|
NOTE: THE
PROJECTIONS IN THE TABLES ABOVE AND THE EXPLANATORY NOTES BELOW ARE
PROVIDED FOR YOU TO BETTER UNDERSTAND THE PROCESS OF GROWING AND
HARVESTING TEAK TREES. WHILE WE BELIEVE THESE ESTIMATES OF GROWTH, COSTS
AND YIELDS TO BE FAIR AND REASONABLE, WE CANNOT GUARANTEE THE FUTURE
VALUE OF YOUR TREES, NOR THE LUMBER OR PROCEEDS YOU WILL RECEIVE FROM
THEIR THINNING OR HARVEST. IF YOUR DECISION TO HAVE US PLANT TROPICAL
HARDWOOD TREES FOR YOU IS MOTIVATED BY THE EXPECTATION OF FUTURE
PROFITS, WE ENCOURAGE YOU TO SEEK THE COUNSEL OF AN INDEPENDENT
PROFESSIONAL WHO CAN EVALUATE THE REASONABLENESS AND ACCURACY OF THESE
PROJECTIONS.
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 $1,318 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 |
$2.27 |
$962 |
| 17 |
$2.76 |
$1,171 |
| 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%, 35% and 30% respectively for the 7, 10, 13, 17, 21
and 25 year 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 $0.29 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
|
