Jonathan Foley’s other inconvenient truth

I recently revisited Jonathan Foley’s fascinating TED talk in which he discusses the incredible impact agriculture has on the planet.  His presentation is poignant and central to why we see the necessity to farm/manage the lands we have better.

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.

Earth Day

In honor of Earthday I thought I would share this fantastic map of the world’s Intact Forest Landscapes created by Greenpeace.  In it shades of green represent intact (virgin) areas, and shades of gray secondary or intervened forests.

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Keep in mind that tropical forests have up to 100 times the diversity of temperate forests:

Barro_Colorado_Panama

 

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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California REDD

 

On January 1st my homestate of California launched its long-awaited cap-and-trade program, establishing a limit on greenhouse-gas emissions.  These limits are slowly reduced over time, meaning that at some point the emissions should reach levels from two decades ago.  Its an exciting and important moment for carbon programs, like REDD+, not only because of the California factor (The US’s most populous state and the ninth biggest economy in the world) but because other states may follow suit, assuming of course that things pan out correctly.  “California is a big economy, and it is very diverse, like the U.S. as a whole,” says Mary Nichols, chairman of the California Air Resources Board (CARB), which is overseeing the cap-and-trade system. “If it can work in California, it can work in the U.S.”

Assuming other jurisdictions will participate in offset generation, we could see an impact on conservation efforts and reforestation in Latin America.  There’s quite a bit of work ahead, with many actors, but so far there seems to be pointed-effort.  A recent article published in ‘Ecosystem Marketplace‘, discusses the California REDD program which seeks to bring international REDD+ credits to the state’s program:

Link to article

 

 

 

 

 

Thoughts on worker housing

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A few months ago, I heard about a situation in which a forest manager described the worker housing units of a plantation as “luxurious”. He was assessing costs and evidently thought running water, solar panels and a modest kitchen were unnecessary expenses. I’m deducing a bit here, but I do know this for a fact: there is a wide gambit of housing conditions for workers in the industry and most of those are on the low end. Unfortunately, crop and forest managers tend to hire the cheapest, poorest workers available and somehow this translates to very little complaining from those directly affected. I suppose because some income is better than no income, and many of these people just aren’t in a position to complain. There are major institutional timber investors out there who, knowingly or not, invest in projects with sub-standard housing conditions for their workers. Speaking to local managers, the normal reasoning goes something like this “well they’re used to it” or “their own homes are even worse”. Its a presumptuous mentality but really, even if it were true, it’s irrelevant and the opposite of sustainable. In my experience a little investment (and they really are little) towards the comfort of your workers is not only socially and morally the right thing to do, but it is also good business practice.

A smart, well planned housing unit in most of the tropical Americas, for say, 8 workers will cost you between $1000 and $10,000. The lower figure of course representing bare bones housing, usually these will have dirt floors, no electricity and no plumbing. On the high end: a secure house, with real beds, plumbing and electricity for basic services. As an experiment, try the following: take a medium or large size project with a 22 to 25 year harvest rotation and apply these figures, both the high and the low, to a cash-flow model. Whether you’re calculating for NPV, IRR or ROI I have seen almost no scenario where your investment is adversely affected by this extra cost. Your returns, logically, are much more affected by other factors like biological performance, land appreciation, lumber prices, etc. When you consider that most workers live on the plantation, rarely leave during the working months, head to the fields at dawn, work all day, cook their meals and then go to sleep; a little extra comfort after a long day’s work seems worthwhile!

Assuming you agree with the above, there is still the matter of upfront costs which need to be “justified”. Its harder to measure, but my gut tells me that worker retention improves when your workers are more comfortable – it seems only logical. If I were in their shoes, I would opt for sleeping in a sanitary, comfortable environment. The benefits of a steady, committed workforce are for the most part obvious, but here are just a few savings that come to mind: recruiting costs, transportation costs, training costs, and field efficiency. Depending on the country of your operation, these costs will be more or less substantial but all will require time & effort. Less tangible benefits which affect operations include the development of comradery, trust, improved physical health, and employee satisfaction.

In upcoming posts I will suggest attractive, practical, inexpensive designs for these types of units.

