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Potlatch Completes Timberland Acquisition and Board Increases Dividend 7%

Potlatch Completes Timberland Acquisition and Board Increases Dividend 7% | Timberland Investment | Scoop.it
Potlatch Corporation (Nasdaq:PCH) announced today that it has closed the previously announced purchase of approximately 201,000 acres of timberlands in Alabama and Mississippi from affiliates of Resource Management Service, LLC for $384 million. The transaction was first announced on October 20, 2014.

Potlatch also announced that its Board of Directors has declared a dividend of $0.375 per share payable December 31, 2014 to stockholders of record on December 16, 2014. This is a 7 percent increase relative to the prior quarterly dividend of $0.35 per share.

The timberland acquisition was financed using cash and $310 million of new long-term debt. Moody's confirmed our Baa3 investment grade debt rating with a stable outlook earlier this week.
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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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Some useful links

 

Stock quotes, news and financial metrics

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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Forest Mortality Exceeds Growth in America’s National Forests

Forest Mortality Exceeds Growth in America’s National Forests | Timberland Investment | Scoop.it
With wildfire season just a few weeks away in the Pacific Northwest (PNW), the amount of standing dead timber in western national forests is a real concern for both residents and the federal and state agencies that are tasked with fire suppression efforts and mitigating fire damage.

Per a 2017 Resources Planning Act (RPA) Assessment update to the Forest Resources of the United States technical document, the situation in public, government-managed forests in the western US is dire. Based on new data published in this RPA, the U.S. Forest Service (USFS) says that forest mortality exceeded net growth on America’s national forest timberlands in 2016. The data come from the agency’s annual Forest Inventory Analysis (FIA) Program and include trees at least 5” in diameter.

Forest growth was 48 percent of mortality, while timber harvests were a mere 11 percent of what is dying annually—and this trend is on the rise. The agency estimates that 6.3 billion dead trees were standing in 11 Western states in 2015, up from 5.8 billion in 2010. Roughly 20 percent of those trees were killed by bark beetles, although other causes of mortality include drought and disease.
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Rayonier Buys 18,000 Acres Of Timberland In St. Johns, Flagler Counties

Rayonier Buys 18,000 Acres Of Timberland In St. Johns, Flagler Counties | Timberland Investment | Scoop.it
Yulee-based Rayonier Inc. bought about 18,000 acres of timberland last week in St. Johns and Flagler counties for almost $24 million.

It bought the land from Wilson Green LLC, part of Greenfield Partners, a Connecticut real estate investment company, according to our Jacksonville Daily Record news partner.

Rayonier hasn’t said what it will do with the land.

“As a public company, we don’t comment on acquisitions or divestitures outside of our ordinary public disclosures or other public release,” said Alejandro Barbero, director of strategic development and communications.

Barbero said in February, after a sale of timberland, that “We are a timber REIT and we continuously evaluate our portfolio.”

Rayonier, through Rayonier Atlantic Timber Co., paid $16 million for almost 12,416 acres of timberland in southern St. Johns County and almost $8 million for about 5,392 acres in Flagler County.

The purchase works out to about $1,347 an acre.

The St. Johns County property is near Interstate 95 and Florida 206 West in Hastings and St. Augustine. The Flagler County land is just south of that.
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Real assets growing as investors look to diversify, hedge against inflation

Real assets growing as investors look to diversify, hedge against inflation | Timberland Investment | Scoop.it

Infrastructure and energy are attracting much of the capital flowing to real assets now, but the broader asset class has been growing as investors seek diversification.
***
There was a strong focus on timber and agriculture six or so years ago when investors were more focused on inflation than they are today, said Alan A. Pardee, New York-based co-founder and managing partner of placement agent Mercury Capital Advisors Group LP. According to data from the U.S. Department of Labor Statistics, inflation reached 3.2% in 2011 and then began to fall. Last year, inflation began ticking up and was 2.5% for the 12 months ended April 30.

Timber and agriculture are niche areas, with a shortlist of managers in each category, Mr. Pardee said. "I wouldn't say it's a booming area for capital raising," he said.

Northern Trust Corp. invests more in natural resources — which includes energy, metals, water and timber — than in infrastructure or real estate, said Jim McDonald, Chicago-based chief investment strategist.

Natural resources have a better correlation to protect against inflation than real estate or infrastructure, Mr. McDonald said.

In the first five months of 2018, two timberland funds closed with a combined $600 million, compared to seven funds with $1.7 billion in all of 2017 and $1.3 billion by five funds in 2016, according to London-based alternative investment research firm Preqin Ltd. The high point for timberland fundraising was in 2008, when eight funds raised $3.1 billion.

Agriculture funds have raised a bit more capital this year than timber, with a combined $1 billion by four funds, compared with $1.5 billion by 12 funds in all of last year and $3.5 billion by 15 funds in 2016, Preqin data show. The peak of fundraising for agriculture funds over the past decade was in 2015 when 15 funds raised $5.6 billion.

"Timber as an asset class has always been cyclical and it's something that investors are always aware of when investing in timberland," said Bob Ratliffe, president and portfolio manager at Silver Creek Capital Management LLC, Seattle.

For instance, much of the timber for U.S. consumption is grown in the South, Mr. Ratliffe said. "There were predictions of recovery in the South that didn't come to pass," he said.
***
Still, commingled funds are not investors' only route to investing in timber and agriculture.

