Farm Ireland
Independent.ie

Sunday 19 November 2017

Analysis: New investment deal for forestry is welcome but the devil will be in the detail

The Irish forestry industry is finally coming of age
The Irish forestry industry is finally coming of age
Joe Barry

Joe Barry

Good news has been a scarce commodity in the agricultural sector in recent months but the announcement that the European Investment Bank, along with others, is to support a €200m investment in Irish forestry confirms that the industry here has finally come of age.

This is a marvellous ­endorsement of timber- growing as a sound additional farm enterprise as well as a solid investment.

To receive such a substantial boost and have it promoted by some serious money men - along with our Minister, Andrew Doyle - must give anyone who planted over the past 20 years or so great confidence in the worth of their own woodland.

It was also good to see that Coillte are planning to replant more than 35,000 hectares and construct and upgrade over 1,600km of forest roads. They will also improve maintenance of 1,000km of publicly accessible walking routes and mountain bike trails.

To read that Coillte are aiming to resume planting and put money back onto their forest estate is a further injection of confidence and good news for rural Ireland in general.

So, what will it all mean to the majority of woodland owners in Ireland who own an average of 8.5ha?

Probably not a lot for the moment, as it appears the fund is only interested in larger areas of coniferous woods as well as bare land suitable for planting.

Confidence, however, is the driver of all markets and whether it is in housing, commercial building, farmland or forests, optimism will boost values and increase prices.

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Those who have condemned forestry in the past should by now realise that they were criticising an exciting and viable land use option, with international appeal, that brings prosperity to rural areas and enables farmers, especially those with marginal land, to increase their income and provide security for the future.

If you have bare land that is suitable for planting, this new competition can only boost its value, but then perhaps you should ask yourself: should you lease, sell or just plant it yourself?

If you have coniferous woodland that has drawn its full 20-year premiums, should you sell the harvesting rights or continue to manage it and wait for the big pay day when it reaches maturity at approximately year 35?

 Dasos Capital, the Finnish firm who are part-funding this initiative, are to be represented in Ireland by SWS Forestry, a long-established business that is highly regarded in the Irish forest sector.

The EIB has already invested €4.5bn in forestry- related projects over the past five years, so the combined financial weight and experience in woodland management that is backing this scheme is impressive.

The aim is to build a portfolio of approximately 18,000 hectares. This is substantial when viewed in the context of the average Irish farm size.

Recently it has become difficult to purchase land for planting, as prices have surged and there are only limited areas being advertised for sale.

Traditionally, Irish farmers have been reluctant to sell land and only a tiny percentage of the national estate reaches the market in any one year.

Land mobility has been slowed further by the presence of the various attractive EU-funded farm schemes and the entitlements that go with land ownership.

The EU, however, is not a limitless source of money and there are noises emanating from Brussels that give cause for fear that there are changes in the pipeline.

Reductions in direct payments may well begin to occur in the near future.

Were this to happen, more land would quickly become available, especially in areas that are marginal for mainstream farming but ideal for growing trees.

If existing farm subsidies in the livestock and tillage sectors were slashed, then forestry would become the clear alternative.

Alternative crop

Given the fact that Ireland grows trees better and faster than almost anywhere else in Europe, farm forestry, which is simply the production of an alternative crop, would be an obvious choice.

The finer points of what is proposed are as yet unclear but it appears that if you own either bare land or semi-mature woodland, then the backers of this scheme will be interested in purchasing or leasing it.

We don't yet know but can only assume that the options will include harvesting rights as an additional choice.

On reading the information at hand, it struck me that much of what is contained in the proposals may be similar to, perhaps, leasing land for windfarm or solar electricity generation, with the benefits and potential pitfalls that this brings.

With that in mind, any forest owner looking to sell or lease would need to ensure they take forestry, legal and taxation guidance, as well as taking account of family considerations and farm structure. Leasing might also prevent the granting of a site to a family member.

Landowners who lease property for afforestation or harvesting might no longer be in occupation of the property but, as the owner, they could still have liabilities for replanting.

Due to the absence of subsidies and the long-term nature of timber production, such land is usually valued at zero for accountancy purposes. This is because of the cost and relatively long wait for the next pay day.

The promoters of this scheme have deep pockets and will no doubt have heavyweight legal support, whereas most farmers will be relying on a local solicitor.

Getting advice on complex issues such as this is always costly and one should never sign anything without having first received the protection of an informed legal opinion.

As always, the devil is in the detail.


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