 

The bee malady

Recently the NY times published an article on the startling bee death epidemic that started showing up about 8 years ago, the numbers of course are staggering.  Not long ago, the normal die-off rate for managed bee colonies would land somewhere between 5 and 10%, today that figure hovers between 40 and 50%.  Bees are our most important pollinators, meaning the implications on the food industry are, well, scary.  I’m glad there is awareness about this issue, but really the reaction, among the average consumer is nil.  Probably, for most people, it is difficult to become alarmed about a “bug” malady, or perhaps it is the perceived intangibility of the subject but just imagine if this were a mammal; particularly a mammal with an ancient symbiotic relationship with mankind, how would we react?:  Let’s take the meat industry as an example, say we were confronted with a situation in which the cattle die-off  rate rose to 40 or 50% and we didn’t really know why!  I have no doubt it would be a major news story, most likely with a strong & definitive response by the government.  The bee problem is shocking, and in many ways more alarming than the cattle example, in that we have options when it comes to animal protein.  In terms of net impact we really don’t have a replacement for bee pollinators.

There are many theories, none universally accepted, as to why bees are dying off, but the most accepted has to do with the use of chemicals in plant management.  Today there are 100’s of widely used insecticides and herbicides, recently (around 2005) the use of systemic insecticides, known as neonicotinoids, have gained popularity and are more and more seen as the culprit.  These chemicals function by being incorporated into the plants themselves, they are applied in small doses (which could be good) but live inside the plants very structure, allowing for longterm, systemic insect control.  Considering the fact that we don’t fully understand the prolonged effect of these agents, or how they react to each other, much less on fragile indicator species, I wouldn’t be surprised at all if these neonictonides were conclusively tied to the bee malady.

Bee good.

Ok, so I bring it up, for two reasons: because here, yet again, we have one more reason to consume organic products and two because it’s relevant to farming.  In the tropical timber industry, chemical control is almost necessary.  The natural competition a tree, or any crop for that matter, receives is probably ten times more aggressive in the tropics.  For some crops, going organic could mean a sharp increase in manual labor and costs.  Its unreasonable to assume industrial tropical food producers can simply go organic.  I wish they did, but I can only imagine what the implications would be.  In the tropics, I would say its more reasonable, to ask for responsible use of chemical agents.  A few years ago, on my own farm, we experimented with Neem, a naturally derived alternative to insecticides, and saw some success.  The downside, was that our workers much preferred stronger, industrial options.  The application of the industrial brand was easier and more effective, despite the considerable effects these industrial agents might have on human health.  In my experience, humans will generally opt for cheapest, easiest option, (I’m not entirely excluding myself from this condition) but I do think it is time that we (collectively) farm consciously.  If work intensive options like neem are not practical for your operation, you can vie for certified pesticides.  FSC has a list of permissible chemicals that might serve as a good baseline.  Unfortunately, certification, is not without fault.  Research is often rushed and really, how do you test every environmental, social, geographic and ecological scenario out there?  Its impossible.  My suggestion, as always, is to plan at a landscape level:  The use of forest buffers and the promotion of natural cycles will reduce your chance of outbreak, of any sort.  Separating, as much as you can, crops into parcels too will also reduce risk.  Allocating species to soil and topographical conditions will reduce the need for insect and weed suppression through chemical applications (more on this later).  Adhering to FSC certification standards and using low-toxicity chemicals should also reduce environmental impact.  Biological controls in a well managed farm can be very effective.  That is, using naturally occurring organisms and parasites to control pests: agents can be native insects, fungus or even bacteria.  The use of of Pheromones is also interesting.  There are plenty of good ideas out there.

Another possible service to your local flora and fauna is to actually introduce beekeeping to your operation.  Areas of natural forest or reserve where there are natural buffers against synthetic products and chemicals are perfect.  Ideally these are also away from homes and communities as you don’t want to create a nuisance or instigate, excuse the term, chemical warfare against the bees.

As an added bonus you may soon be eating and selling your own honey, so there.

Tonewoods

Tonewoods are basically defined as those woods used in the construction of musical instruments.  There are many species used, in the tropics, the most popular are: Mahogany, Rosewood, Koa, Cocobolo and Ebony.  These are species chosen for there ability to carry “tones” and their aesthetic value.

