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Green Belt Blog (84)

Friday, 29 January 2016 11:54

Drones make a difference

Green Belt has begun using drone imagery on selected forests

Wednesday, 16 December 2015 14:34

Expansion in the Forestry Sector

Forestry investment blossoming in face of data dearth Read More

There is going to be significant expansion in the forestry industry in the coming years

If you’re thinking that commercial forestry may be the intelligent, low-risk, long-term, green investment alternative to the cyclical cheers-and-tears of the amnesiac property market, the good news is you’re probably right.

The bad news is so are thousands of others.

Private sector investment is driving the expected doubling of Irish timber production to 6.4 million cubic metres by 2028 while delivering enviable returns off some of Ireland’s poorest land – and the lion’s share of investors are classified as “farmers”.

Approximately 750,000 hectares, or about 11 per cent of the State, is under forestry. Already the highest level of cover in more than 350 years, it is trending towards 17 per cent cover by 2030: the percentage deemed necessary to create a domestic international-scale forestry industry.

From a minimal private ownership base just 40 years ago, 47 per cent of Ireland’s forests are now privately owned. The remainder is owned mostly by Coillte, the State-owned forestry company, that will only sell land under exceptional circumstances.

The total value of Irish forestry and forestry products to the economy is €2.3 billion, supporting almost 12,000 jobs while playing a pivotal role in climate change mitigation. But what does it offer the investor?

Principally, a low risk to return ratio, a largely negative correlation to stock market indices, uber-generous grants and biological growth which, unlike capital gain, is not swayed by economic whim.

However, a planting cycle of up to 35 years (for “green land,” as opposed to semi-mature plantations), a dearth of publicly-available data on forestry-driven capital gains, along with demand for suitable land lapping supply, keeps many non-connected would-be investors at bay.

Recent delays for retail investors looking to recover up to €30 million invested in nine 10-year forestry plans between 2002 and 2005 haven’t helped.

An industry collapse in 2011 just as payments started to fall due saw investors in Irish Forestry Funds having to hang on longer than expected. Just recently the 10,000 acres of semi-mature trees were sold to a European private equity fund and people are receiving their payments, although the returns are less than the initially projected 8.5-9.6 per cent per annum figure.

“There is real scope now for private investment, but forestry is a long way from being in the accepted options that most people would consider for an investment, which is something we want to change,” says Maurice Ryan, timber marketing manager at Green Belt, Ireland’s largest private forest management company - Irish Forestry Investment

It manages more than 120,000 hectares of forestry in Ireland for private clients, investors and pension funds, but it can also help locate and advise on potential forest land purchases.

“Very often when we know of people who are looking to purchase land, such as 20 or 50 acres, we can then target that through our network of foresters around the country.”

Though he concedes the lack of suitable, available land for forest planting is a “concern”, nonetheless about 7,000 hectares is planted each year in Ireland.

Neither does a famine of forest sales strike the viewer upon visiting forestsales.ie – “pretty much the shop window for forestry in the country”, according to founder Paul Lafferty.

At the time of writing there are 231 forests listed, from 14 acres to over 400, across the four provinces. Connacht, at 128, unsurprisingly makes up more than half of these, leaving Munster, Leinster and Ulster, respectively, in the dust.

Working in the industry since the late 1980s, Lafferty says one of the main reasons for the lack of private investment companies focused on the forestry sector is that the taxation system in Ireland has traditionally been “geared so that farmers who own forestry are exempt to a certain level”.

Farmers make-up a towering 86 per cent of private investors – at least in the eyes of the Revenue Commissioners – though Budget 2016 should help loosen that stranglehold.

“To turn that on its head, you could say that 86 per cent qualify as farmers. But it may not be just money from farming that is going into the forestry [that is, through the farm business, from friends, relatives or business connections]…They are not all everyday farmers, let’s put it that way.”

While regular returns from Irish forestry plantations are routinely cited at between 5 and 6 per cent, Lafferty says that does not take into account how much forestry land prices have risen over the last 20 years.

