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Private equity's choice: Obama or Romney

Private equity's choice: Obama or Romney | Timberland Investment | Scoop.it

In 36 hours or so, we should know if America has elected its first-ever private equity president. Or if it's reelected the guy who campaigned, in part, by criticizing some of private equity's more controversial practices.


Based on the rhetoric, it seems obvious that Mitt Romney should be the choice of private equity professionals who vote their business interests. But I'm not so sure that it's quite so clear-cut.
For starters, future private equity success will depend more on a vibrant economy than on any industry-specific policy. Not only because a rising tide lifts portfolio company financials (and, in turn, sale prices), but also because private equity relies on capital commitments from a wide swath of institutional investors (public pensions, college endowments, corporations, family offices, nonprofit foundations, etc.).


So if a private equity voter is convinced that Romney's economic policies are best for broad-based prosperity -- both in America and worldwide -- then he should be the pick. Same goes for Obama.
And before calling this a cop-out, two opposing pieces of data: Romney has raised far more money from private equity execs than has Obama, and also seems to have their ballot box support. At the same time, Cambridge Associates reports that private equity has generated 16.62% benchmark returns in the three years between June 30, 2009 and June 30, 2012. That's better than the private equity benchmark for any other time period that CA measures, and was based largely on a public equities market that has thrived under Obama's watch.


Again, not clear-cut. And macro economic prognostication is an educated guessing game, at best.

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Timberland Investment
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Sponsored by...

Sponsored by... | Timberland Investment | Scoop.it

Prentiss & Carlisle  is one of the largest timberland asset managers in North America. P&C provides ongoing management services on approximately 1.75 million acres of timberland located in Maine, Michigan, New York, Vermont, Wisconsin, Ontario and Quebec. Nearly every acre under management is certified by the Forest Stewardship Council through either our clients or through P&C itself, which holds FSC certificates for both Forest Management and Chain-of-Custody.

 

P&C provides turnkey land management from long-range forest planning through on-ground forestry, marketing of forest products, harvesting, transportation, road construction and maintenance, stump-to-mill accounting and reporting, client cash management, administration of third-party relationships, public advocacy/representation and strategic asset planning. P&C also provides specialized consulting services in related areas of expertise:

  • Timber inventory design, execution and analysis
  • G&Y modeling and timber harvest scheduling
  • GIS mapping and data management services
  • Timberland valuations and appraisals
  • Acquisition and disposition due diligence
  • Market studies
  • Timber supply modeling

 

About this magazine

Our aim is to provide a gathering place for news and opinion about timberland investing. We cover both publicly traded issues including listed timber companies, real estate investment trusts (REIT's), and exchange traded funds (ETF's), and the more private world of institutional investing in timberland. Our focus is on: the rationale for investing in timberland; performance of publicly traded timber investments; timberland deals and transactions; timber supply, demand and prices, and; public policy issues that impact timberland investing. Not interested in all of these topics? You can easily filter the stories by using the Tags button above.

 

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These links take you to customized Google Finance pages for timber REITS, indexes and other publicly traded companies of interest:

 

Prentiss & Carlisle newsletters

Quarterly updates on conditions in our operating regions

 

Timber Mart North 

Lake States price reporting service published by P&C

 

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U.S. slaps dumping duties on Canadian wood, Ottawa vows to fight

U.S. slaps dumping duties on Canadian wood, Ottawa vows to fight | Timberland Investment | Scoop.it
Escalating a trade dispute with Canada in the run-up to talks on renegotiating NAFTA, the U.S. Commerce Department on Monday imposed preliminary anti-dumping duties on Canadian softwood lumber of up to 7.72 percent.

When combined with preliminary anti-subsidy duties issued in April, the new measures will bring total duties on Canadian lumber to between 17.41 percent and 30.88 percent.

The announcement, which was largely expected, prompted an angry reaction from the Canadian government against what it called unfair and punitive duties.

"We will vigorously defend Canada's softwood lumber industry, including through litigation," the government said in a statement.

The bilateral dispute is the fifth over lumber in less than 40 years.
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Why biomass remains a challenge, even in timber-rich Georgia

Why biomass remains a challenge, even in timber-rich Georgia | Timberland Investment | Scoop.it

A new biomass plant under construction in Georgia highlights the challenging economics of the technology, even in a state so rich in forestry waste it exports it to other countries.

The 50 MW Albany Green plant – the largest renewable energy project in the state so far – is a unique collaboration among Georgia Power, private companies (including Procter & Gamble) and a nearby Marine base. While the cost for biomass generated electricity is too high to compete with wind and solar, the project also produces steam for industrial use, which improves its economics.
***
Two thirds of Georgia is forested—25 million acres—and the state is ranked first in the nation for commercial timberland. More than a dozen plants in the state export wood pellets to supply renewable fuel to power plants in Europe – where electricity prices are high and the fuel is classified as “carbon neutral” by the European Union (even though many scientists reject biomass as a climate solution).
***
Mary Booth, director of the Partnership for Policy Integrity, is a skeptic. “This plant has a 1,037 million BTU boiler that is capable of burning 100-110 tons of wood an hour,” she explains. She believes much of that wood will be harvested when green, and “a boiler that size burning green wood chips can end up being as dirty as coal.”
***
Yet for Georgia, biomass is a lucrative industry—at least for exports. Georgia’s residues from timber harvesting (tops and branches) exceed five million dry tons annually, according to a 2008 report by the Georgia Forestry Commission. Georgia Biomass in Waycross is the world’s largest biomass pellet facility, and exports 750,000 tons of processed wood pellets a year. The Port of Brunswick has expanded in order to ship a million tons of pellets a year. But biomass generation for in-state use is an upward battle, largely because of the availability of cheaper locally available power from gas and solar.
***
Even at 13 cents a kilowatt, says Echols, the project had trouble securing financing. Now, with 1,600 megawatts of new renewables approved by the PSC last summer, much of it likely to be solar, Echols expects the solar price to be “in the 6 cent per kilowatt ballpark, and obviously you can’t build a biomass plant for that.”