For example, CalPERS has a $2 billion timber portfolio, all in two separate accounts, according to the $352.8 billion California Public Employees' Retirement System's latest annual real asset report provided to the investment committee in November.

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Chattanooga Fire & Police names finalists in agriculture, timber manager searches

Chattanooga Fire & Police names finalists in agriculture, timber manager searches | Timberland Investment | Scoop.it
Chattanooga (Tenn.) Fire & Police Pension Fund selected finalists in its searches for agriculture and timber managers each to run $5 million portfolios, said recently released board meeting minutes.

The $225 million pension fund's board at its May 3 meeting named Ceres Partners and UBS Farmland Investors as finalists in the agriculture manager search, and Molpus Woodlands Group and Resource Management Service as finalists in the timber manager search.

The pension fund issued separate RFPs in February following the creation of targets of 5% each to timber and farmland at its July 20 meeting, and made its first commitment in October of $12 million to a timber and farmland fund managed by Hancock Natural Resource Group, both according to previous board meeting minutes. The funding sources could not be immediately learned.
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Nonprofit purchases 32K-plus acres of forest in Western Pa.

Nonprofit purchases 32K-plus acres of forest in Western Pa. | Timberland Investment | Scoop.it

A vast swath of Penn’s Woods in Elk and McKean Counties will be conserved, thanks to a Virginia-based nonprofit.

 

The Conservation Fund, in a news release, said the Clarion Junction Forest consists of 32,598 acres of “sustainable timberland” around the city of Johnsonburg, Elk County, in the “Pennsylvania Wilds,” just under 300 miles northwest of Philadelphia. It may be the largest conservation acquisition by a nonprofit in Pennsylvania history, a spokeswoman said.

In a deal finalized Wednesday, the Conservation Fund said its purchase will bridge Pennsylvania Game Commission lands and the Allegheny National Forest, while also securing the confluence of the East and West Branches of the Clarion River.

 

“We are in an entirely new era of private forest ownership in America,” Brian Dangler, vice president and director of the Conservation Fund’s Working Forest Fund, said in the news release. “The transfer of large, industrial-size forests is happening so quickly, we only have a very short window to protect these forested landscapes to ensure their ecological benefits and that they can remain the backbone of rural economies and traditional uses nationwide.”

 

A spokeswoman for the Conservation Fund said she couldn’t disclose the cost of the purchase, due to a confidentiality agreement. A 9,894-acre property is for sale in Elk County for $31.5 million.

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A New Paradigm for Maine's Woodlands?

A New Paradigm for Maine's Woodlands? | Timberland Investment | Scoop.it

Robert Perschel has worked in forestry for a long time. As an industrial forester, a forestry consultant, with The Wilderness Society and a chair of the Northern Forest Alliance. He’s a co-founder of the Forest Stewards Guild. Perschel has seen a lot of different types of forestry. And he’s often grappled with the question of what, exactly, really good forestry is. Exemplary forestry, one might say.

 

Now, as executive director of the New England Forestry Foundation, he’s helping define it. This spring NEFF published its definition on its website, essentially making it official, though Perschel said that too is likely to change over time as more research is done and more information gleaned.
***
In a nutshell, exemplary forestry would look at the forest through a holistic lens, valuing it for things like wildlife habitat, clean air and water and its ability to help mitigate climate change by absorbing carbon. When it comes to timber, exemplary forestry would demand a healthier, better-stocked forest producing higher value products. And it would do those things using objective and verifiable standards.
***
“Those two goals” – creating a healthier forest environment and boosting timber production substantially – “aren’t in conflict if one is given the time to achieve them on the ground, said R. Alec Giffen, a NEFF senior advisor and, with Perschel, the co-author of a report out this past April defining exemplary forestry, catchily titled “Exemplary Forestry for the 21st Century – Managing the Acadian Forest for Bird’s Feet and Board Feet at a Landscape Scale.”

Giffen notes that the basic disconnect is that good forest management is a decades long proposition, while our early 21st century economic system is focused on much shorter spans of time. Many new forestland investors these days plan to hold their properties only 10 to 15 years, and want to make a respectable rate of return on it during that time.
***
NEFF is working with the Maine Mountain Collaborative, a consortium of conservation and forestry organizations, to bring together philanthropists and investors as part of a new economic calculus intended to promote long-term investing with clear timber production and forest health goals.

 

Under it, explain Perschel and Giffen, investors would be partly reimbursed for the costs of forestland by the sale of “exemplary forestry” easements on the property to a land trust funded by donations from philanthropists. Those easements would go far beyond easements in use now, which are primarily intended to restrict development. Instead they would specify target stocking and timber production goals and measurable objectives for things like wildlife habitat, public access and even aesthetics.
***
To demonstrate the feasibility of this new financing “partnership” the Maine Mountain Collaborative is now pursuing the creation of an Exemplary Forestry Fund to finance a pilot project of at least 100,000 acres -“landscape scale” in other words.

They are focusing on the area known as “the Mountains of the Dawn” – the swath of the Appalachians that runs from the New Hampshire border to the area around Baxter State Park.
***
Henry Whittemore, the new executive director of the Maine TREE Foundation, also worked as a consultant on the project, running spreadsheet models to see how the numbers might shake out.