mandolins

Tonewood buyers are extremely picky, pay high prices, and are dealing with a disappearing commodity.  Every major tropical tonewood species is cites listed,  meaning facing extinction if harvested at current rates.  Many, (possibly most) tonewood buyers are buying FSC certified lumber, and I believe they understand the value of their raw materials.  Makers of fine instruments have a direct, unmistakable, interest in preserving these species so it is logical that they take steps to purchase responsibly.  That said, I believe this effort is only half honest in that there are no tropical tonewood “reserves”.  Remember these species, for the most part are harvested from disappearing natural forests and are facing (rightfully) stricter trade laws.  To truly ensure the long-    term supply of tonewood hardwoods, an effort must be made to establish, manage and protect tonewood plantations.  The problem, as always, is convincing major instrument makers that an investment made today is worth the 25 (Mahogany) to 40 (Cocobolo) year wait.  But when you consider the legacy of companies like Gibson, Taylor, Yamaha, Martin and others, longevity is a necessity. That said, there ARE one or two established tonewood forests, mostly family projects, with trees 10+ years old, meaning the “wait” is reduced.  Why not partner with them?  Investing in the establishment, maintenance and preservation of rare tonewoods will be an essential part of the effort in preserving the tradition of wood instrument making.  As the owner of several guitars I can’t imagine a synthetic replacement for these beautiful woods.  A tonewood forest would not only be a model project to be emulated, but also the only answer to future shortages of precious tonewoods.

The value of conservation within an investment scheme pt 1

I am a firm believer in the protection and establishment of conservation zones in a plantation setting.  Aside from the nice dose of karmic energy that you are sure to receive, conserving natural forest stands can yield tangible benefits to your project.   These areas may function as small habitats and essential sources of food to local wildlife, which will no doubt add to your farm experience.  The aesthetic value too, is surely a consideration.  That said, I want to discuss the commercial value of conservation zones.

In Central America a typical farm might have between 5% and 25% of its total land area classified as natural forest.  Since these forests usually represent a reduction of the productive area, they are usually reduced to small areas of difficult topography, or along waterways; most are threatened.  There are, however, good reasons to protect and indeed expand natural forest areas in your project.  The first function is that of a buffer zone.  For example conservation areas bordering riparian or agriculture zones can function as a natural shield by reducing the threat of disease and pests (depending where you operate).  Similarly they’ll form natural barriers against wind and livestock, reducing risk and the possibility of damage.  With its well-established shade, a secondary natural forest may prevent the spread of invasive species like introduced grasses and therefore suppress the negative impacts that these may have on sensitive ecosystems and your plantation.

Simply put a well-balanced plantation system will see reduced forest diseases and insect outbreaks.

Rainforests make water.  The California Academy of Sciences puts it well: Since water vapor needs something to condense upon, airborne particles become the seeds of liquid droplets in fog, mist and clouds. With examination, the researchers found that tiny grains of potassium salts are the basis of raindrops in the Amazon.  The salts are not generated by soot or the nearby Atlantic Ocean, but by the living things in the rainforest. Fungal spores seem to be one of the biggest contributors. In other words, the forest itself is causing the rain.  In other words THE essential ingredient for your plantation, is directly dependent on natural forests.  We can assume this process occurs 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’.

Erosion control too, and the preservation of topsoil, around or near your plantation, particularly in the early years, will reduce run-off and preserve land area.  For example, natural vegetation will keep banks from falling into waterways or embankments.  The restoration and protection of forest wetlands and mangroves may effectively cleanse and filter water pollution and other wastewater management challenges.  The upsides are extensive..

Natural forest have monetary value too. The carbon-credit market for example, while developing as a platform, shows great promise.  Most people I know, even those that don’t directly invest or promote the carbon market believe it to be a fundamental instrument in giving natural forest more value.  This is a big issue so we’ll talk about it more at a later date, but I believe once the world’s financial woes settle down, the carbon market will see quick maturation.

Important also, particularly in the tropics, is the natural seedbank you are protecting.  Even in secondary forests, it is likely you will find genetic material for your native species plantings.  Additionally, these will be naturally adapted to the area in which you operate.

One of the obvious advantages is the potential upside for tourism and real-estate you are creating.  Those forests, often ignored even if they are protected, offer opportunities for nature trails, bird watching and more.  In Costa Rica I know of several plantation projects that were once considered strictly farmland (with no particular tourism potential) that today play host to lovely establishments.  I recently visited an old hotel in Bocas del Toro, Panama set in an abandoned cacao farm.  The owners thoughtfully removed exotic species, cleaned the understory, promoted the growth of native flowers and plants and built several lovely cabañas whilst reviving the cacao operation and conducting limited reforestation.  They’re booked solid.  A project that promotes responsible tourism, while functioning as a productive farm is a compelling prospect.  Highest and best use, means thinking outside of the box and envisioning land-use for all of its potentials.

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Last month we visited la Loma Jungle Lodge in Panama

My final thought: In the end natural forests are beautiful, provide eco-system services and should be respected.  That in itself is enough, don’t you think?