Bob Taylor’s – World Forestry Tour (video)

Izabal Agro-Forest recently had the privilege of hosting Bob Taylor and an impressive group of influencers in the wood business, in Guatemala.   Their visit was part of a world forestry tour that Bob Taylor has been planning for some time now, the main objective is/was to learn.  The group is planting trees in Cameroon, Hawaii, and Washington, and they wanted to see examples of forward-thinking forestry operations, in the hopes to exchange ideas and meet people with similiar visions of what the tonewood & forestry sector will look like in the future.

We spent the day reviewing our operations in Izabal, and had a great day listening and learning from this very inspiring group of individuals (listed below).  Thank you to the talented Paul Akers for documenting the visit:

If you would like information about Izabal Agro-Forest’s sustainable investments please contact us here.

1.  Bob Taylor  – Co-ower/operator Taylor Guitars, Crelicam, a Cameroonian ebony company and Paniolo Tonewoods, an Hawaiian company focused on growing several wood species, including Koa (TaylorGuitars website)
2.  Steve McMinn  – Owner and operator of Pacific Rim Tonewoods, a spruce supplier (Pacific Rim Tonewoods website)
3.  Kevin Burke  – Pacific Rim Tonewoods, primary log buyer and project manager
4.  Scott Paul  – Previously an important forest campaigner for Greenpeace,  current Natural Resource Sustainability Director for Taylor Guitars
5.  Vidal De Teresa – The is the owner and operator of Madinter Tonewoods as well as partner in Crelicam, a Cameroonian ebony company (Madinter website)
6.    Nicholas Koch  – Forester with 14 yrs experience, Forest Solutions website
7.   Paul Akers  – he is an entrepreneur, author, speaker. He is the founder and president of FastCap. Paul Akers website

Chocolate & Wine: A Common Fate?

Over the past decade the chocolate market has undergone an astonishingly fast process of “premiumization,” in some ways comparable to the segmentation of the wine market. Viticulture concepts, such as “goût de terroir,” “grand cru” and “single estate,” are increasingly bandied around to describe fine-flavor cacao beans and denominate origin. Some bar makers have gone so far as to recommend pairing their products with specific foods or spirits.

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Wooden fermentation bins, Hacienda Rio Dulce, Izabal, Guatemala

The boutique chocolate maker, To’ak, made waves with the launch of  bars retailing for over $300 a pop made from aged Ecuadorian beans replete with vintage year. Another noteworthy trend in the gourmet chocolate world is an intensified emphasis on origin. Onyx Coffee Lab recently launched its Terroir Coffee Chocolate, which combines coffee and cacao grown in the same region:

For the initial run of Terroir, Onyx has selected three distinct origins, two that will be familiar to the coffee world and one that is better known for its cacao. Their Guatemalan chocolate combines a 69% cacao grown amongst lemons, coffee, and honeybees with wash-processed Caturra and Bourbon varieties from the famed Finca La Esperanza in Huehuetenango.

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Insulation fabric to modulate temperature during fermentation, Hacienda Rio Dulce

These concepts may well be justified given cacao’s chemical complexity. Like wine, chocolate has a dazzlingly high number of chemical compounds that determine aroma and flavor (cocoa contains more than 600 flavor compounds; red wine has some 200). Compared with other industrial crops, cacao trees represent a vast genetic variability among cultivars by region. Trees’ genes interplay with the conditions in which they are grown to produce flavor: elevation, shading, rainfall, soil type, micronutrients and even endemic mycorrhizae, the fungi that colonize a plant’s roots. Proper fermentation and drying of the cacao and their subsequent transformation into chocolate tease out the bean’s full potential.

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Cacao beans being prepared for fermentation, Hacienda Rio Dulce

As growers, an equally intriguing comparison can be made between the cultivation of wine grapes and cacao. A recent article published in the New York Times profiled the Jackson Family Wines company in California and the winemaker’s adoption of techniques to anticipate and mitigate the effects of climate change. Like cacao and coffee, climate change is posing an existential threat to many traditional vineyard areas with one study suggesting that global output could plummet by mid-century:

It found that the area suitable for wine production will shrink by as much as 73% by 2050 in certain parts of the globe, with high potential for stress on rivers and other freshwater ecosystems as vineyards use water to cool grapes or irrigate to compensate for rising temperatures and declining rainfall.