So, is it a sellable idea? “I think it’s going to be a challenge,” Whittemore said. But he added that for the right investor, one with truly ‘patient’ capital, and with a leaning toward philanthropy, who wants to do good even if the results take a while to become apparent, it could be a good fit.

 

What Whittemore’s analysis comes down to is that forestland investing that concentrates on turning timber quickly into cash generates greater returns, at least over the short term, but leaves the initial asset – the forest itself – worth less. Exemplary forestry will produce a respectable return over the longer term and in the end the forestland itself is more valuable because it’s in better shape.

 

That’s not to disparage other types of forestry, Whittemore, Bley and others emphasize. Corporations and investors have constraints that sometimes don’t give them a lot of leeway in management.
***
Whittemore said exemplary forestry “presents an alternative to managing the woods that Aldo Leopold would have embraced. It’s ‘intelligent tinkering’ where you keep all the parts. It can be thought of as creating a kind of bridge between the preservation outlook of John Muir and the utilitarian view of Gifford Pinchot.”

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AgTech Blockchain Startup Bext360 Raises $3.35 Million To Provide Traceability To Commodities

AgTech Blockchain Startup Bext360 Raises $3.35 Million To Provide Traceability To Commodities | Timberland Investment | Scoop.it

Blockchain SaaS startup Bext360, which provides traceability for coffee products with a Coinstar-like device for farmers, announced Friday that it has completed its $3.35 million seed round. Investors in the startup include SKS Ventures and Plug and Play Ventures.

Bext360's software keeps track of commodities by identifying and making an electronic token for each one. This unique ID provided to each coffee bean produced enables the company to trace it through the entire supply chain, from the farmer all the way to the cup you drink at a coffee shop. By tokenizing the coffee beans, the company is also able to provide payment to farmers upfront, so they aren't left waiting for weeks or sometimes even months to be paid for their products.
***
Now that the company has proven its technology with coffee, it's using part of this seed money to expand into other verticals. According to its CEO Dan Jones, the company will be partnering with Fashion For Good to do a pilot program with cotton later this year, as well as a pilot for palm oil. Future expansion will include nuts, seafood and potentially even minerals and timber.

"We had to pick verticals in line with current mission and verticals that had huge impact on environment," Jones said.
***
Moving into these new verticals will provide new challenges for Bext360. Cotton, for example, can't be as easily sorted as coffee beans, so the company is working on alternate ways to trace it. According to Jones, the company is working with biomarker companies as well as developing its own markers in-house. These technologies include possible ways to track cotton such as synthetic DNA strands or fluorescent tags.

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$300 million biofuel plant planned in Michigan UP

$300 million biofuel plant planned in Michigan UP | Timberland Investment | Scoop.it
ONTONAGON — After months of waiting, Synsel Energy announced this week that financing terms for construction of a biofuel plant at the site of the former Smurfit-Stone paper mill have been finalized.

The $300 million refinery will create second-generation biofuels from pulp and waste wood abundant in the area, Synsel said in a release.

“Everything’s been worked out, the i’s are dotted and the t’s are crossed,” said Pat Tucker of Lost Bowl Development LLC, which owns the site. He was unable to comment on the identity of the investors due to a non-disclosure agreement.

Securing the funds was a long and slow process but now it is on to the next stage, he said.

“The next step of actually putting the plant up is another long, involved process, but it’s done with one challenge and on to the next one,” Tucker said.

Lost Bowl Development is contracted to act as co-developer on the property and will continue to be part of the process.

Snysel will be involving as many local resources and companies as possible on the project, Tucker said, although some work will be done off-site and require specialized workers.

“We don’t have many locals that have built bio-refineries,” he added.

Synsel estimates the work will bring hundreds of workers to the area during construction, stimulating the local economy. In the long term, 100 to 150 permanent jobs will be created.
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Southern Timber Supplies: Investment Implications

Southern Timber Supplies: Investment Implications | Timberland Investment | Scoop.it

Growth-to-drain analysis compares annual growth of timber to annual harvesting to provide a measure of market demand relative to supply. A growth-to-drain ratio of 1.0 indicates a balanced market that harvests timber at the rate of growth. Growth that exceeds demand by a large margin indicates oversupply. Conversely, annual removals that exceed growth indicate competitive markets for raw materials. The growth-to-drain metric is one useful tool to score markets for investment in timberland (more favorable scores for tighter, competitive markets for raw materials) and in mill infrastructure (more favorable scores for well-supplied markets for access to raw materials).

Forisk conducted an analysis of growth-to-drain in the U.S. South by “smoothing” the timber growth and removals data to better account for local timber markets. The “smoothing” exercise spatially allocated county-level growth and removals to all adjoining counties. This mimics local supply basins for mills.

Removals provide an indication of where pine markets are located; markets are located around mills. Pine removals are heaviest in southeast Georgia, southern Alabama and Mississippi, and in northern Louisiana (Figure 1). Mill activity also concentrates along the North Carolina and Virginia border. Removals drop off rapidly in Appalachia, the Mississippi River delta, the Ozarks, and southern Florida.

