBM
    -Size 7"-8" x 7"-8" = 820 USD/CBM
    -Size 9"-10" x 9"-10" = 850 USD/CBM

    With any questions please let me know.

    Please contact me at santipot(at)gmail(dot)com or Viber & Whatsapp with number +6686-999-4177

    Regards
    Sam

    ReplyDelete
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    ReplyDelete
  11. Dear Dexter, you are very frank and truthful in your article. Teak Plantation is good only when you have knowledge + time. We are in plantation in Africa since 1996 with all sorts of experiences. We are now Planting a new variety (Anirudhdha Cyclic Tissue Culture- patent Pending) which can give 0.4 to 0.5 CBM in 10 years and with 2 to 3 generations. But this has to be cultivated and monitored with extreme care. Only with knowledge, experience and timely application of both the success can be achieved.....
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    ReplyDelete
  12. Dear Dexter,
    please email us on babaveg@gmail.com about the oppurchunities in to your lands for project farming, we are interested _ regards - piyush patel

    ReplyDelete
  13. greetings!
    I have a plantation of teak wood for sale in Ivory Coast,West Africa. There are 4,900 trees. Please email me massamba@mourtallagroup.com for further discussions.

    ReplyDelete
  14. Thanks for the informative blog, You did a great job. Seems like you know a lot about Teak Trees. Thank You for sharing so much interesting information about Teak.

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    ReplyDelete
  15. I think Sagwan Plantation is important not only for income but also helpful to tackle global warming. Nice Info. I have also write one post on Sagwan Plantation In Hindi

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