Wine growers are challenged by increasingly unpredictable temperature swings and more frequent dry spells. This has prompted growers to expand into new, generally cooler regions, such as Oregon. These are trends we are also contending with at Izabal Agro-Forest. Across Central America, a combination of factors has already led to the conversion of farms from coffee to cacao driven principally by climate change. Drier, warmer weather is pushing cacao cultivation up the mountain into higher elevations along Central America’s cordillera.

In Nicaragua, the ideal coffee zone is between 700 and 1,700 meters (2,297-5,577 feet) above sea level, but rising temperatures and lower rainfall will shift the range to 1,000 to 1,700 meters (3,281-5,577 feet) by 2050, according to a 2012 study by the International Center for Tropical Agriculture. Temperatures have increased between 0.5 and 3 degrees Celsius (0.9-5.4 degrees Fahrenheit) in the region in the past century, and temperatures in coffee zones are expected to rise another 2.1 degrees Celsius (3.8 Fahrenheit) by 2050.

Simultaneously, the spread of roya — a type of fungal rust that affects coffee trees — is accelerating under the warmer conditions. In sum, we have much to learn from our wine-growing counterparts in Napa and Sonoma Valley largely because the threats are common.

Jackson Family Wines has adopted high-tech measures, such as sensor-activated wind machines. While these may not be cost-effective for most cacao growers, Izabal Agro-Forest uses principles of agro-forestry, most importantly, the interplanting of overstory trees. Interplanting not only provides shade, but also serves as shock absorption against heavy rains and wind while helping to retain humidity during dry periods. Izabal Agro-Forest utilizes native hardwoods with high resilience and commercial value, including, among others, big-leaf mahogany (Swietenia macrophylla). By producing a source of sustainable plantation mahogany, we hope eventually to relieve pressure on the species in its natural habitat, which is nearing commercial depletion.

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Interplanted native hardwoods and cacao at Hacienda Rio Dulce

Jackson Family Wines employs birds of prey by providing dozens of owl boxes and even bringing in falconers. Although controlling the population or behavioral patterns of fruit-eating birds may, at first glance, appear anti-ecological, farmers are contending with imbalances triggered by the human-induced decline of raptors and other predators. The explosion of prey populations that also happen to feed on crops can have deleterious effects on food production and even the geological landscape.

I recently became familiar with the concept of “trophic cascade,” which refers to a process in which a predator suppresses the population and/or distribution of prey. The reintroduction of wolves into the Yellowstone National Park has been perhaps the most salient recent example. Researchers discovered that the flourishing wolf population altered the behavior of deer, which had become emboldened in their grazing. More than killing large numbers, the wolves drove the deer away from low-lying river areas. The retreat of the deer led to the regeneration of vegetation, which in turn reduced erosion. The return of trees and natural grasses altered the course of streams, creating habitat for beavers and other wildlife whose populations began to rebound. Perhaps Izabal Agro-Forest can draw lessons from the experience of Jackson Family Wines as its cacao stands have faced losses due to an abundance of woodpeckers. The reintroduction of raptors could be an elegant solution, although any such measures would need to occur in close collaboration with ecologists.

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Cacao cultivars, Hacienda Rio Dulce

Like many winemakers, Izabal Agro-Forest has turned to red wigglers for help. With assistance from Byo-Earth and other partners, we constructed a worm compost facility whose vermicompost has helped improve nutrient content and bio-availability to levels superior to those of inorganic fertilizers. Just as important as its nutritional content, vermicompost is a soil conditioner that improves water retention, a crucial benefit given that cacao cultivation worldwide is almost entirely rainfed and subject to increasingly dry weather conditions.

