Key Land Factors for Tropical Tree Plantations

Last posting, I discussed the 3 key climate factors for tropical tree plantations. This time I want to comment on the 3 key land and soil factors affecting tropical tree plantations. In the tropics there is a wide variety of vegetation specific to different land types. By far the largest tropical vegetation area is savannah (42%), followed by rain forest (30%), semideciduous and deciduous woodland (15%), and finally desert areas (13%), with desert shrub and grasses or even with no vegetation. These numbers are changing as deforestation continues unabated and deserts are growing. From a plantation perspective the ideal areas for afforestation and reforestation programs are savannah, because of reliable rainfall and ease of access. Amazonia Reforestation is doing extensive planting in the savannah areas of the llano oriental or eastern plains of Colombia.

Despite the lush and profuse vegetation found in most rain forests, that abundance is not an indication of high soil fertility. In fact, most rain forest soils are infertile, but the forest itself  has evolved to make extremely efficient use of nutrients by recycling everything, thanks to rapid decay and absorption of litter, dead fall, old leaves, fallen fruits and nuts, and atmospheric sequestration of gases like CO2 and nitrogen. This is why deforerstation for subsistence farming and ranching has produced such poor results, with crops failing within a couple of years of clearing the rain forest, and ranching producing eually poor results because of the low nutrient value of grasses that have replaced the rain forest.  In contrast, poorly vegetated savannah often has superior soil fertility. Only 7% of the soil types found in the Amazon basin have agricultural potential. CO2 Tropical Trees plants in savannah areas with superior carbon sequestration potential, as part of their "Make your car carbon neutral campaign!"

Tropical tree plantations also favor savannah and steppe areas, because the cost of land is lower in those locations. The majority of the world's unused but potentially arable land is in tropial savannah and semidesert areas. Since these areas generally correspond with countries in development, they suffer from under-use or inefficient use, or from environmentally bad use, such as mono-cultures of oil palms. Tree farms see these areas as having great potential for timber by making improved use of the land and by implementing modern forestry practices and environmentally sound  programs. Amazonia Reforestation, for instance, is active in planting native tree species for conservation and preservation of endangered wildlife. This goes hand in hand with the final reason why tropical tree plantations like these areas. They have human populations that require the resources for economic and social development, something that afforestation and reforestation programs offer.

Key Climate Factors for Tropical Tree Plantations

Temperature: Temperature extremes increase away from the equator. This means that there is greater certainty regarding temperature in the tropics, which is important when selecting the types of trees one might consider planting. Amazonia Reforestation is presently planting in areas that are 6° degrees north of the equator. While there are daily variations in temperature, the important factor is the annual mean average. Amazonia Reforestation relies on a mean temperature of around 25° degrees Celsius or 77° degrees Fahrenheit.

Solar Radiation: In the tropics the daily solar radiation levels are approximately double those of temperate zones. This is caused by the fact that there is less variation in the angle of the sun’s rays throughout the year. The result of this is of course that tropical trees receive more energy for photosynthesis than their temperate or boreal counterparts. Another aspect of the sun’s angle is the fact that tropical trees enjoy a constant average of 12 hours of daylight or photoperiod. Plantations like Amazonia Reforestation avoid locations that are shaded, like valley bottoms, which could reduce daylight hours.

Rainfall: Tropical trees respond well to consistent rainfall. Approximately half of the tropics receive seasonal or monsoonal rainfall. Amazonia Reforestation can count on an 8 month wet season and a 4 month dry season. The definition of a dry season is not an absence of rain, but less rain meaning that evapo-transpiration exceeds rainfall for those 4 months. Intensity of rainfall is also an issue. A lot of rain in a short period of time tends to be water that runs off the surface rather than being absorbed in the soil.

Why invest in private reforestation and afforestation?

