Concern has been raised at the establishment of a €112m forestry investment fund, which aims to purchase, lease and manage plantations involving the European Investment Bank (EIB) and Ireland Strategic Investment Fund (ISIF).
The €112m investment is spearheaded by Dasos Capital, a Finnish-based fund, and is backed by the EIB and ISIF, who are investing €28.5m and €55m respectively.
However, the plan has been labelled shortsighted by Roscommon/Galway East TD Michael Fitzmaurice who said it would have "detrimental effect" on small farmers.
“My worst fears were confirmed this week when I got written confirmation from Dasos Capital that they would not be lending to landowners here to pursue planting, rather their strategy would be to purchase lands and have the larger forestry companies here manage their holdings for them" he said
"We again face a situation where European policy making, coupled with our own Governments' insistence on encouraging the plantation of land will result in the widespread afforestation of rural regions.
“Farmers will find it almost impossible to compete for land holdings against these big multinationals.
“It will make farming an even more difficult venture for many smaller farmers and indeed younger farmers into the future and it is a short sighted policy by our Government and the EU," he said.
"This policy means that our resources will be further denuded as big private companies come in buying up land for forestry to the detriment of local communities and farm families.
“We have seen vulture funds coming in to this country buying up property in recent years to the detriment of mortgage holders those with distressed loans. In the programme for Government it was agreed that a review of forestry policy was to take place but this new venture ensures that any such review will not now happen,” he said.
According to last week's announcement, Dasos intends to develop a portfolio of forests across Ireland in the coming years by supporting direct land acquisition, lease contracts, afforestation and other forms of land management.
"The Dasos Ireland forestry fund intends to help overcome diverse challenges faced by a fragmented industry and revitalise forestry in rural communities," said Dasos CEO Dr Olli Haltia.
It is understood that the fund will target privately owned plantations where subsidies are coming to an end, or have already been fully drawn down. These 20-year-old plantations are generally around 15 years off maturity and harvesting.
The announcement was welcomed by the Minister of State at the Department of Agriculture, Andrew Doyle, who said the investment would "underpin continued expansion and development" in the forestry industry.
However, established players in the sector were not convinced that the fund would be able to secure the vast area of forestry mentioned, given the reticence of Irish farmers to sell land. There are an estimated 19,500 private owners of small forests across Ireland.
There was some confusion regarding the exact amount of land being targeted by the investment fund, with the area varying in different press statements from 10,000ha to 18,000ha.
Good-quality, 20-year-old plantations of Sitka or Norway Spruce are selling for around €12,000/ha, which means the €112m fund could theoretically purchase around 10,000ha. These plantations at harvest would give a cost-free return of close to €22,000/ha.
Meanwhile, Coillte has secured €90m in long-term loans from the EIB. The loans will be used to finance the cost of planting, forest management and forest road construction and maintenance over the next four years.