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Local students visit recently-inaugurated vermiculture bins, Hacienda Rio Dulce

Our company has deployed the ancient technique of biochar which utilizes biomass converted to activated charcoal through pyrolysis. Biochar is effective at improving the fertility of acidic soils. (The majority of tropical soils tend to be acidic due to weathering and leaching, particularly after forests are cleared). There is increasing evidence that biochar promotes carbon sequestration.

Although wine grapes and cacao come from vastly different regions, they face similar threats. Growers of both are well-advised to swap notes on management techniques that enhance crop resilience and check the burgeoning threats posed by a changing climate. For die-hard chocoholics and wine connoisseurs alike, the question itself may be existential: Is a planet without wine and chocolate a planet worth living on?

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Steve Bergin of Conservation Cacao contemplating the biochemistry of fermentation, Hacienda Rio Dulce

The Final Warning Bell

In Brazil deforestation repesents 70% of the country’s carbon emissions (photo courtesy of the WWF)

The final warning bell has been rung by a UN Climate Change report.  The ongoing destruction of the remaining tropical rain forests and the advance of the pine beetle into the extreme north has contributed to 1/5th of the carbon being delivered into our precious atmosphere, much more than all the motorized vehicles, ships and factories on the planet.  Agriculture is the main polluter and negative factor in this equation.  Here in Guatemala, just to mention an example, at certain times of the year, the burning of the cane fields on the Pacific coast, is enough to darken the sky and cause an ash fall of choking dimensions in nearby communities.

The question is why has forestry not been able to play a more important and sustainable role in mitigating climate change?  One obvious reply is that the global public is kept in the dark by a disinterested media, passive educators and politicians looking only as far as the next vote.

But then what about reforestation companies and the forest investment companies?  Why are they not playing a greater role in the sequestration of carbon and so the salvation of our planet as we know it.  Again the answer is painful:  enormous areas covered by mono-cultures of short term tree crops for mainly pulp or biomass using species (e.g. Pine,Eucaliptus or Melina) that are most often foreign to the tropics with negative effects on the soil.  Sustainable agroforestry is one answer.  India has just passed more progressive legislation that removes many of the bureaucratic restrictions on the planting and use of new forests by farmers,that is expected to increase the forest cover there by millions of hectares.  Both investors, forestry companies and governments need to pay more attention to native forest species for lumber and food while considering the infinite possibilities of sub-canopy planting.

In addition, especially Universities should be playing an important role in environmentally correct reforestation and habitat recovery, but sadly most often their endowment funds invest in mono-cultures and doubtful short term returns, while their scientists preach another story.  It is a dysfunction that every responsible citizen and especially foresters need to urgently correct before we are obligated to send a flotilla of arks to Bangladesh, a country that lies almost entirely at sea level.

– Richard Bronson

Palm monoculture

Palm monoculture in Guatemala

Agrforestry parcel, IAF, Guatemala

 

Standard forestry vs agroforestry

Cacao in Cocobolo grove: Izabal Agro-Forest

Cacao in Cocobolo grove: Izabal Agro-Forest

Over the years I’ve had many conversations about the benefits and so-called disadvantages of agro-forestry, and I’ve found that people with a forestry pedigree tend to be skeptical.  The question always comes down to whether or not there is a financial or biological burden when double cropping land.  It’s understandable, as a forester you probably want to prioritize tree silviculture, so the idea that you may have to adjust your method so that the other crop coexist in a healthy way is a no-go for some managers.  To be clear, there are sacrifices.  In a monoculture your management is 100% oriented around the success of one species, there are no other considerations.  For example, you can plant your trees as intensively as possible, (1100+ trees per hectare), personnel can focus on one set of skills, and possibly there are other considerations.

But of course I see this from a different perspective, first and foremost I see agro-forestry in terms of risk mitigation.