It is popular in some sectors to blame the free market for deforestation, which in turn causes high lumber prices and wood shortages. This blame game probably deters some people from investing in reforestation and afforestation by the private sector, because they feel that harvesting the trees later is somehow not “green” or environmentally friendly. But what if in fact the exact opposite is true? The economics of growing plantation wood may in fact be much more environmentally sound than the alternative. Let us consider some examples. In Germany, Spain, Colombia and a number of other countries, there are many privately owned forests. How is it that those forests aren’t permanently clear cut? After all, doesn’t a capitalist want to maximize his or her profits in one sweep of the chainsaw?

The answer is really quite simple. A tree farmer or plantation owner with property rights does not log everything in sight, because it is in their best interest to preserve the sustainability of the plantation for on-going, long term profit. Their profit and the sustainability of the land is greatly reduced with a quick one-time windfall. A well managed forest or woodlot provides profit over the length of the tree farmer’s tenure. Common sense says that as markets and prices fluctuate based on supply and demand principles, selling only a few trees at a time while replacing them makes good economic sense. Contrast this with government-owned or community-run forests. When there are no property rights involved loggers tend to maximize their take, simply because they have no certainty for the future. There is no reason to act in a sustainable manner, because what one logger doesn’t take the next one will. For instance, the destruction of the Amazon rainforest can in many cases be traced to a lack of property rights in Brazil. The same can be said for the destruction of forests of Indonesia, India and Africa.

Selling only some trees at a time while replanting guarantees that there will be trees for future profits. Smart plantation and woodlot owners know that demand continues to grow for wood products, meaning that as lumber prices rise they will enjoy even greater profits in the future. A clear cut doesn’t continue to make money, but a sustainable forest does, because the tree farmer can have other on-going revenues, like eco-tourism or paid hunting on private land, or revenues from alternate harvests like fruits, nuts, seeds, saps like maple syrup or latex for rubber, to name just a few. It is hardly surprising that if people can have long term sustained income they will choose that over one short-term windfall cheque. In the case of Amazonia Reforestation, we are counting on our afforestation efforts to provide numerous spin-off industries for the benefit of local communities, like rainforest honey production, eco-tourism thanks to expanded wildlife habitat, and ever healthier soil, allowing the planting of greater varieties of hardwood trees, each with even greater cash values, for future harvest. So if you are thinking about a green investment, then afforestation and reforestation of tropical trees is not only profitable, but sustainable and beneficial in numerous ways.

Why is timber investing so profitable?

Sometimes it is a good idea to review why tropical trees have become such a good investment. It has only been in the last 70 years, starting in the 1940’s, that the idea of growing trees for sale and profit in international markets has become a major business. Since then, forestry companies, plantations and investors have been planting, buying, selling, harvesting and processing trees in an organized manner, making timber a recognized commodity that has managed to consistently outperform world stock markets. The attraction for many investors was seeing the pulp and paper industry panic after World War Two, as it had invested in pulp mills around the world. There was a sudden recognition that timber supplies were shrinking. Human and urban expansion, pressure from other industries like building materials, ranching and agriculture, and increased environmental awareness meant that the pulp and paper industry needed to start planting trees to feed their mills if they were to survive. The days of recklessly logging natural forests had come to an end.

The result of this recognition was an industrial approach to forestry. People could see sophisticated machinery clear cutting woodlots and processing plantations of all ages to feed not just the pulp and paper industry, but also providing lumber for the post-World War Two building boom and for the myriad other uses timber is known for. If anything, this pressure was even more noticeable where tropical trees were concerned. Many developing countries were slow to protect their natural resources, like Brazil where much of the Amazon forest has been devastated, or Haiti, where the forests were used for cooking fuel. Yet others have gone the other route, like India or Costa Rica, with strict forestry laws, huge national parks, and other wood management regimes which have drastically reduced access to timber. All of these factors proved themselves to be the signs investors were looking for. Busy timber markets and increased pressure on planetary forests signalled healthy demand, while evidence of huge resources being spent to plant trees meant that wood processing industries and woodlot owners were confident of their markets and profit margins. Investors correctly deduced that demand at the very best equalled supply, but more probably surpassed it. Years later trees, and especially tropical trees and hardwoods, are now recognized as extremely profitable investments.