In addition, federal tax incentives for biomass are about 1/3 of solar and wind, according to Ron Melchior, Executive Director of Distributed Energy at Constellation, which had the winning bid to develop the plant from Georgia Power. “Biomass is an established technology, and incentives tend to be reduced as a technology ages.”

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Canada and U.S. remain 'quite far apart' on softwood lumber, Freeland says

Canada and U.S. remain 'quite far apart' on softwood lumber, Freeland says | Timberland Investment | Scoop.it
Canada and the United States remain "quite far apart" on negotiating a softwood lumber settlement, Foreign Affairs Minister Chrystia Freeland said Monday, suggesting that any hopes for a swift resolution may be dashed.

Freeland offered the blunt assessment before meeting members of Quebec's forestry sector, who for nearly two months have been charged duties for shipping softwood south of the border.

"Our positions are still quite far apart," she said after addressing the International Economic Forum of the Americas in Montreal. "But I think that talking is always a good thing and that is something that we are doing very actively and energetically."

Her comments come after Raymond Chretien, Quebec's softwood lumber envoy, said earlier this month that he was optimistic the trade dispute could be resolved before NAFTA renegotiations get underway in mid-August. He also warned, however, that the softwood standoff could last for years if an agreement isn't reached prior to those NAFTA talks.
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Proposal to conserve 13,398 acres of timber company land under public review

Proposal to conserve 13,398 acres of timber company land under public review | Timberland Investment | Scoop.it

Nearly 22 square miles of important fish and wildlife habitat nine miles northwest of Whitefish could soon find its way into public hands.

 

Montana Fish, Wildlife and Parks and The Trust for Public Land is working to conserve 13,398 acres of property, currently owned by Weyerhaeuser, through a complicated land deal that involves funding from a variety of sources.
***
The lands are part of the properties purchased by Weyerhaeuser in 2016 from Plum Creek Timber.

The company indicated it planned to sell the property and gave the Trust for Public Lands the first option to buy the lands.
***
The proposal calls for The Trust for Public Lands to acquire the entire project area from Weyerhaeuser by the end of September.

 

FWP proposes to purchase a conservation easement on 16 sections, or 10,218 acres. Once the Lazy Creek Conservation Easement is in place, the Montana Department of Natural Resources and Conservation would purchase the underlying fee ownership from the Trust.

 

The funding would come from a variety of federal and state sources, including the U.S. Forest Service Forest Legacy Program, U.S. Fish and Wildlife Service Habitat Conservation Plan Land Acquisition Grant, hunter license dollars through FWP’s Habitat Montana Program and private funds from The Trust for Public Lands.
***
The Bonneville Power Administration will pay $11.5 million for the five other sections of land, or about 3,180 acres, in the Swift Creek drainage. BPA would retain a conservation easement on the land to conserve important native fish habitat.

 

The BPA’s portion of the proposed project will serve as partial mitigation for fishery losses from the construction of Hungry Horse Dam.

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How a Math Formula Could Decide the Fate of Endangered U.S. Species

How a Math Formula Could Decide the Fate of Endangered U.S. Species | Timberland Investment | Scoop.it

The Trump administration is considering a proposal that could effectively let some plants and animals become extinct so cash-strapped agencies can use more of their funds to save others.

 

At a closed-door meeting last month, Arizona State University ecologist Leah Gerber presented a plan to U.S. Fish and Wildlife Service officials that would use a mathematical formula to direct government money away from endangered and threatened species she calls "over-funded failures" and toward plants and animals that can more easily be saved.

 

Gavin Shire, a spokesman for the U.S. Fish and Wildlife Service, said in an email to Reuters that the agency is examining the controversial proposal.

 

"We have worked closely with this group of scientists as they developed this new conservation tool, and while we have not made any determinations yet, are impressed with its potential," Shire said. "We will be exploring further if and how we may best use it to improve the effectiveness of our recovery efforts."

 

Gerber's May 5 meeting with administration officials and their stated interest in her proposal have not been previously reported. The agency would not comment further.

Sam Radcliffe's insight:

In typical lazy (or ignorant) fashion, the media describes the proposed approach as "a math formula". Here is a description of Dr. Gerber's work from a research proposal:

 

In light of an increasing list of imperiled species requiring evaluation and protection, the FWS is exploring new ways to address this significant management challenge. In collaboration with agency scientists and managers, we propose to co-develop a general decision framework to facilitate recovery and spending decisions. Our proposed Venture will synthesize theory and models from multiple disciplines with FWS data to address two fundamental aspects of recovery: setting recovery priorities and allocating recovery funds. We will draw on successful models of formal decision making in recovery planning from Australia and New Zealand to optimize resource allocation and maximize the benefits of recovery action. We will actively engage agency scientists in developing the techniques, and will also establish a consumer group of agency staff with whom we will work for field testing. Close interaction with the FWS will ensure the Venture has immediate practical relevance in that the analytical techniques we develop will be embraced by field and regional offices nationwide. (http://www.sesync.org/project/ventures/esa-decision-making)

 

I expect more from Scientific American.