Overall, pine markets across the South are balanced or well-supplied with pine timber. The growth-to-drain analysis indicates market areas of East Texas, Texarkana, southern Georgia and northern Florida are tighter markets with strong demand relative to supply. Eastern Arkansas, northern Mississippi, and northern Alabama are heavily oversupplied on a relative basis.

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Stafford Capital timberland fund VIII exceeds fundraising target at close

Stafford Capital timberland fund VIII exceeds fundraising target at close | Timberland Investment | Scoop.it

Stafford Capital Partners’ latest timberland fund has exceeded its fundraising target by 22% at the final close.

 

Stafford International Timberland VIII Fund (SIT VIII) raised $612.5m (€698.8m) from investors in the UK, Europe and the US. The final close exceeded the target fund size of $500m.

 

IPE Real Assets reported last year that Swiss pension fund ASGA Pensionskasse awarded Stafford a mandate to invest $100m 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.

 

SIT VIII has already made three secondary investments and one co-investment, all with leading timberland managers, committing close to 21% of the fund, the investment manager said.

 

Stafford said SIT VIII is a continuation of the firm’s specialist timberland funds with a focus on acquiring secondary positions in existing timberland funds and accessing timberland co-investments.

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Landlocked Property Considered Insurmountable by Land Buyers

Landlocked Property Considered Insurmountable by Land Buyers | Timberland Investment | Scoop.it

Last month, the LANDTHINK Pulse posed the following question to our audience: Which do you see as the biggest drawback or deterrent when considering the purchase of rural land?

 

Our informal online survey revealed that 29.4% of respondents feel that lack of legal right of access to a property is the biggest deterrent to potential land buyers. Land without ingress and egress from a public road is referred to as “landlocked”, and the only way on or off the property is to cross land owned by someone else. A deeded easement is a “nonpossessory” property interest and is the best way to secure right of way in order to access landlocked property without having to trespass on adjoining land. Buyers of a landlocked property can propose and negotiate an easement with the adjoining landowner and usually come to terms on an agreeable price. A contingency clause can be included in the purchase contract, giving the buyer the right to back out if a written access agreement cannot be negotiated successfully with an adjoining landowner.

 

Dealing with a landlocked property can be a tricky legal situation, but risk-takers looking to score a deal should view a land locked property as an exciting prospect- potential buyers have a lot of negotiating power in terms of price. A buyer willing to put in the work, stands to benefit if property access can be legally obtained. Once legal access is gained, a property’s value will increase in value significantly.

 

Is being landlocked a deal-killer? In his LANDTHINK article Should You Buy Property Without Legal Access?, Curtis Seltzer has this to say about land access: “Well, like so many other things, it depends on the particulars. These no-access deals can be winners or absolute disasters. Only thorough research before submitting a contract will show you where on that continuum you’re likely to land—and even then it can be chancy.”

 

For those contemplating purchasing a landlocked property, seek the advice of a real estate attorney. When it comes to land access, as Seltzer explains in the article, “The general principle in real-estate law is that private property cannot be landlocked, that is, denied reasonable vehicular access from a public road. But states and their courts differ in how this principle is interpreted, and several situations can exist that modify the rule.”

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Meteor Timber Appealing Court Decision That Struck Down Wetland Permit

Meteor Timber Appealing Court Decision That Struck Down Wetland Permit | Timberland Investment | Scoop.it

Atlanta-based Meteor Timber is appealing a judge’s decision to invalidate wetland permits it was issued by the Wisconsin Department of Natural Resources to fill 16 acres of wetland in Monroe County as part of a proposed $75 million frac sand processing and rail loading facility.

 

On Friday, May 4, Administrative Law Judge Eric Defort ruled the DNR improperly granted Meteor Timber permits because the agency lacked enough information to determine the environmental impact of the project and whether a plan to alleviate wetland impacts would work.

 

In a statement, Meteor Timber project manager Chris Mathis said the company has proved to the DNR that it’s application was thorough and made clear the project would provide a net environmental benefit for the state.

 

"Today, we filed an appeal of the administrative law judge determination on our Department of Natural Resources permit," said Mathis. "We believe our permit application and the 30-plus months of continued work with the department clearly demonstrate the permit was comprehensive and should allow the project to go forward. We look forward to a robust discussion and intend to follow the process to its rightful conclusion that will allow this $75 million project to proceed, and the local community to flourish."

 

Another document sent to WPR by Meteor Timber mentioned the DNR has "the sole discretion to concur with the administrative law judge or reverse the decision if the agency believes there are significant factual or legal errors. Meteor Timber believes there are errors which merit a second review by the state agency with decades of experience in environmental permitting."

 

Meteor said a number of Defort’s findings in his decision are contradicted by conditions included in the permit issued by the DNR. Also, the document criticized the court for making its decision without "acknowledging the testimony of the department’s five witnesses (or any of the Meteor witnesses), but based solely on the testimony of a former department staffer who helped to draft the conditions of the permit she later testified against."

 

Finally, Meteor was critical of the court’s finding that the DNR was not allowed to issue an amended wetland permit for the company. The DNR initially approved Meteor’s wetland permit in May 2017. An amended permit was issued by the agency in August of that year.

 

Meteor’s statement said the DNR has amended more than a dozen wetland permits in past examples. "We believe the aforementioned samples are illustrative of a number of errors which cannot be allowed to stand for both this project and for Wisconsin as a whole."