As if that were not enough, investing in timber means more than just profit. Timber is also one of those rare commodities that protects against inflation. Tropical trees grow even when they are not cared for. Using modern forestry practices and management techniques means plantations can produce non-compounded returns on investment of 30% to 40% a year over a 10 year period from biological growth alone, without even considering the value of the land or the fruits and other products that are profitable spin-offs. For example, the wood of rubber trees is valuable in its own right, without taking into account the value of the latex those tropical trees produce. The ability of tropical trees to absorb or sequester large amounts of CO2 on an annual basis from the atmosphere is a whole new and evolving industry in the fight against climate change. Best of all, tropical trees grow much faster than their temperate and boreal cousins, often leading to profitability in as little as 10 years time. Amazonia Reforestation represents all of the benefits mentioned here, so what are you waiting for? Make a green investment today!

Agroforestry Marketing and News

Earlier today I registered Planeta Verde Reforestación S.A. with a new agroforestry trading service out of Serbia, with a representative in Argentina. They call themselves Agrofood Planet and have ambitious plans to become the one and only true internet based agricultural portal for suppliers and buyers. I like this approach to marketing, because it allows suppliers like ourselves to be found by potential buyers anywhere on the planet. Since the market for tropical hardwood lumber is international, this is a very cost-effective and efficient way of making trading contacts. While they get started buyers and suppliers can register for free. Their new web site is located at http://www.agrofoodplanet.com/.

A very interesting technology has been invented by Gary Lewis, a Canadian farmer and Alberta rancher. This technology has experienced several years of testing in places like the UK, Australia and China, and promises to revolutionize some aspects of agriculture. What Mr. Lewis discovered is that if one injects the CO2 emissions from one's tractor directly into the soil, the mineral rich emissions seem to act as a catalyst that breaks up soil nutrients and minerals in such a way as to boost whatever one is planting. All farmers testing this technology state that they have not had to use fertilizers now for several years, a savings that can often run into the hundreds of thousands of dollars. The other intriguing aspect of this process is the fact that the emissions are held in the soil where they can become part of the biomass of the plant or tree, and are not discharged into the atmosphere. This makes the process a win win win for the farmer, the customers and the environment.

Two former Agriculture Canada scientists turned consultants, Dr. Jill Clapperton and Dr. Loraine Bailey, have stated that the exhaust emissions have had a positive effect on crop growth, yield and quality, and may have positively enhanced soil nutrients and chemistry. The process results in a significant release of soil nitrogen (N) and stimulates crops to take up that nitrogen. There is also a small increase in the uptake of phosphorus, potassium and sulphur. The World Health Organization published a Volkswagen study that seems to confirm the potency of diesel exhausts. A light duty Volkswagen diesel engine emits by weight 75 per cent nitrogen, 15 per cent oxygen, seven per cent carbon dioxide and 2.6 per cent water vapour. Several other substances are also emitted in quantities of less than 0.1 per cent. Needless to say this offers amazing opportunities for tropical tree afforestation projects on marginal land. By reducing or eliminating the CO2 emissions caused by the tractors and reduced fertilizer costs, together with the carbon sequestration capacity of tropical trees and a promising excellerated growth rate, this becomes a very attractive situation for Amazonia Reforestation investors.

Compare stock market to direct tropical tree investments

I suspect many of you didn't know that you can invest in tropical trees on the stock market. The issue for me, however, is whether that is the best approach for smaller investors or for people who are not watching the market diligently on a daily basis. If you have purchased tropical trees through a broker please don't take this article the wrong way, as I applaud you for making a green decision. However, I want my comments to provide people with some food for thought, especially given the 2 spectacular stock market meltdowns we have witnessed in the past decade alone. I suspect many of us make investment assumptions that are not really based in fact or reality, so maybe these 3 comparisons will be of assistance. Whichever way you choose to go, you should have the opportunity to compare your options before making an investment decision. A good article on the subject can be found here.