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Quebec makes its case on lumber

Quebec makes its case on lumber | Timberland Investment | Scoop.it
Quebec Premier Philippe Couillard knows a little about lumber. His electoral district (or “riding” to Canadian politicos) of Roberval is the heart of Quebec’s lumber industry. So during a whirlwind day Monday discussing with Commerce Secretary Wilbur Ross and other U.S. officials the litany of trade issues now dogging the brotherly bond between the U.S. and Canada, his message on softwood lumber was clear: One province is not like the other.

In Canada’s lumber-producing provinces it’s all about stumpage or how the province prices access to timber on public lands, where the vast majority of timber resources are located in most provinces. The U.S. lumber industry is currently challenging Canada a fifth time over a system it says subsidizes Canadian lumber through cheap access and allows companies to sell below market price.

Couillard was here to assert that Quebec made major reforms to its stumpage system in 2013 that ties government timber prices to prices generated in private auctions (the U.S. side could argue this doesn’t go far enough). He said Quebec’s system is “as close to free market as can be,” which is different from British Columbia, the only other province that outranks Quebec in lumber production. The former neurosurgeon acknowledged that the different business models in each province could “present some difficulties” in wrapping up a negotiated settlement on lumber trade, but he hopefully added that it shouldn’t stand in the way of a possible agreement.

“We just want to make sure that our way of managing the forest is well-known in the U.S., it’s better known and it’s taken into consideration as well,” he said in an interview with POLITICO.

In the latest softwood lumber trade fight, there may be some eventual recognition that Quebec is different. When the Commerce Department issued preliminary countervailing duties in April, Quebec-based Resolute FP Canada was on the low end of the duty scale, with a rate of 12.82 percent (three major British Columbia firms were hit with tariff rates between 19 percent and 24 percent). Commerce is now readying its preliminary anti-dumping duties, which are due out Monday. Canada’s maritime provinces (where most timber is on private lands) are already pressing to be exempted from final duties as they have in past trade cases. Couillard said some in Quebec are pushing for the same treatment.
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Global timber trade rose 10% in 2016. US, China and UK top 3 importing countries

Global timber trade rose 10% in 2016. US, China and UK top 3 importing countries | Timberland Investment | Scoop.it

According to Wood Resources International (WRI), 118 million m3 of timber was traded last year resulting in +10 percent compared to 2015.

Imports to the US account for about one-third of globally traded timber and have almost doubled in five years. China accounted for about 17% of import volumes in 2016, followed by the United Kingdom, Japan and Germany.
 
The biggest declines in imports globally from 2015 to 2016 were to the MENA region, where demand for timber fell in all the major markets, including Egypt, Algeria, Saudi Arabia and Morocco.

Moreover, early 2017 showed an upward trend for global softwood timber market with prices in North America hitting a 13-year high, while Chinese import prices increasing 13% in 18 months.

WRI report also presents an insight on macro-areas:

North America
Timber production in North America in 2016 was up six percent from the previous year, reaching its highest level since 2007. The biggest rises in production occurred in the US South and Eastern Canada, while the increases in western Canada and the western US were more modest.

Prices for timber in the US have jumped during the first four months of the year to hit a 13-year high in April. Many of the commonly traded grades surged in price by more than 20% from April of 2016.


Northern Europe
Sweden exported 12.9 million m3 of softwood timber in 2016, which was the highest volume exported since 2006. The increase from 2015 was a modest 1.5%, with shipments to Denmark, Japan, China and France rising the most.

Domestic timber prices in both Finland and Sweden continue to be close to their lowest levels in ten years in US dollar terms, as reported in the Wood Resource Quarterly.


China
Prices for imported softwood timber to China have been in a steady upward trend during 2016 and 2017 with the average import price in March 2017 being 13% higher than 18 months earlier.

The biggest change in pricing over the past two year has been that prices for Russian timber are no longer substantially cheaper than those for timber from other supplying regions, but instead are rather close to the average import price.


Japan
Total housing starts were up 3.2% in Japan in the 1Q/17 as compared to the same quarter in 2016, and the economic outlook for the coming year is slightly more optimistic than that for last year.

Prices for domestic and imported timber have remained practically unchanged for almost a year in Yen terms. With the Yen strengthening against the US dollar during the first four months of 2017, timber prices have increased so far this year in US dollar terms.


Russia
After a substantial decline in softwood timber export prices during 2014 and 2015, Russian timber prices have trended upward for most of 2016 and early 2017. Average export prices in March 2017 were 12% higher than in the same month last year, and prices for wood going to China have gone up even faster over the same time-period.

Export volumes to China in the 1Q/17 were unchanged from the previous quarter, holding steady at the second highest level on record.

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Double certified forests on the rise, joint PEFC / FSC data report

Double certified forests on the rise, joint PEFC / FSC data report | Timberland Investment | Scoop.it

The two largest forest certification schemes - PEFC and FSC - have agreed to jointly collect and publish data on double certification, starting from 2016 onwards.