 

In response to Meteor's appeal, Clean Wisconsin's communication manager Jon Drewsen said the organization is "looking at the petition for review and do not have a comment at this time."

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US softwood lumber consumption on track for record highs

US softwood lumber consumption on track for record highs | Timberland Investment | Scoop.it

US consumption of softwood lumber is likely to reach record-highs by 2030, resulting in export opportunities for sawmills in Europe and Latin America, according to a new study from ForestEdge and Wood Resources International.

 

Higher lumber demand from all end-use sectors in the US in the coming years will result in continued expansion of sawmill capacity in the US South and increased imports from overseas, while Western Canada will reduce its shipments to the US market.

 

The predictions are contained in the report: “Future Suppliers of Softwood Lumber to the US Market – Supply and Demand Outlook 2017-2030.” The report forecasts US softwood lumber demand will grow at an annual rate of 2.3% through 2030, with a base case demand scenario suggesting that US lumber consumption will reach an all-time high by 2030.

 

The category “non-residential construction” will grow at the fastest rate and will increase its share of the total softwood lumber usage from just over 11% in 2016 to almost 14% by 2030. Lumber consumed by the residential housing sector, including repair and remodeling, will continue to account for the almost 70% of the end-use market. Canadian lumber producers’ market share in the US is expected to decline in the coming years, with the biggest reduction occurring between 2017 and 2025.

 

Overseas supply of lumber to the US is forecasted to increase both in volume and market share by 2025, followed by a decline until 2030. The major supplying regions are likely to include Brazil, Chile, Germany and the Nordic countries. In the study’s high demand scenario, overseas supply will be crucial and reach a market share of over 10% by 2030.

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Peaking Log Prices in the Pacific Northwest?

Peaking Log Prices in the Pacific Northwest? | Timberland Investment | Scoop.it

In our previous post, we discussed timber market drivers and the “rough-hewn relationship between housing, lumber and timber.” Now, we consider regional analyses for localized investment strategies to best-position our mills and timberlands. While trees grow and markets cycle, regional markets have unique profiles that follow their own patterns and timelines.


Over the past ten years, log prices in the South and Pacific Northwest (PNW) have been a tale of two markets. Since 2009, delivered Douglas-fir sawlog prices doubled, while Southern pine sawtimber prices dropped about ten percent. However, this time frame requires the context of history. Twenty years ago, we saw this story in reverse, with prices surging in the South and sliding in the PNW (Figure). Current western prices, in nominal terms, simply returned to where they were in 1995.


Our general outlook, that domestic sawlog prices in the West are bouncing around an effective “maximum” range, is informed by physical constraints and shifting capacities in the sector:

  • Few opportunities for growing log consumption exist in the PNW. The regional market is supply constrained. While there have been a few meaningful mill investments (e.g. Sierra Pacific’s new sawmill in Shelton, WA), there have also been closures and downtime due to scarce raw material supplies. And much of the net increase in lumber production comes from mill efficiency, not more logs.
  • PNW prices are running at or near long-term highs (depending on how you measure them). When we model prices and get results outside of the normal distribution, we need an operable “story” that accounts for physical and economic realities to justify the position. Otherwise, we must acknowledge the elevated prices for what they are: elevated spikes desperately looking for a release valve. Which brings us to a final reality…
  • The PNW is at a competitive disadvantage to the South. While the log and timberland markets are not fungible in this way, the economics of the industry continue to push log demand and lumber production South. Each year, the South gains a little US market share, which aligns with the capital investment story. And from a timberland investment perspective, we view the PNW as a cash flow story and the South as a growth story.

 

Two primary levers would or could drastically change our outlook. One is the log export market. Incremental changes in Chinese demand and Canadian flows affect directly PNW price outlooks. Two is log supply. We have evidence of localized harvest patterns affecting localized prices, which vary by forest owner type.

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The Shift from Coal to Biomass Is on in Europe

The Shift from Coal to Biomass Is on in Europe | Timberland Investment | Scoop.it

The European Union (EU) is preparing to fully generate 20% of its electricity by 2020 using only renewable sources. As such, fuel switching from coal to biomass or natural gas is enabling some power plants in the EU to stay open and profitably generate power despite ever-tightening emissions limits. One of the other major pressures driving fuel switching is Europe’s $38 billion-a-year carbon market. Now a decade after the policy was enacted, it’s finally having an effect on regional generation as more plants turn to biomass. Under EU rules, biomass is considered carbon neutral—and a growing number of large coal burners are finding it a viable option.

Coupled with rapidly falling installation costs for renewables, industry is aggressively finding ways to phase out the worst pollution sources—although unevenly across the continent. While to the east, coal is still the biggest fuel source, western Europe is moving quickly away from it—with Germany, not surprisingly, straddling the fence, essentially building a second renewable system on top of a carbon-intensive one.

Taking it further, several western European nations have formally announced a deadline to end all coal burning. The UK was the first large user to set a drawdown, scheduling the last fires to go out by 2025, propelled even faster by an increased carbon tax. France, a small coal burner, will phase it out altogether by 2022. The Netherlands and Italy have also proposed plans to close their coal-fired power plants by 2030 and 2025, respectively.

