FAO: Logistics presents timber investment challenge

Logistics is one of the main challenges for timberland investors says Adrian Whiteman, senior forestry officer (economic analysis) at the Food and Agriculture Organisation (FAO).

“Getting wood to the market can be a big problem,” he told delegates at the Timber Invest Europe conference in London on Tuesday.

Growth and yield projections can be misleading or misunderstood and often “don’t live up to expectations”, he added. This is often a result of firms buying cheap land and expecting the same returns as better-quality land. Whiteman also emphasised the quality of wood from plantations compared with that from forests.

“Wood from plantations is not the same as that grown in forests; it is not as valuable as the natural alternative,” he said.

Naturally-grown wood raises reputational risk concerns, which can push producers into an unappealing middle market position. They unable to produce wood as cheaply as the bottom end but are unwilling to take on the risk of naturally-grown forestry.

Regulatory risks can also be a big concern, he added. “The places where wood grows the fastest tend to the places with the weakest governments [for timber regulation],” he told delegates.

This includes rules surrounding land ownership and tenure. These are particular issues in Africa, which Whiteman described as the “new wild wild West of investing in lands and forests”.

Whiteman suggested these risks could be mitigated by diversification, forest certification or social initiatives.