More than 69 million hectares (or 16%) of all certified forests globally are double certified to both PEFC and FSC. This is an increase of 30 million hectares compared to data collected by PEFC in 2012.

Double certification exists because foresters in different parts of the world have chosen to use both PEFC and FSC certification for their forest management units to prove their sustainable forest management practices. As their respective certified forest area appears in both the PEFC and the FSC statistics, this has led to inflated numbers of the total global certified area. 

PEFC and FSC therefore decided to work together to provide a more accurate and mutually agreed estimate for the total global certified area.

"From a global point of view, resources invested in certifying already certified forest area are resources that are not invested in certifying new forest area as sustainably managed," said Ben Gunneberg, CEO of PEFC International.

"Our common goal should be to expand sustainable forest management and to increase the availability of certified forest products. Adding one label on top of another label doesn't help us in achieving this objective," added Mr. Gunneberg.

"One cause of double certification is market access, and here companies have a role to play: by accepting both PEFC and FSC, they remove the pressure on forest owners to double certify.”
***
The data collected for 2016 shows that double certification exists in 28 countries. Removing double certification from the statistics shows that a total of 429 million hectares of forests are certified globally. 70% of these forests have a PEFC certificate.

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Phaunos Timber: we’ve done the hard work, let us make a money tree!

Phaunos Timber: we’ve done the hard work, let us make a money tree! | Timberland Investment | Scoop.it
Phaunos Timber (PTF) has hit back at an activist investor pushing for a wind-up of the company, warning it could take years and impose ‘significant’ losses on investors.

Hong Kong-based hedge fund LIM Advisors, which owns 10.7% of the Guernsey-based investment company, has called on shareholders to vote against a resolution at next week’s annual general meeting to extend its life another five years.

Phaunos chairman Henry Studholme said the board had discussed a wind-up of the £237 million fund but said it was not clear how much shareholders would get back or how long the recovery would be.

‘It is not possible to state with any certainty the level of discount that would be suffered on the sale of the company’s assets, or the time scale to sell all of the underlying investments,’ he said.

Studholme referred to another timber fund, thought to be Cambium Global Timberland (TREE), which had taken several years to sell its assets and wind up, and incurred shareholder losses in the process.
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Factors that influence working forest conservation and parcelization

Factors that influence working forest conservation and parcelization | Timberland Investment | Scoop.it

Highlights

  • 7.8% of industrial forests sold to public and 19.6% put in conservation easements.
  • Over one-fifth of properties withdrawn from the state tax program was parcelized.
  • Public purchases were more similar to withdrawals than conservation easements.
  • Tax program term elapsed was a statistically significant deterrent for withdrawal.
  • Public policies and land characteristics shape ownership and conservation outcomes.


Abstract
Ownership of private forestland is changing rapidly, especially in areas owned by industrial forest product companies. Following divestment by industrial owners, forested lands are increasingly likely to move from intensive timber production to subdivision of the land, development and other private uses, or alternatively to conservation under public tenure. This research follows a unique dataset of forestland properties previously owned by industrial and corporate owners in Wisconsin from 1999 to 2014. A multinomial logistic regression showed that divested lands were more likely to be publicly purchased outright if they were adjacent to water, adjacent to public land, not adjacent to roads, and had higher housing value, while in contrast the predictors of conservation easement acquisition were location in large blocks outside of zoned townships. Properties were more likely to be parcelized if they were adjacent to a paved road, adjacent to water, smaller, in a zoned township, and had fewer years remaining in their tax program enrollment. In an era of rapid industrial land divestment, these findings indicate an important role played by public policies, including preferential tax programs and funds for land and conservation easement acquisition, in shaping whether private forestland is parcelized, conserved under private ownership, or publicly acquired.

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Domain Timber Advisors Purchases Timbervest’s Fund Management Business

Domain Timber Advisors Purchases Timbervest’s Fund Management Business | Timberland Investment | Scoop.it

Domain Timber Advisors, LLC (“Domain Timber”), a SEC Registered Investment Advisor and an affiliate of Domain Capital Advisors, LLC (“Domain Capital”) headquartered in Atlanta, announced the purchase of Timbervest, LLC’s fund management business (“Timbervest”). Domain Timber is focused on discretionary investment management of timberland and timberland-related investments for public and private pension plans, corporations, foundations, endowments, and high net worth individuals.

The purchase was completed on May 30, 2017 and included the acquisition of the Timbervest infrastructure and personnel responsible for managing a 530,000-acre timberland portfolio with a market value of approximately $1 billion across the major timber producing regions of the U.S. In addition, the portfolio is also comprised of environmental restoration projects including mitigation and conservation banks across the U.S., with a market value of approximately $200 million.

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Switzerland's ASGA awards $100m timber and agriculture mandate

Switzerland's ASGA awards $100m timber and agriculture mandate | Timberland Investment | Scoop.it

ASGA Pensionskasse, a CHF13.5bn (€12.4bn) Swiss pension fund, has awarded Stafford Capital Partners a mandate to invest $100m (€89.1m) in timberland and agriculture.

 

The mandate includes a commitment to Stafford’s latest timberland fund, co-investments in timber and a separate account for agriculture investments.

 

Stafford International Timberland Fund VIII, which invests in timber through the secondary market and co-investments, raised $262m in commitments in April.