Germany, the EU’s largest economy and a perceived champion of clean energy through its Energiewende program, remains Europe’s largest coal burner. The question of a “coal exit” is being hotly debated by the country’s new coalition government, and most experts don’t expect a phase-out to fully take place until 2030 at the earliest. Just the same, recent figures show that hard coal-fired generation in Germany fell by 53.2% in the year ending in January, while lignite coal generation dropped by 6.6%.

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China's green credentials tested at the Russian border

China's green credentials tested at the Russian border | Timberland Investment | Scoop.it

Facing growing demand for wood and shortages in domestic supply, Chinese authorities are pushing for greater imports from Russia, ignoring the fact that its neighbour will cease to be a reliable supplier within a decade.

 

On the website of Jiagedaqi, a city in China’s northern Heilongjiang province, an advertisement promoting investment in the Amazar Pulp and Saw Mill project, which lies a short distance across the border with Russia, proclaims that, “Russia possesses one quarter of the world’s forests with enormous underutilised wood resources.”

 

If only this were true.

 

Nowadays, mature forests in Russia are scarce and the authorities are running out of logging concessions for new export-oriented enterprises. Some areas bordering China are even experiencing shortages of construction timber for local needs.

 

There are no accurate figures on Russia’s forest resources due to outdated inventories, but at least one million hectares are cut down annually according to Greenpeace Russia, and much more is lost to burning.

 

But it’s not just China’s supply of timber that’s at stake. Rampant deforestation in Russian border provinces also threatens China’s efforts to create an “ecological civilisation“. Destruction of transboundary ecosystems negatively affects local climate, shared watercourses, migratory wildlife populations and prospects for environmental tourism and a “green economy”.

 

Many on the Russian side of the border are increasingly anxious about the situation. Dozens of petitions calling for wood exports to China to cease have been organised, with mass protests also taking place in 2017 and 2018.

 

Some of these efforts are paying off. On May 11, at public hearings held in the Zakamensky district of the Buryatia Republic, citizens rallied against allowing Chinese investors to lease 86,000 hectares of primeval larch forest. Instead, they created a Citizen Council for Forest Control to ensure public oversight of the forestry sector and to support the protection of their forests.

 

Strong demand for wood from Asian countries has persisted for the past 25 years. In 2006, China imported 12 million cubic metres of timber just from the Russian Far East. But the devastation of Russia’s forests started in the Soviet period (1922 -1991).

The greatest problem is that Russia still practices “forest mining” in its primary forests, with forests being cut unsustainably and left to regenerate naturally.

 

One reason for this is that the country lacks capacity to engage in plantation forestry. Management of forests has declined following repeated reorganisation of the State Forest Service, reducing ten-fold the number of foresters on the ground in the past 15 years.

However, this largely domestic mismanagement is being framed as a Chinese threat due to the scale of demand from across the border and the unresponsiveness of Chinese companies on the issue.

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Phaunos Timber soars as former manager eyes bid

Phaunos Timber soars as former manager eyes bid | Timberland Investment | Scoop.it
Shares in Phaunos Timber (PTF) jumped 11% to a 12-month high yesterday after its former fund manager said it was considering an all-cash bid for the investment company which is being wound up.

Shares in the US dollar-denominated, Guernsey-based fund gained five cents to 48.5 ($0.485) cents in London, their highest level shareholders voted against its continuation last June.

Stafford Capital Partners, which resigned as Phaunos’ investment adviser last August, has announced a possible offer of $0.49 per share – valuing the company, which invests in forestry businesses and plantations in New Zealand, Brazil and Uruguay, at $244.2 million (£182 million).

The offer, on behalf of the recently launched Stafford Timberland VIII fund, was 11% higher than Phaunos’ closing share price on Monday of $0.44 and a ‘modest’ discount to its net asset value (NAV) per share of $0.51 at 31 December.

Stafford was appointed to turn round the distressed portfolio four years ago and was half-way through its job when a campaign by activist investor LIM Advisors succeeded in persuading shareholders to terminate the heavily discounted fund.
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US South Timber Prices: 1Q2018 Performance & Outlook

US South Timber Prices: 1Q2018 Performance & Outlook | Timberland Investment | Scoop.it

US South timber prices during 1Q2018 were mixed. Pulpwood products increased slightly and pine log products decreased, but the general trend of timber prices was downward in 1Q (-6 percent).

 

On a Southwide basis, pine pulpwood prices remained flat at $10.22/ton during 1Q2018 (+0.1 percent), although two out of three regions experienced price increases for pine pulpwood. The Mid-South experienced the largest increase to $9.32/ton, or +9.4 percent. The East-South rose to $13.11/ton, an increase of +1.3 percent, and the West-South decreased to $7.80/ton, or -5.1 percent.

 

Southwide hardwood pulpwood prices increased in 1Q, rising to $8.74/ton (+14.8 percent). The West-South region experienced the largest surge to $11.30/ton, or +24.4 percent. The East-South rose to $4.49/ton (+19.1 percent), and the Mid-South increased to $10.01/ton (+10.5 percent).

***

Pine chip-n-saw prices dropped to $17.86/ton, a reduction of -0.9 percent Southwide. The West-South and East-South regions experienced a decrease, as prices dropped to $13.98/ton (-8.7 percent) and $20.35/ton (-4.0 percent). Prices in the Mid-South region surged to $17.62/ton, a +6.1 percent increase.