Timber, agriculture, cacao, livestock, apples, papayas, they all have risks; the most common are disease, fire, natural disaster and market volatility, a farmers life is full of ups and downs.  Trust me I know.  But rarely do these risks affect crops in the same way, whereas fire may wipe out a forest floor crop like cacao, only a concentrated extremely intense fire could kill a hardwood tree.  Similarly, diseases, common in fruits and vegetables rarely affect trees in the same way, particularly hardwoods.  Market prices for any commodity will see good years and bad, but rarely across the whole spectrum.  And  unlike fruit crops, you don’t necessarily have to harvest your timber trees if there is a market lull, you can wait the bad prices out (and in the meantime they continue to grow!).  It has been been said before, as long as the sun shines and rain falls, trees grow.

The biggest disadvantage with timber investment is the long, (sometimes very long) wait it takes a tree to grow to a good, harvestable size.  For tropical hardwoods the time-frame is usually estimated between 20 and 30 years, depending on the species of course.  But therein also lies the beauty of the symbiotic relationship that a forest floor crop (like cacao or coffee) and a longterm tree crop:  One provides you the cash-flow to continue operations and receive income, the other functions as the life-jacket that provides a low-risk and historically reliable investment.

There are other factors as well of course:  A poly-culture will look and function more like a natural forest than a standard monoculture.    Agro-forestry is more likely to provide consistent, long-term, employment to community members, there are at least two streams of revenue and I should also mention that in a world where high-quality land capable of producing food is extremely limited, it’s just the right thing to do!

Mahogany & cacaogrove on my farm, Izabal Agro-Forest

Mahogany & cacaogrove on my farm, Izabal Agro-Forest

Hardwood trees with cacao understory - izabalagroforest.com

Hardwood trees with cacao understory – izabalagroforest.com

Taylor Guitars

Finished Taylor Guitars

Finished Taylor Guitars

We visit home, California, a couple times a year.  While here we bask in the fresh food, family fun and general goodness that is the Bay Area.  It also gives me an opportunity to visit with the wood workers and craftsmen that consume the hardwoods we work so hard to cultivate and protect in the tropics.

A few days ago I had the opportunity to visit the Taylor Guitar facilities in Southern California.  Taylor is a world class acoustic guitar producer that has become one of the leading proponents of sustainable hardwood sourcing.  They use Genuine Mahogany, Cocobolo, Sapele, Koa, Rosewood, Ebony and other species for their guitar components.  After a substantial number of processes, including milling, drying, sanding, laser cutting, treating, sealing and more, the incredible aesthetic potential of these woods is revealed in spectacular fashion.  The shapes, patterns, color and luster were a vivid reminder of why these woods have been sought and traded for so long.

My host was Chris Cosgrove, wood buyer for Taylor Guitars.  He, better than most, understands the finite nature of these endangered woods (most are cites appendix I or II listed) and we’ve been discussing long-term sourcing solutions for their instruments.  To the company’s credit, they work with responsible suppliers and concessions and do their best to buy from sustainable sources.  Recently they’ve invested in a concession and mill in Cameroon, a move that was risky but possibly necessary to secure the medium term availability of precious hardwoods, particularly ebony (Diospyros crassiflora).

Taylor’s Spring Limited Edition Granadillo and Ebony Guitars

Since I’ve always been a huge fan of Mahogany and its viability as plantation species we spent quite a bit of time discussing its qualities and availability.  In their warehouses we saw Mahogany from Fiji, Guatemala, Belize and Honduras.  (Only the Fijean lumber is plantation sourced, however Fijian politics and bureaucracy have severely limited its viability.)  Tropical Mahogany is one of the most important tonewood species, used by generations of instrument makers for its workability and balanced tonewood qualities:

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Genuine Mahogany (darker boards) at the Taylor facilities

In general most tropical tonewoods are sourced from natural (non-plantation) forests, which means of course that they are being depleted without being replaced.  Species like Cocobolo and American Rosewood are already difficult to acquire and must be extracted from isolated forests, which even if purchased legally (bought through a concession) will be subject to less oversight.  (see National Geographic’s recent issue on Mahogany for the many problems with concessions: June 2013)  Essentially there is and will continue to be a need for plantation tonewoods, even moreso in the next decade when the concessions dry up.  Musicians and lute makers alike would do well to consider the future of their craft and consider and support the only viable, not to mention sustainable, solution for their longterm raw material needs: meaning an international tonewood reserve & plantation needs to be established and supported as soon as possible.