 

Angus Whiteley, Stafford’s group CEO, said: “Our strategy of accessing the markets through secondary acquisitions, co-investments alongside the best managers and new fund investments is well established in the timberland markets.

 

“We are using this same approach in the agriculture markets, where we see great opportunities to access another category of non-correlated, income generating investments.”

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Support grows for thinning trees to combat forest fires as wildfires scorch West

Support grows for thinning trees to combat forest fires as wildfires scorch West | Timberland Investment | Scoop.it
With wildfires already raging through the West, House Republicans took a chainsaw Tuesday to federal regulations that have created a fire-friendly environment on public lands by slowing forest-thinning and dead-tree removal.

The House Natural Resources Committee passed the Resilient Federal Forests Act of 2017, moving to combat the rise in catastrophic wildfires by reversing what sponsors described as the Forest Service and Bureau of Land Management’s “anemic forest management efforts.”

“As we debated this bill, dozens of wildfires continue to burn in the Southwest,” said Rep. Bruce Westerman, Arkansas Republican and the bill’s sponsor.

The Brian Head fire in southern Utah, the largest of 21 major wildfires currently burning in the West, has razed 21 buildings, 13 of them homes, across 50,000 acres and forced the evacuation of 1,500 residents.

“Our forest health crisis can no longer be neglected,” said chairman Rob Bishop, Utah Republican. “Active management is needed to reduce the risk of catastrophic wildfire and improve the health and resiliency of our forests and grasslands. More money alone is not the solution.”
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7 Reasons Why Virtual Reality Technology Will Totally Disrupt the Real Estate Industry [Infographic]

7 Reasons Why Virtual Reality Technology Will Totally Disrupt the Real Estate Industry [Infographic] | Timberland Investment | Scoop.it
Sam Radcliffe's insight:

This relates to residential real estate, but why not timberland offerings?

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Spruce budworm outbreak can put forests at fire risk

Spruce budworm outbreak can put forests at fire risk | Timberland Investment | Scoop.it
Turns out, it is not "a moth to a flame," but "a flame to a moth" as a new study has revealed that a spruce budworm outbreak could increase forest fire risk.

"If you walk in the woods in an area that's being severely defoliated, it sounds like rain. It's all of their frass, the bug poo, falling through the canopy of the trees," said researcher Patrick James from Universite de Montreal.

More than that, it's devastating the economy.

"There's a huge consequence for the forest industry," James said. "The budworm changes the composition of the forest, it denudes the trees and leaves behind huge areas of standing dead and dry timber. Most of those trees don't get harvested, they don't go to the sawmill, profits aren't made."

Budworm outbreaks will cost the industry in New Brunswick alone an estimated $3 billion to $4 billion over the next 30 years, according to a 2012 study by University of New Brunswick researchers. Timber revenue will be lost, so will jobs, and the consequences will amplify as budworm, grown into dime-size moths, head south.

And in their wake comes something else: fire.

In his study, James shows that defoliation increases the risk of natural fires igniting eight to 10 years after a budworm outbreak - especially now, in the spring, before summer fire season starts. Interestingly, this risk actually decreases in the years immediately after an outbreak, since the "greenup" of ground vegetation keeps the soil moist and less likely to ignite.

For his study, James looked at defoliation data stretching back to 1963 in two vast ecosystems in eastern and central Ontario. These results suggest that fire management agencies, which normally rely on weather indicators, could also include defoliation data to better predict areas of high fire risk. Knowing when and where the fire risk is increased due to the budworm can lead to pro-active techniques like "salvage logging," harvesting dead trees from areas already defoliated.

"If you can reduce the amount of budworm-killed forests in an area, you would then reduce the risk of fire ignition, which would then reduce the probability of having large forest fires," James said.
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Keeping the Forests as Forests

Keeping the Forests as Forests | Timberland Investment | Scoop.it

Across the Northeast U.S. and much of the country, markets for low-grade wood resources have fallen off dramatically. In this context, “low grade” is used to describe wood feedstocks that have few, if any, higher-value markets. Here in the Northeast, this generally means roundwood chips used for pulp, energy or pellet feedstock, or sawmill residues used for pulp or pellet feedstock and firewood.

 

The forestry trade press has reported widely on the decline in pulp and biomass energy markets, estimated to have dropped some 4 million tons in just the past few years across northern New England and New York. Some of this decline is cyclical and will return. But most of it reflects a fundamental change in how we use wood, and will not return.

 

The practice of sustainable forestry is absolutely dependent on these markets. Strong demand and high prices will probably always be there for high-quality veneer and sawlogs to make premium lumber, but if these are the only products that have markets, what stays behind in the woods after harvest? That’s right—the poorer-quality, misshapen or unhealthy trees that otherwise have no markets. They become the future forest.
***
Years ago, this was a tough concept to get across to lawmakers during debates about renewable biomass energy policy. But that’s changing. In Maine, New Hampshire, Vermont, New York and elsewhere, opinion leaders are beginning to understand that without robust markets for low-grade wood, forestry is threatened as a viable land use.
***
Lawmakers are beginning to realize the public interest in biomass energy policy is about much more than renewable electricity and heat displacing demand for high carbon, nonrenewable fossil fuels. The value of productive healthy forests is incalculable to society. Policies that support these markets sometimes come with a cost to taxpayers or ratepayers, such as state renewable portfolio standards or federal tax credits. But the economic, social and environmental benefits far outweigh the costs.

