Dear listmembers,
According to a report by Le Vif/L'Express (January 5, 1996), a leading
Francophone information weekly, which was recently posted to the list by
Nelson Wong,
>even the best forests in the world only provide a 2-4%
>annual return on investment,
Here in New Zealand for radiata pine plantations, we expect to get at least
7% real pre-tax rate of return on plantation forest (usually radiata pine)
investments. Carter Holt Harvey, the leading industrial forest land owner
uses 8% discount rate to value its forests (CHH Annual Report. 1995). I'm
told that one of our other leading forestry companies uses 9% while still
another uses 7%. I've seen private forestry investment scheme prospectuses
promoting potential returns 13.5%, although I believe that something less
than 10% is more realistic and conservative. These returns do not include
any subsidization by government for the planting or tending. They are also
all real (ie: not including inflation) and pre-tax.
I'd be surprised if similar pre-subsidization rates of return were not
being used or expected in Chile or other radiata-growing countries for
plantation investments.
I know that the US Forest Service uses a 4% discount rate and that the
question of what is the appropriate discount rate has plagued foresters
since the days of Martin Faustmann.
While I agree that 20% seems most unrealistic as a planning basis for a
forestry investment, I just wanted to point out that 2-4% is far worse than
we expect in New Zealand. I'm also curious what rates of return are
expected elsewhere. I'll be happy to summarize any information I receive
on this for a future posting to the list.
Ted
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| Ted Bilek, Forestry Economics |
| University of Canterbury, School of Forestry |
| Private Bag 4800, Christchurch, NEW ZEALAND |
| |
| e-mail: e.bilek@fore.canterbury.ac.nz |
| phone: 64-3-364-2121 fax: 64-3-364-2124 |
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