A few photos from my visit:

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CoastEcoTimber

Corotu

Last week I visited Coast Eco-Timber’s new storefont in Panama City.  The founder, Alana Husby, is a fellow West Coast Canadian and fifth generation logger.  Like me, her grandfathers worked during a time of (seemingly) endless forests and timber abundance… that landscape of course has changed quite a bit and the timber/forest industry has had to change with it.  Alana has made that adjustment beautifully.  A few years ago she embarked on what she calls the most “challenging and unusual project yet, underwater logging in Panama.  When a concession in Panama’s Lake Bayano (owned by the Kuna Madugandi Tribe) was brought to her attention the fit between past and present came into alignment. Working with the indigenous tribe as well as her team of skilled divers and sawmill staff, CoastEcoTimber is delving deep to recover timber that has lay preserved in the underwater jungles of Panama since 1979”  In this way they provide their customers with spectacular historic wood.

It was great to see, firsthand, the beautiful pieces they are extracting from the lake.  Most of the species they seem to be finding are “lesser” known, at least in the international market but long used by woodworkers in Central America.  To my delight many of these species are the very ones slowly gaining acceptance as plantation woods (see pic below).  A few of these are: Zapatero (Hieronima alchorneoides), Amarillo (Terminalia amazonia), Almendro (Dipteryx oleifera), Cedro Amargo (Cedrela odorata) and others.  By offering these woods, (successfully) Coast Eco Timber is validating what we, native species planters, have believed for so long: that these woods are beautiful, workable and will one day fulfill a demand.

Photographs of Alana’s salvaged wood:

zapatero

Cedro Espino

Quira stump

Plantation Amarillo:

Plantation Amarillo - Las Lajas, Panama

For more info on CoastEcoTimber click here

 

 

An energy crisis

Late rains have caused an energy crisis in Panama.  Hydroelectric generators, as with most tropical economies, are this country’s main source of energy; so when weather patterns don’t hold up, the whole system falters: Schools have been closed, A/C prohibited during certain times of the day, public offices have shortened business hours, and rolling blackouts may follow.  People are angry.  A national group of engineers has demanded a government plan for alternative energy, parents are confused and don’t know what to do with their children, and in cattle country, ranchers are demanding subsidies for feed, the problem has affected everyone.

Deforestation means reduced evapotranspiration (evaporation of plants and soil) resulting in both a decrease in rainfall and changing annual rainfall patterns with unusually dry conditions

In a recent newspaper article describing the predicament, the ranchers complain of climate change, expressing frustration at their parched fields and demand government action.  The problem, however, lies at their feet and looking for a bail-out is like sweeping dust under the rug.  Long-term watershed management has to be a part of the conversation.

Latin America’s #1 driver of deforestation is the cattle frontier. Photo credit: Andy Berry

In other words THE essential ingredient for your operation (water), be it agriculture, forestry or ranching is directly dependent on natural forests.  We can assume this (water cycle) process, can happen elsewhere, but there is significant evidence that suggests forests have an effect on precipitation in their immediate area.  (See TED talk ‘How to Restore A Rainforest’.)

There is simply NO conversation about the effects of deforestation on the water cycle.  Trees, brush and spores play an integral cycle in the tropical water cycle.  But because more pasture, means more cattle and more meat, (and therefore money) cattle ranchers will generally clear as much land as possible.  Right to the edges of their land.  It is no secret that the vast majority of deforestation in Central America is driven by the cattle frontier.    The process goes something like this:

