Wood, returns

Returns

Investments with repeating returns

Return forecast

At ForestFinance you invest in raw materials: timber and cocoa. Your returns are subject to ecological developments and fluctuations, which is quite normal for natural systems. On this site you will find information on how our harvest and return forecasts are being calculated. Our return forecasts are based on growth rates for natural resources and our experience of over 20 years of work. Actual sales returns and expectations in future developments are taken into account, as well.

ForestFinance provides long-term experience in developing forest investments, constant monitoring of the timber and cocoa market as well as regular measurements on existing areas. Using this combination of analysis metrics allows our forecasts to be as realistic as possible. We are able to present real numbers and figures to our customers regarding their investments.

 

 

 

 

Natural factors & market development

Some of the most important calculation parameters, which can affect the total return of investments in mixed forest, acacia forest or agro forest systems, are: natural factors such as timber-, biomass- and cocoa yield per area as well as quality of raw materials. Additional parameters are sales proceeds on the national and international market and prices for various tree and cocoa species.

The assessment of natural factors is based on growth forecasts that are calculated by trained forestry scientists, using internationally recognised standards. In order to properly apply assessment criteria for biological resources a considerable amount of experience is required. ForestFinance has more than two decades of experience in the field of forestry. Moreover, we include yield and return margins in our forecasts.

 

 

 

As our own rule of thumb our return forecasts are based on the average growth and development of timber and cocoa. Although in nature, extreme outcomes are possible, we consider an average yield and return forecast to be the most realistic expectation. ForestFinance constantly monitors price and market developments for timber and cocoa in order to improve and adjust our forecasts, if necessary. For this purpose we analyse data from numerous reliable sources, including international indices and trading publications (for instance ITTO, NCREIF, FAO), our own sales experiences and market studies.

Forestry costs & forest as a real value

Increasing revenues from timber and other forest products are likely to be opposed by (partly increasing) farming and maintenance costs. Tropical forestry causes most of the costs during the first three to five years. This way, approx. 70 per cent of the overall costs occur during the first five years. This, however, minimises the cost risks for long-term forest investments. We calculate the costs by applying similar criteria as used for the return calculation. This means, we take increases in costs (inflation) into account. However, like the return forecast, this is only a projection based on expectations and our experience from over 20 years in the field of forest investments.

 

 

We believe forest investments offer additional advantages compared to other investment opportunities as the asset forest generates yields on its own after approx. ten years. For instance, these revenues could be used to pay the forest management, meaning a lower return, but minimising the risk of a total loss. Of course, we adjust our return forecasts to market developments on a regular basis. We analyse real market and economic developments and take these into account in the pricing and return forecasts of our products.

The harvest co-operative

 

 

ForestFinance is able to call on a tried-and-tested system: the harvest co-operative. Owners of small and medium-sized forest plots, farmers or winemakers are still forming machinery rings or (harvest) co-operatives, in order to successfully and safely cultivate their plots. The harvest and marketing co-operative offers ForestFinance customers cost benefits as well as benefits of large-scale forest investments by levelling out individual risks.

This means: thinnings, harvests and sales of forest products are carried out within a co-operative, including all investors from the same year of planting. This serves the purpose of minimising costs and increasing profits for customers. Both, the costs as well as the proceeds of a harvest co-operative are proportionately distributed among the members of the same harvest co-operative. Compared to the far more expensive individual cultivation and selling, this system offers a clear benefit to the customer. The harvest co-operative is a non-compulsory offer by ForestFinance to its customers.