 

Pine sawtimber prices dropped -1.1 percent to a Southwide average of $25.28/ton. Mid-South pine sawtimber prices rose to $25.17/ton (+5.0 percent), and East-South were up slightly to $26.18/ton (+0.8 percent). Prices in the West-South dropped considerably to $24.46/ton (-15.0 percent).

 

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Emerald ash borer makes long-dreaded appearance in Maine, but not where it was expected

Emerald ash borer makes long-dreaded appearance in Maine, but not where it was expected | Timberland Investment | Scoop.it

The emerald ash borer was found in a tree in Madawaska on May 22, just five days after Canadian officials announced the pest’s discovery just across the river in Edmunston, New Brunswick. Although Maine forestry and insect experts long had anticipated that the emerald ash borer would eventually be detected in Maine, many suspected it would first arrive in southern Maine because the emerald-colored insect is already established in neighboring New Hampshire counties.

***

 

A native of Asia, emerald ash borers have killed millions of trees in the U.S. and Canada since being discovered in 2002 and are regarded as one of the most destructive forest pests in North America.

 

 

The small, metallic-looking beetles lay eggs on ash trees and the hatching larvae then tunnel under the trees’ bark, causing extensive damage that typically results in tree death within three to five years. Although there are methods to control the spread of the emerald ash borer, experts have yet to devise a way to eliminate the pests once they are established.

 

Although accounting for just 4 percent of Maine’s hardwood forest resources, ash trees fill an important cultural and economic niche in Maine. And the borer’s discovery, while anticipated, was nonetheless unwelcome news to some of the craftspeople who rely on the wood.

***

Maine has been aggressively monitoring for the emerald ash borer for more than a decade by using specially designed traps, conducting tree surveys and coordinating hundreds of volunteers to monitor for the bug. Maine also prohibits the transportation of untreated firewood into the state to prevent the borer and other invasive pests from hitching a ride into the state.

 

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Romania breaks up alleged €25m illegal logging ring

Romania breaks up alleged €25m illegal logging ring | Timberland Investment | Scoop.it

Romania’s security forces have mounted a series of raids to break up an alleged €25m illegal logging ring, in what is believed to be the largest operation of its kind yet seen in Europe.

 

Officers from Romania’s Directorate for Investigation of Organised Crime and Terrorism (DIICOT) swooped on 23 addresses – including factories owned by the Austrian timber group Schweighofer Holzindustrie, according to local press reports.

 

A government statement yesterday said that they had “reasonable suspicion that, since 2011, several individuals have constituted an organised criminal group, the members of the group acting to hijack public auctions organisation at the level of forestry departments.”

 

Some civil servants were also involved in the “tree-cutting offences,” the release said.

 

The case involves deforestation in the Carpathian mountains which shelter some of Europe’s last virgin forests – similar in nature to Poland’s Białowieża but on a larger scale.

***

David Gehl, the Environmental Investigation Agency (EIA)’s Eurasia programmes coordinator, told the Guardian: “This is the first time that a company has really been held to account for illegal logging on this scale in Europe. It sends a huge signal to the timber industry that illegal logging in Europe’s last great ancient forests will have consequences.”

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Builders Say Lumber Tops Labor as Biggest Challenge

Builders Say Lumber Tops Labor as Biggest Challenge | Timberland Investment | Scoop.it
The most serious headwind facing housing markets today is the escalation of framing lumber prices — up 59% since the start of 2017. Recent NAHB surveys suggest the price for lumber has overtaken the availability of labor as the primary business challenge for home builders.

Since the beginning of last year, rising lumber prices have added more than $7,000 to the price of a typical new home and more than $2,000 to the price of a typical apartment.

“In the little markets, most builders are very small and so are their margins. When you add $7,000 to the cost of a home [that’s 300,000], people walk away,” said Dale Oxley of Modern Home Concepts in Hurricane, W.Va. “When you have a market that’s anemic, a small builder is pretty much out of business – you can’t get an appraisal to reflect [the additional cost of lumber], so it’s left to the contractor to eat.”

There are a number of reasons why lumber prices have jumped, including a rail car shortage in Canada, but the primary factor is the 21% effective tariff rate placed on Canadian softwood lumber. The ongoing concerns over trade wars represent a macroeconomic risk to the gains resulting from the recent tax legislation, and lumber is a prime example.

Nonetheless, builder confidence remains strong, despite total housing starts falling 3.7% in April. Though multifamily starts declined 11% last month, that market is up 10% year-to-date, outperforming our forecast. And single-family starts are 8% above their year-to-date totals from a year ago. However, recent data show a gain in average new-home size, which is an early indicator of weakness in the entry-level market due to rising input costs.
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Stora Enso launches a wood-based biocomposite as a replacement for plastic.

Stora Enso launches a wood-based biocomposite as a replacement for plastic. | Timberland Investment | Scoop.it
The step by step process to create high performance and sustainable bio-based alternatives to plastics has moved forward again thanks to a new product from Stora Enso, a wood-based biocomposite – DuraSense. This innovation, enables the use of renewable fibres, such as wood, to substitute for a large portion of fossil-based plastic. The production of biocomposites began in 2018 at Stora Enso’s Hylte Mill in Sweden, following a EUR 12 million investment announced in 2017. At full production, the mill’s annual production capacity is 15 000 tonnes, which is the largest capacity in Europe dedicated to wood fibre composites.