1. Sell family plot

2. With the money, buy cheap land in remote areas (usually tree covered)

3.  Extract and sell all and any valuable lumber on property

4.  Burn

5.  Apply herbicide

6.  Introduce/establish hardy exotic grass for pasture

7.  Truck in cattle

8.  Make 2, maybe 3% annual profit

There’s a saying here: “A cattle farmer lives poor and dies rich”.  This isn’t because cattle eventually become profitable, it’s because of land-value appreciation.  And its true, cattle ranchers occasionally end-up owing significant real-estate.  Recently, while pitching an environmental restoration project to a cattle ranching association, a colleague of mine posed the question: what would your land be worth without water?  Unanimously, they all agreed that it would be worth close to nothing.  Interestingly they all understood, from firsthand experience no-doubt, that forested areas have more water and more rain.  The idea then is to convince them that if they can each allocate a small percentage of their holdings to conservation, particularly along waterways, that there is tangible economic upside.  I wrote about this concept in an earlier post.  Its an uphill battle I’m sure, but based on the receptive conversation I think these situations do make people reconsider their role climate change .   Conversation about drought, particularly in the tropics, must include reforestation and conservation.  Governments would do well to incentivize cattle operations that conserve forested areas or employ forward thinking silvo-pastoral systems instead of exacerbating the problem by buying them transported feed, or subsidizing beef.

The case for Genuine Mahogany

Last month, an article about Genuine Mahogany was featured in National Geographic magazine.  In it the author discusses its threatened state, demand, and solutions to curbing its illegal harvest.  Since most large Genuine Mahogany (Swietenia macrophylla) stands are found in the remote forests of South America controlling its illegal harvest has been difficult, despite its endangered species status (cites.org).  Apparently logging companies will buy or lease legal forest concessions, usually quickly depleted, but then will use these permits to sneak into adjoining protected forests or indigenous territories.  These circumstances are met with increased patrolling and stricter trade laws but in the end, like drugs, the product will make its way to the consumer.  Its a great read, but I ask myself why one of the world’s great timber species is still rejected as a plantation crop.  I know the answer, I’ve worked with foresters and timber investors my whole life, it all come down to a pesky insect.  The Mahogany shoot borer (Hypsipyla grandella), damages trees when its larva bores into and kills the terminal shoot. A lateral branch grows upward to replace the lost terminal shoot, resulting in a crooked main stem. Also, the damage to the terminal breaks apical dominance, resulting in excessive lateral branching. (Howard and Meerow 1993). Small trees whose terminal shoots are attacked repeatedly in successive years become extremely deformed, severely reducing its commercial value/potential.  The shoot borer has created a situation in which the only considerable plantations are located on islands (exotic to mahogany) where the moth doesn’t exist, namely Fiji and the Philippines.  That said, and despite what you may hear, the shoot borer can be controlled.  We’ve been doing it for years.  There is a cost effective, easy method for doing so, the only requirement is consistent management.  The big argument is that individual control is too labor intensive and therefore too expensive.  In Guatemala, we recently did a cost study of shoot borer management for 13000 trees.  In the first year we averaged $0.16 per tree, in the second year when the trees are taller and more difficult manage, that increased by 25%.  By the third year, no more control was necessary due to height and hardening of the shoot.  Furthermore mahogany requires less formative pruning than other species because it naturally grows vertically.  There is significant data on its growth, recently a comprehensive study conducted by the University of Munich estimated optimal rotation length for mahogany at roughly 25 years, which is more than competitive when compared to other hardwoods.  This estimate is roughly in line with our own growth predictions.

Geniune Mahogany stand with zero bifurcation

Genuine Mahogany stand with zero bifurcation on lateritic soil

The biggest advantage of Mahogany against, say Teak, is its incredible robustness.  Mahogany can grow on very poor  and diverse soils, which is evident when you consider its wide distribution from Mid-Mexico all the way down to the Southern Amazon.  Meaning, even if the labor requirements are slightly higher, you can establish it on cheaper lands.  In Panama’s Western Darien “teakable” lands cost anywhere between $4000 and $7000 per hectare, marginal lands may be procured at half of that price.  That ratio remains roughly consistent throughout Central America and I speculate Brazil is similar.

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Mahogany’s wide distribution is a testament to its vigor and durability

Mahogany is a “cites” listed species, meaning endangered.

The other side of this story is calculating market value for plantation mahogany and how it sizes up to Teak expectations.  And of course a quality comparison between natural and plantation mahogany.  I will be discussing both subjects in an upcoming entry.