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Forest growth increases in Finland – timber stock is larger than ever

Forest growth increases in Finland – timber stock is larger than ever | Timberland Investment | Scoop.it
Preliminary results of the Finnish 12th National Forest Inventory from 2014–16 have been finalised. According to them, the timber stock in Finnish forests is larger than ever, 2.5 thousand million cubic metres.

Annual increment is also rising. The previous result from 2013 was 105 million cubic metres annually, now the corresponding figure is 110 million. The volume of all tree species, such as pine, spruce and broadleaves have increased.

Total timber removal from the forests was 82 million cubic metres in 2015. Of that, 59 million cubic metres consisted of industrial harvests, nine million of trunks to bioenergy production and 14 million of harvesting residues left in the forest and from natural loss.

According to fresh statistics, amount of industrial harvesting increased to 62 million cubic metres in 2016. This means that a quarter of annual increment is left in the forest to increase timber stock and carbon storage of forests.

In northern Finland, the amount of stout timber increases quickly as well. The share of mature and regeneration-ready forests has increased from 29 percent to 38 in just ten years.
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Commerce Hits Hardwood Plywood from China with Preliminary Duties

Commerce Hits Hardwood Plywood from China with Preliminary Duties | Timberland Investment | Scoop.it

Hardwood plywood from China will get hit with preliminary dumping duties of up to 114.72 percent, the Commerce Department announced June 19.

 

As a result, U.S. Customs and Border Protection will collect cash deposits in the amount of the preliminary margins. Imports of hardwood plywood from China were valued at an estimated $1.12 billion in 2016, Commerce said.
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In the preliminary ruling, Commerce assigned Shandong Dongfang Bayley Wood Co. Ltd. a dumping margin of 114.72 percent. Commerce preliminarily found that Linyi Chengen Import and Export Co. Ltd did not dump hardwood plywood.

 

Commerce established a preliminary dumping margin of 57.36 percent for non-investigated companies that qualified for a separate rate and a preliminary dumping margin of 114.72 percent for all other producers/exporters in China.

 

The Coalition for Fair Trade in Hardwood Plywood and its individual members--Columbia Forest Products, Commonwealth Plywood Inc., Murphy Plywood, Roseburg Forest Products Co., States Industries, Inc. and Timber Products Co.--asked for the probe.

 

Commerce will now move to its final determination expected around Aug. 30. Duties will only be finalized if the International Trade Commission, which is conducting its own investigation, finds a causal link between dumping and material injury to the U.S. industry. The ITC determination is expected around Oct. 13.

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US Withdrawal from Paris Climate Accord: What’s Really at Stake?

US Withdrawal from Paris Climate Accord: What’s Really at Stake? | Timberland Investment | Scoop.it

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However, there are far less emotional—and far more realistic and shrewd—reasons to remain level-headed should the US formally withdraw from the Paris Climate Accord. A number of economists and analysts believe that President Trump’s decision essentially changes nothing because COP21 commitments are non-binding. ***

Key reasons why President Trump’s decision will have no measurable impact include:

  • The official global target of a 2°C temperature rise is “utterly inadequate,” according to a lead author on the Intergovernmental Panel on Climate Change (IPCC). Petra Tschakert from Pennsylvania State University and a coordinating lead author of the IPCC's Fifth Assessment Report noted that, "The consensus that transpired during this session was that a 2°C danger level seemed utterly inadequate given the already observed impacts on ecosystems, food, livelihoods, and sustainable development.” 

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  • Fundamental economics and rapidly emerging technologies, rather than regulation, are driving the US shift away from fossil fuels and toward renewable energy sources. Besides the improving economics of renewable energy sources, coal is coming under pressure from competitive natural gas prices. 

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  • "The increasingly favorable economics of renewables are more important than the presidential election’s impact on the industry, in our view,” says Stephen Byrd, a senior analyst with Morgan Stanley. “Wind and solar are price-competitive in many parts of the US. It’s the economics and not the politics that’s driving the use of renewables.”

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  • The process of a US withdrawal from COP21 is complex; it’s not as if the US can immediately scrap its current responsibilities as a member nation of the pact—even if they are non-binding in this case. A country that is part of the Accord can withdraw only four years after giving notice of its intent to do so.  

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Josiah Neely astutely notes that, “[The] United States has over the past decade reduced its greenhouse-gas emissions by more than almost any other country. It did this despite the fact that it had not joined the Kyoto Protocol, a previous international agreement meant to fight climate change. Instead of imposing costly measures to reduce emissions, the United States succeeded because of new technologies that were both cheaper and cleaner than existing sources.”

 

While such nebulous international agreements as COP21 and the Kyoto Protocol do have the potential to galvanize support, the free market—not government—will ultimately develop and implement scalable renewable solutions that will benefit both the environment and humanity in the coming decades.

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1031 Exchange, a Cherished Real Estate Tax Break, Faces Extinction

1031 Exchange, a Cherished Real Estate Tax Break, Faces Extinction | Timberland Investment | Scoop.it

A much-loved tax advantage in the commercial real-estate industry is on the chopping block even as chances dim for the passage of a broad federal tax overhaul this year.

Why? If a sweeping bill doesn’t get traction in Congress, there is still a decent chance a narrower tax rate cut will get passed, according to lobbyists and Capitol Hill officials working on tax legislation.