“Reducing the amount of plastic and replacing it with renewable and traceable materials is a gradual process. With DuraSense, we can offer customers a wood fibre-based alternative which improves sustainability performance and, depending on the product, significantly reduces the carbon footprint – all the way up to 80%,” says Jari Suominen, Head of Wood Products at Stora Enso.

The DuraSense product family is suitable for a wide range of applications from consumer goods to industrial applications. Typical applications include, for example, furniture, pallets, hand tools, automotive parts, beauty and lifestyle products, toys and items, such as kitchen utensils and bottle caps, among other uses.

The DuraSense granules are a combination of natural wood fibres, polymers and additives offering the mouldability of plastic with the sustainability and workability of wood. With DuraSense, it is also possible to combine fibres with recycled or bio-based polymers to further enhance environmental values. For example, DuraSense™ Eco100, which is one of the product grades and based on wood fibres and biopolymers, is a cost-competitive way to fully replace fossil-based plastics.
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Scots forest sales soar as timber prices hit record levels

Scots forest sales soar as timber prices hit record levels | Timberland Investment | Scoop.it

MONEY may not actually grow on trees, but they are certainly bringing in the bucks in Scotland.

Timber prices have gone through the wooden roof, fuelled by increased demand and has set the value and sale of Scotland's forests soaring.

In 2015, forests with a combine value of more than £21 million were up for sale with landowners looking to cash in on what was then a booming market.

Now there are 47 forests up for grabs around Scotland priced at over £35 million pounds. Eight forests are on the market at over £1 million.

The priciest forest is at the head of Loch Fyne, on the west coast of Argyll and Bute, which has just come onto the market for offers over £8 million.

Sellers say Dunderave Forest offers a "diverse range of timber crops" spread across over 3000 acres with what they called "significant potential for timber revenue".

Selling agent Fenning Welstead, in John Clegg & Co’s Edinburgh office said: “This forest investment will not only provide a good return from tax free income from timber sales, but also capital appreciation. It is an unusual offering – forests of this size do not come to the market very often – and I expect it to attract significant interest.”

The main driver of the upsurge is new wood-burning - or biomass - power stations south of the Border, which has sent demand for timber rocketing.

Meanwhile the price of timber in the UK timber has reached record highs, with logs selling at up to £80 a tonne. In the last two years prices have nearly doubled.

Some forests are selling the kind of timber currently in short supply at 50 per cent above the guide price, at £16,000 per hectare.

The timber industry organisation Confor says the UK timber market has reached record highs, with logs selling at up to £80 a tonne delivered.

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DNR Board OKs Large Conservation Easement In Sawyer County

DNR Board OKs Large Conservation Easement In Sawyer County | Timberland Investment | Scoop.it

Plans by the state to spend $7.2 million on a large conservation easement in northwest Wisconsin have won approval by the Natural Resources Board. The fast-moving proposal announced less than two weeks ago by Gov. Scott Walker would guarantee public hunting, fishing and trapping rights on nearly 21,000 acres of privately-owned land near Hayward. The landowner could do sustainable timber harvesting.

 

The Wisconsin Department of Natural Resources is calling the project the Lake of the Pines Conservation Easement. DNR Real Estate Section Chief James Lemke said people would be able to drive on more than 20 miles of private roads. "The abilities to create a perpetual access rights for the public to drive licensed vehicles is very important for the usability of the property," Lemke told the board during a meeting Wednesday.Lemke said a $515,000 endowment fund — part of the purchase price — will help maintain the roads.

 

Birchwood resident Linda Zillmer urged the Board to slow down on the proposal. But Board Chairman Terry Hilgenberg said the DNR did a very careful review. "Now, are there some skeletons out there, yet? Oh, probably. Nothing's 100 percent. But, I think we're about as close as we're going to get, on this one," Hilgenberg told the board. 

 

The Wisconsin Conservation Congress and the Wisconsin Wildlife Federation testified in favor of the easement. But Federation leader George Meyer reminded the board the agency's stewardship program will end in two years, unless state lawmakers renew it.

Sam Radcliffe's insight:

The seller of the conservation easement is Northwoods ATP, a Danish pension fund.

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KKR puts sandalwood asset Santanol on the chopping block

KKR puts sandalwood asset Santanol on the chopping block | Timberland Investment | Scoop.it
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KKR has put sandalwood company Santanol Group on the market in the latest twist for the plantation industry based in northern Australia.

Santanol Group owns about 2000 hectares of plantations with more than 560,000 sandalwood trees in Western Australia and Queensland.

Grant Samuel is advising on the sale of 100 per cent of Santanol Group in a move which comes after KKR reached a peace deal in a legal dispute with the minority shareholders who founded the company.

The Santanol Group is being marketed as a vertically integrated producer of Indian sandalwood oil and timber for the global fine fragrance, cosmetics, aromatherapy and traditional markets.

It expects to materially increase output as plantations mature.
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The assets include a timber processing facility in the WA town of Kununurra and oil distillation and refining facilities in Perth.

KKR became a majority shareholder in 2013 when it funded the $70 million acquisition of plantations controlled by Elders to add to those held by the Santanol founders.
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