Farm Ireland

Sunday 25 February 2018

Forestry is hard to beat for its financial security

Joe Barry

Joe Barry

Now that autumn is here, it's time to start thinking about forestry again. I know that a lot of thinning and clearfell takes place during the summer months and, with cold storage, planting is often undertaken as late as June.

I always preferred, however, to avoid late planting and to try and get all work done during the winter and early spring.

Coniferous woodland, despite the bad press it gets from the environmental lobby, provides habitat for a surprising variety of wildlife -- and, for that reason, I also like to defer work until autumn at the earliest and leave the woods alone during the nesting season. Thinning hardwoods is definitely best done in winter when the moisture content of the wood is at its lowest.

But it is essential that all these activities eventually lead to a profit, so it is worth examining the options.

The financial markets are in a far worse state than they were a year ago and there is a huge demand among investors for risk-free assets. A friend of mine, who is a noted guru on financial matters, told me that he had attended a seminar for fund managers recently. The main speaker was an international banker with a reputation for having exceptional business knowledge and skills. When the seminar ended, my friend cornered him and complimented him on a great presentation but then asked him the most important question of all: What do you do with your own money?

The man replied that he invested all his spare income in forestry because he felt that land was the best possible hedge against currency fluctuations and inflation. Trees, he added, while perhaps unspectacular as an investment, consistently delivered around 5-6pc annually and wood was almost always in demand. If the timber markets were down for any reason, he just waited until things improved -- as they always do eventually.

Forestry is proving its worth as a safe investment and is always attractive to the financial community. If we plant some land ourselves, we can create our own pension and remain in full control knowing that stock markets can collapse, currencies can go up or down and even inflation or deflation can do their worst, but the trees will keep growing into a valuable and saleable low-risk asset.

With a little help from a qualified forester for the essential form-filling, we can avoid giving high commissions to pension and investment fund managers and stick with what we know and understand. I could never figure out why farmers occasionally invested in forestry funds when they could buy and plant land themselves, and thereby benefit from the higher premium returns that they alone enjoy.

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We have a huge financial advantage over others, due to the way in which the afforestation schemes are structured, and can easily carry out all fencing, planting, drainage and maintenance work ourselves or alternatively employ one of the many contractors available.

There are, of course, people outside farming who can benefit from investing in a reputable forestry fund which has proved its worth over the years. But given the advantages that farmers have, planting your own land does look to be the better option.

Despite the current high prices for livestock and a general buoyancy in agriculture, markets rise and fall -- as we all know to our cost.

A stroke of a pen in Brussels can alter the entire financial scene, and if EU leaders decide to do deals with South American countries and take their cheap beef in return for opening up their markets to goods from Europe then this would spell trouble for our livestock exports.

I cannot see that we will ever be self-sufficient in timber, whereas we must export most of our meat and dairy products to survive. It has always been a tough world out there and we receive little sympathy if we make costly mistakes. I should know, having made more than my share of them over the years, but at least I learned from them and, above all, learned not to depend totally on any one form of investment.

I like the feeling of solid dependability that growing trees brings. I like the annual premiums and the knowledge that, so long as I look after them, my trees are growing into money and the thinnings are already giving a return.

I would never wish to be totally dependant on forestry, but for an additional farm enterprise, it looks hard to beat.

Give it some thought this autumn.

Indo Farming