Forest management & investment basics

Speaking to a few of my readers I have been asked to write a bit about the basics of timber management and investment.  And just for kicks I’m going to include a tidbit of its history:
HISTORY
In the fifth century a group of Romanian monks established a pine forest on the Adriatic coast.  This was one of the first examples of timber management established to provide the monastery with a source of fuel and food.  This (now) massive forest was mentioned by Dante Alighieri in his 1308 poem Divine Comedy.   In China the Han and Ming dynasty adopted forest management practices, and in Germany forest management and sustainable harvesting were practiced as early as the 14th century.  In almost all cases these forests consisted of different types of Pine and Oak.
The practice of actually establishing forests, at a large scale at least, came about in conjunction with the invention of the steam engine and the great navy’s of the colonial era.
TROPICAL FORESTRY
Tropical Forestry is the branch of forestry which deals with equatorial forests that yield woods such as teak and mahogany.   Tropical forest management, particularly with hardwoods is relatively new.  These forests weren’t really “managed” until the 20th century, which explains why we are still identifying best practices for the region.  However, there is speculation that the Mayans did indeed plant and manage certain tree species.  Unfortunately very little of this knowledge was passed down after the great cities were abandoned.  The advantage of tropical forests is that they grow year-round with no significant dormant period; tropical hardwoods can grow up to ten times faster than its temperate counterparts.
FOREST INVESTMENT
As I mentioned above, forest management has been practiced for centuries, however forest investment as we see it today is, in relative terms, new.  Since natural forests are finite and evermore protected, there has been and always will be a real necessity to establish “man-made” plantations.  When people or institutions invest in forestry, generally they are investing in the raw material for pulp or lumber.  Naturally, these are considered longterm investments since most timber species require between 15 and 40 years before they become “harvestable”.  That said, many plantations today are bought and sold at different stages of the harvest cycle.  Most of the large plantations, particularly in Latin America, have been sold at least once.  For example there are risk averse investors who prefer to enter once the forest has been established, at say, year 4 or 5.  The reason for this is that new forests are more prone to damage, be it physical or biological, when they are young.  An established forest (4+ years old) is generally more robust and has a higher survival rate.
Investments in the establishment of new plantations usually include costs for: land purchase, legal fees, nursery/germination efforts, planting costs, management, and the subsequent maintenance of a timber forest.  These investors often seek to exit at that 4 or 5 year mark.  (By the way, a well-prepared forest manager should be able to facilitate this transaction.)  Investors who come in at that secondary mark should expect to pay ongoing maintenance costs, as well as a start-up premium for entering at a low-risk stage.
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MARKET
Timberland investment has grown substantially as market volatility and inflation rates have boosted demand for tangible-asset investments.  The good news for timberland investors, is that no matter what the market is doing, the trees will continue to grow as long as the sun continues to shine and the rain continues to fall.  So, for example: if timber prices are down in a particular year (Due to housing market slumps, etc) the investor may simply choose to delay harvesting, and in the meantime the wood volume will continue to grow/increase.
Historically timber investments have shown market resiliency through the decades, several factors can be attributed to it continuing this performance trend:
  • Global population/demographic changes: expected to reach 7.5 billion in 2020
  • New environmental policy and regulation will limit natural-forest sources of timber
  • Increased demand for alternative energy sources
  • Global economic growth (as measured by GDP) is expected to double by 2030
  • Scarcity!
  • Demand from emerging markets, particularly in Asia (link to chart)
SUSTAINABLE/IMPACT TIMBER INVESTMENTS
This blog, as it were, aims to promote and discuss impact reforestation investments.  In theory these should not only perform financially but also:
  1. create stable job creation and economic development in the rural areas
  2. promote transparent and non-corrupt business practices
  3. promote environmentally friendly forest projects
  4. provide the investor with returns with 5 to 12% IRR’s
  5. mitigate pressure on standing natural forests
  6. create biodiversity protection
  7. at least partially rehabilitate degraded ecosystems and improve natural habitats
  8. sequester greenhouse gases in the atmosphere
  9. protect natural forest stands

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