Practical Considerations

If you are going to invest in the stock market you need a brokerage account. This automatically puts a middle  man between you and the companies in which you may wish to invest. That middle man or broker is going to take a commission for every transaction he or she handles. In addition, many brokerages don't even want to talk to you or open an account if you have less than $50,000 to $100,000 to invest. If you look for cheap solutions like on-line brokerages, then you lose the service factor. A frequent issue is conflicted advice. Many brokers will recommend stocks that are questionable simply because the brokerage has a special deal with the company in question. In those cases the brokerage hopes to move the stock price in the short term by piling people into that stock without any consideration for the long term capacity of that company to produce results. None of these considerations affect people who invest directly and privately in tropical trees with a plantation or forestry company.

Due Diligence

Other people assume that because the SEC or securities commission has licensed a business for public trading due diligence is no longer a factor. They are dead wrong. First off, it is not the SEC's responsibility to evaluate the business model a company has, nor can they mind read to ascertain whether someone is lying or not. The result in the past decade has been less than comforting. Recently we had the fund fiasco with Bernie Madoff, the spectacular frauds of Enron, Worldcom, Bre-X and barrels of others, and the incompetence of banks (Lehman Brothers et al.) and insurance companies (AIG et al.) around the world investing in assets that were value-less and unsupportable. Regulation is not a guarantee of anything, and government has shown itself to be an extremely poor arbiter of market place malfunctions, though government seems to have no problem using taxpayers money after the fact to try and bail out CEO's who deserve no leniency. In contrast, a direct investment in tropical trees with a plantation or forestry company makes for easy due diligence. You can ask and answer these questions yourself: Do they own or control the land on which my trees will be planted? Are they actively planting tropical trees at present? Can I visit and see where the trees I want to purchase are being planted or have been planted? Answers to these questions are usually right there on their web site or just a phone call or visit away.

What Am I Buying?

If you invest in the stock market you are buying shares in the company that is promoting the green  investment. That can be a problem if they are not actually the plantation that is growing the trees. Shares can be problematic when companies keep on selling shares to raise money, which means that the stock you hold is being continuously diluted, with your percentage of ownership declining as time passes. Despite these problems publicly traded timber stocks have managed to average a growth of about 13% non-compounded a year for investors, which is pretty good. However, consider that if you invest directly with a plantation by owning some tropical trees, you are secured against the primary asset of the business. You are not sharing in any dilutions of the stock, or other risks. If you buy 100 tropical trees on day one, you own 100 mature tropical trees on the maturity date in 10 years time. It becomes a matter of low risk but high return. For example, Amazonia Reforestation investors earn a return of between 30% to 40% per year non-compounded over the 10 year growth cycle of their tropical trees, depending on the amount they invest. $4,000 invested becomes $17,000 in just 10 years time, way better than anything the stock market can offer, and in my opinion with a lot less risk.

MOU with University of Alberta

I am extremely pleased to announce that the Memorandum of Understanding (MOU) between Planeta Verde Reforestación S.A. representing Amazonia Reforestation and CO2 Tropical Trees and the Faculty of Agricultural, Life and Environmental Sciences at the University of Alberta (U of A) in Edmonton, Canada, was formally signed today at the U of A. Dr. Kochurani Dombro signed on behalf of Planeta Verde, while the university's Provost and the faculty's Dean signed on behalf of the University of Alberta. Also participating were Dr. Debra Davidson, one of the professor's planning a study using our tropical tree farm as a base, and Renny Khan, the Director of the International Centre for the university. Dr. John Spence is another professor planning a carbon sequestration study based on the tropical trees we are planting in Colombia.

The MOU is a way of setting in place a collaborative effort between our two entities. Specific contracts will be signed on a case by case basis in the future, for each study, research or program, as it is mutually agreed upon. Planeta Verde for its part has offered the use of its facilities, infrastructure and land for U of A studies and research. We are also hopeful that the natural reserve we are establishing in Vichada, Colombia, will provide further opportunities for zoological and botanical studies in the future. This signing comes hot on the heals of another MOU we signed with the world renowned Omacha Foundation of Bogotá, Colombia, who will be doing a biological inventory of our natural reserve, will assist us in the establishment of an endangered river turtle hatchery, and will work with us for the conservation of native tree species.