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Notes to
Projections
1. The
projections in the tables above are based upon the approximate current
mill-run teak lumber prices shown below for lumber from the thinnings
and final harvest of seed-grown teak trees at the ages shown.
For two examples, teak lumber
from the thinnings of 7 year old teak trees is worth today about $0.65
per board foot or $276 per cubic meter on the local market, while teak
lumber from 20 year old teak trees is about $3.11 per board foot today,
or $1,319 per cubic meter on the international wholesale market.
|
Seed-Grown Teak Lumber |
Tree
Age |
$ per
Board Foot |
$ per
Cubic Meter |
| 7 |
$0.65 |
$276 |
| 10 |
$0.75 |
$318 |
| 13 |
$1.28 |
$543 |
| 17 |
$2.10 |
$890 |
| 20 |
$3.11 |
$1,319 |
Note: Mill-run means the average
of all of the qualities of lumber resulting from the milling of the
trees, ranging from the very best quality teak from the first log
closest to the ground, to teak from the upper logs with knots and other
defects.
It is also
important to note that young teak from the earliest thinnings is quite
beautiful and wonderful for indoor furnishings but does not yet have the
characteristics of adult teak. Those adult characteristics begin to
appear in the lumber from approximately age 13 or later and increase as
the trees mature. (You are welcome to read more in
Young Tropical Hardwoods) That increase in adult characteristics is
reflected in the teak lumber pricing listed above.
For the most
recent report by the ITTO of current teak lumber prices in the US and
European markets, go to
Teak Lumber Prices.
2. The
projections in tables above are based upon the price of teak lumber
increasing at 5% per year.
For example, teak lumber from 7
year old trees that sells today for $0.65 per board foot (from note
1 above ), that same 7-year teak lumber, increasing at 5% per year,
would sell for $0.91 per board foot 7 years from now. And teak from 20
year old trees that would average $3.11 per board foot today, increasing
at 5% per year would sell for $8.25 per board foot 20 years from now.
So that you can better evaluate
different annual increases in teak lumber prices, in addition to the 5%
increase in teak lumber prices in each of the tables above, we have also
included links for each table to show the results at 0%, or no increase,
and 10% annual increase in teak lumber prices.
Historically,
according to the United Nations FAO publication Forest Products
Prices, the median export/import prices of teak rose at an average
rate of 9.7% per year for the 18 years from 1970 to 1988 (the last year
of the report), and 13.2% per year for the last four years of the
report.
3. Both the
timing and number of trees harvested are based upon on a combination of
our experience and the experience of our professional foresters, as well
as the latest published silvicultural practices derived from years of
others' experience in teak plantations.
The actual thinnings
and harvests of your trees will be determined by our professional
foresters, who monitor the growth profiles of your trees in the
plantations.
Please also note that
if you elect to have us sell your hardwoods for you, at least six months
after any thinning or harvest will be required to mill, dry and grade
your lumber and prepare it for the local or international export market.
An additional year or more may be required for the earliest thinnings,
because young tropical hardwoods are less known, or even unknown, in the
world markets.
4. The
projections above include a mortality and cull loss of 15%. The most
likely period of mortality or cull loss is during the first years after
field planting. Our foresters will examine your trees frequently during
this period and, during the first year, we will promptly replant, at no
charge to you, any tree that is not healthy or in any way not growing
properly.
5. The
height and diameter growth estimates are based upon growth rates on our
farms as well as those obtained in well cared for plantations on good
sites in Central America and the Caribbean.
6. For
teak, our estimated volume per tree is arrived at by multiplying the
basal area of the tree (Pi x (1/2 diameter)2) times the
usable height of the tree, and then reducing the result by 35% to
account for the taper.
7. The
amount of marketable wood per tree is stated both in board feet, a
standard lumber measure used in the U.S., and in cubic meters, a
standard lumber measure used throughout the world. One board foot is one
foot square by one inch thick (12" x 12" x 1"). There are 424 board feet
in a cubic meter of lumber.
The amounts of
marketable wood for the thinnings and final harvest are based upon the
calculated volume per tree6 and then reduced
by the estimated amount of processing waste, which is sawing losses and
damage to the logs while being harvested, transported and processed. The
inefficiency of smaller diameter logs results in greater sawing loss on
younger, smaller trees. Accordingly, we have subtracted a processing
waste of 55%, 50%, 45%, 40%, and 35% respectively for the 7, 10, 13, 17
and 20 year old teak trees.
We may achieve
more efficient yields than those projected since we mill everything
ourselves right on the farms, using the latest thin-kerf, high-yield
bandmill technology.
8. Gross
harvest proceeds, the estimated gross value of the lumber from each
thinning and harvest, are arrived at by multiplying the number of
marketable board feet per tree times the price per board foot at the
time of harvest (see Notes
1 and 2 above) and then multiplying
the result times the number of good trees harvested in that thinning or
harvest.
Although we are
managing our plantations with the objective of producing veneer-quality
logs from the older trees, to be conservative, the projected values in
these projections are based only upon the value of sawn lumber the trees
may produce and do not include any estimate of premium value which
veneer logs may bring once the trees are larger.
9. Harvest
and processing costs are the direct costs of harvesting your trees,
milling your logs into marketable lumber, and drying your lumber.
The harvest and
processing costs shown in the tables above are based on our actual
harvest and processing costs of $0.37 per board foot, increasing
annually at the same annual rate as the projected increase in the price
of the teak lumber.
10. Net harvest
proceeds are arrived at by subtracting the estimated harvest and
processing costs from gross harvest proceeds.
11. The care and
management fee is our reward for managing the care and maintenance of
your trees and the harvest, processing and sale of your hardwoods. Our
care and management fee is fixed at 6% of the net harvest proceeds. We
will defer receiving our care and management fee until you have first
received the return of the cost of your trees.
12. Net profit
per harvest is your estimated net cash flow from each thinning and
harvest if you have us sell your lumber, arrived at by subtracting our
care and management fee from the net harvest proceeds.
13. Cumulative
net proceeds is a running total of your estimated cash flow from the
thinnings and harvest of your trees if you have us sell your lumber.
14. The IRR, or
internal rate of return, is the calculation of the annual compound
return on investment from the projected cash flow if you have us sell
your lumber for you, based on the 100-tree price of $4,998 for 20-Year
Final Harvest Teak trees Lower tree prices for higher quantities would
result in higher projected IRR's than those shown in these projections.
For the
earliest thinnings, it would be good to anticipate a year or more delay
from the time of the thinning harvest until your lumber is milled,
dried, and marketed if that is your wish. This anticipated year delay is
incorporated into the calculations of the IRR for the first and second
thinnings.
Please
call or
e-mail
if you have any questions at all.
We would love
to grow tropical hardwood trees for you.
next page -
How to Order Trees
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