 

To finance such a rate cut, some in Congress have in their sights what’s known as the 1031 exchange provision, which enables sellers of real estate and other assets to defer capital-gains taxes by reinvesting the proceeds in “like-kind” properties.
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The 1031 exchange could effectively have ended as part of the tax-overhaul plan proposed last year by House Republicans, which gained traction after Donald Trump was elected President. But that plan—named “Better Way”—would have included other provisions that would have made it more palatable for the real-estate industry.

 

Now real estate lobbyists say the Better Way plan is getting bogged down and it is looking like the real-estate industry might have to take the medicine without the spoon of sugar to help it go down even though they would benefit from the lower rates.
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But real estate executives say getting rid of 1031 exchanges would be devastating for the economy as well as their industry. Like-kind exchanges are used in 10% to 20% of commercial real-estate transactions, according to Green Street.
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The 1031 provision of federal tax law applies to a wide range of assets—including cars, planes and patent rights. Real estate accounts for 36% of the exchanges, according to Ernst & Young LLP. In 2014, the Joint Committee on Taxation estimated that repealing like-kind exchanges would raise $40.6 billion in additional tax revenue over one decade.
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Most observers believe the Better Way plan could have ended the 1031 benefit, even though it didn’t specifically address it. Still, if that had happened, Better Way would have lessened the impact partly by allowing buyers of real estate to treat the entire cost—excluding land—as a business expense that could be used to reduce income instead of depreciating those costs over time. This would be good for real estate owners but not enough to offset the pain of losing 1031 exchanges, industry executives say.

Sam Radcliffe's insight:

1031 Exchanges are a frequently used and important tool in the timberland market.

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Arkansas saw timber surplus may keep prices "static"

Arkansas saw timber surplus may keep prices "static" | Timberland Investment | Scoop.it

Hardwood pulp prices should remain strong, pulp pinewood may be brighter in the coming decades, but pine saw timber will likely remain static for the foreseeable future, according to predictions for Arkansas’ $6.3 billion forest industry.

Matt Pelkki, economist and associate director of the Arkansas Forest Resources Center for the University of Arkansas System Division of Agriculture, and George H. Clippert Endowed Chair of Forestry at the University of Arkansas at Monticello, was among the presenters during a day of education and training for registered foresters.
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“Hardwood pulp prices are higher because we have four large paper mills -- Domtar, Evergreen, Georgia Pacific-Crossett and Clearwater -- that all use large amounts of hardwood in their paper making processes,” Pelkki said. “Only Green Bay in Morrilton does not use hardwoods for making its products.

“Recently, Domtar converted a third of its production from a hardwood-dominant use for uncoated free sheet – copier paper to pine fluff pulp for the export market,” he said. “This took full effect this spring. Hardwood pulp prices in southwest Arkansas have really fallen, it just hasn’t shown up on the price reports yet.”

Pelkki expected to see improvement for pine pulpwood in the coming decades. “Pine pulpwood again just has a supply that vastly exceeds demand,” he said. “Even when Sun Paper and Highland Pellets get into full swing, the supply will overwhelm demand for about five years.”
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“Because in the last five or six years, landowners have delayed cutting saw timber and replanting pine, I suspect that in about 12-15 years we should see pine pulpwood in Arkansas reaching the Southeastern United States average price of $11-13 per ton,” he said.

As for pine saw timber, its “supply is overwhelming in Arkansas, and when Sun Paper and Highland Pellets really start thinning pine pulpwood stands, the pine forests of south Arkansas will grow much more rapidly and quickly produce a lot of saw timber,” Pelkki said. However, “for this reason, chip-n-saw, or small saw timber, which produces more chips for paper than wood for lumber, should respond to the growing demand for pine pulp in the next five years.”

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Tallest Mass-Timber Building in U.S. Receives Approval for Construction

Tallest Mass-Timber Building in U.S. Receives Approval for Construction | Timberland Investment | Scoop.it
Today, the Framework Project has received approval for a building permit, allowing construction to begin on the tallest wood high-rise structure in the United States. Portland-based LEVER Architecture designed the 145-foot-tall tower, which Portland mayor Ted Wheeler called “a true technological and entrepreneurial achievement.”

The mixed-use building will contain office space, street level retail, and sixty units of affordable housing. A collaboration between developer project^, Home Forward, Albina Community Bank, and Beneficial State Bank, Framework aims to promote economic opportunity through sustainable building practices. Governor Kate Brown praised the project for demonstrating how timber construction can create jobs in rural economies. “Oregon’s forests are a tried and true resource that may again be the key to economic stability for rural Oregon,” she said in a statement.

The 12-story tower was one of two projects that split the $3 million U.S. Tall Wood Building Prize, sponsored by the U.S. Department of Agriculture, the Softwood Lumber Board, and the Binational Softwood Lumber Council. The building permit was approved following a series of stringent fire, acoustic, and structural tests that validated the resilient structural design meets fire life-safety standards.

Constructed with cross-laminated and glu-laminated timber, Framework also contains  so-called “rocking wall”—an innovative core system of vertical CLT panels and post-tensioned cables that allows the building to withstand an earthquake with minimal damage.
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The Harvard Yard Sale: Private Equity, Real Estate and New Zealand Dairy Farms

The Harvard Yard Sale: Private Equity, Real Estate and New Zealand Dairy Farms | Timberland Investment | Scoop.it

Harvard University spent years assembling 8,500 acres of dairy farms and roughly 5,500 cows on the South Island of New Zealand. Now it’s selling.

 

Private-equity giant KKR is nearing a deal to buy those holdings from Harvard for more than $70 million pending regulatory approval, said people familiar with the matter. The sale would mark an end to one of the most distinctive bets by the world’s richest endowment.

 

Harvard is an anomaly among endowments, holding a $4 billion natural resources portfolio that directly owns assets across five continents. The $36 billion endowment owns California vineyards, Chilean timberland and Brazilian soybean and maize farms. Its natural resources bets helped the endowment profit for more than a decade.

 

But it is reworking that portfolio under a new head of natural resources after Harvard wrote down its value by more than 10% last year, its biggest loss since its 1997 inception.
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Quickly scaling up or down Harvard’s illiquid natural resources holdings is more difficult. Harvard isn’t planning to sell its entire natural resources portfolio and could even buy new assets, a person close to the endowment said, but will exit investments opportunistically.

 

Harvard was once the envy of the endowment world, in part for its lucrative bets on farms and forests. Most other endowments invest in farmland and timber by parking money in funds. But Harvard in the 1990s began amassing direct investments in natural resources, eventually scouring the globe to buy assets directly and find local operators to care for its cows, trim trees and find buyers for the resulting commodities.

 

Over the decade ending 2014, the natural-resources portfolio gained an average annualized 11.6%, above the comparable return of the whole endowment. Harvard hasn’t published a more recent 10-year figure.
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Harvard first ventured into natural resources in 1997, buying a hardwood forest in the Appalachian region. Harvard snagged discounts on forestland by buying in size, believing that riding out timber-price slumps would help yield profits.

 

Harvard started moving away from U.S. timber in 2003, a person familiar with the matter said, a call that proved prescient when the U.S. housing market collapsed. Led by New Zealand native Andrew Wiltshire, the natural resources group diversified by going abroad and into farmland. Many deals bet on increasing consumption in the developing world, particularly China.

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Canadian Lumber Tariffs Impacting Southern Yellow Pine Prices

Canadian Lumber Tariffs Impacting Southern Yellow Pine Prices | Timberland Investment | Scoop.it
With the recently-announced tariffs on Canadian softwood lumber imports into the US, a lot of unanswered questions are floating around the market: How will the tariffs affect supply in the US? Will manufacturers ramp up production to meet seasonal demand? Will sustained high prices dampen US housing starts during peak building months? Will added costs discourage potential first-time home buyers?


Forest2Market’s lumber data has showed steady price decreases since the new tariffs were announced at the end of April. Prices increased steadily through January and February before peaking at a 12-year high in April—perhaps in preparation for an impending tariff—which could account for the leveling of prices we’re seeing now. 

Forest2Market’s data also shows a significant volume increase in #1 and #2 dimension products when comparing January to April. Even if lumber demand and prices were to spike in the coming weeks, the latent capacity at mills and the amount of domestic supply would keep the market from sustaining any kind of long-term price increase.

In March, housing starts declined an unexpected 6.8 percent, with multi-family units declining the most. While April’s decrease was not as severe (-2.6), it was not a standout month to kick off building season. The initial decline in lumber prices could be reflective of the lackluster housing starts numbers, which essentially caused mills to push more inventory to market in anticipation that prices would continue declining after the tariff implementation. 

Reaction to the new lumber tariffs from in the forest products industry and beyond has been mixed, as expected. US homebuilders are not the only ones potentially affected by the tariff; it is speculated that single-family home prices will increase at a rate much higher than they have in the recent past. This compounds the challenges for new home buyers—particularly millennials—who are finding household formation increasingly difficult.

There is no question that current lumber prices are still high compared to previous years, but the downward trend—or at least some kind of equilibrium—will likely be the norm over the next few weeks. Until the market adjusts to both the new tariffs and the reaction from the homebuilding industry, producers will continue to operate in an uncertain environment.

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WEYERHAEUSER TO SELL URUGUAY TIMBERLANDS AND MANUFACTURING BUSINESS TO A CONSORTIUM LED BY BTG PACTUAL'S TIMBERLAND INVESTMENT GROUP FOR $402.5 MILLION IN CASH

WEYERHAEUSER TO SELL URUGUAY TIMBERLANDS AND MANUFACTURING BUSINESS TO A CONSORTIUM LED BY BTG PACTUAL'S TIMBERLAND INVESTMENT GROUP FOR $402.5 MILLION IN CASH | Timberland Investment | Scoop.it

Weyerhaeuser Company (NYSE: WY) today announced an agreement to sell its timberlands and manufacturing business in Uruguay to a consortium led by BTG Pactual's Timberland Investment Group (TIG), including other long-term institutional investors, for $402.5 million in cash. The company anticipates it will incur minimal taxes in conjunction with the transaction.

The transaction includes over 300,000 acres (120,000 hectares) of timberlands in northeastern and north central Uruguay, as well as a plywood and veneer manufacturing facility, a cogeneration facility, and a seedling nursery.
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The transaction is subject to customary purchase price adjustments and closing conditions, including regulatory review, and is expected to close in the fourth quarter of 2017. Weyerhaeuser Uruguay and the buyer consortium will continue to operate separately until the transaction closes.

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