Although Ireland’s soils and climate can grow many commercial tree species considerably faster than our European neighbours, remarkably no publicly-available records are kept which factor in capital gain with forestry returns.

In the UK returns have proven to be the envy of many property investors. According to London-based Investment Property Databank, its 2014 UK Annual Forestry Index returned 18.4 per cent. Median annualised returns from 2004-2014 came in at 15.75 per cent, with an 8.9 per cent annualised total return achieved since 1992 when the index originally came into being.

Most tellingly, the UK index is calculated from private sector coniferous plantations of mostly Sitka spruce – the same species occupying more than half of Ireland’s forest area.

“The market for young plantations is only developing in Ireland, so there is no similar index in place to estimate returns here,” says Donal Whelan, technical director of the Irish Timber Growers Association.

Since 2005 the association has compiled a private roundwood price database, supplied to its own members. However, it is now launching a roundwood price information initiative called the Wood Price Quarterly that will be available to growers to inform them of prices being paid in the market for standing timber from forests.

The project will work with the forestry department of the school of biology and environmental science at UCD, confidentially compiling the price information which is sourced from timber growers and their forest managers. Curiously, data on capital gain in the Irish industry looks set to again be overlooked.

“There is going to be significant expansion in the industry over the coming years and virtually all of the increase is going to come from the private forestry sector,” says Whelan. “In order to attract landowners into forestry there are grant schemes available that cover the costs of the initial planting. After that, the annual premium scheme allows landowners to be paid an annual income for 15 years. It’s basically there to reimburse income forgone from agricultural activities on that land.” Spending commitments: Forestry in Budget 2016 Budget 2016 provides €113.8 million for forestry development, while the Department of Agriculture says it is committed to maintain spending at €110 million for each year of the State-funded 2014-20 Forestry Programme.

Almost 90 per cent of all funding will be directed towards afforestation and the building of forest roads; the former providing for 7,000 hectares of new forestry in 2016, with the latter supporting 110km of forest roads to be built.

The grant rate for establishing forests has increased by 5 per cent across all planting categories so that the entire cost of establishment is covered by the grant.

Secondly, non-farmers are now entitled to the same premium rate as farmers, paid each year for 15 years. Non-farmers previously received, on average, approximately one third of the rate paid to farmers. In tandem with land ownership and availability, it was one of the main reasons for all the “farmers” owning commercial forests.

“The new forestry programme has restructured the forest roads scheme,” a department spokesperson said. “In doing so, the grant rate has been increased by 14 per cent. Financial support has been provided for special construction works, and additional funding has been made available for the construction of bell mouth entrances.”

Crucially, Budget 2016 also removed forestry income entirely from the “High Earners Restriction” for active foresters and farmers. This means that the profits earned from clear-felling will not be subject to income tax, whereas previously it was applicable for returns of more than €80,000.

Article appeared in the Irish Times, Tuesday, December 15th, 2015. Written by Jamie Ball

Friday, 11 December 2015 13:34

Forests to Fight Climate Change

Forestry has a critical role to play in fighting climate change Read More

In an article from the Farmers Journal, A study launched at the Paris climate conference recommends clear European policy decisions to grow our forests into greater carbon sinks.

The negotiations under way in Paris include how countries will be allowed to account for activities that take greenhouse gases out of the atmosphere, including forestry.

A study presented by the European Forest Institute on the side of the COP21 climate conference and funded by European governments including Ireland recommends that the EU assign clear targets to each member state in this area.

The experts estimate that forests and the forest sector currently offset 13% of the EU’s overall greenhouse gas emissions, and a lot more could be done if they were developed and managed more efficiently.

“If adequately incentivised, member states could achieve a combined additional effect of as much as 400 Mt CO2/year by 2030 on top of the existing sink and substitution. With the existing sink and substitution this comes to an equivalent of about 22% of the current EU CO2 emissions,” the authors of the report wrote.

This is of particular interest to Ireland, where the forest cover is very low and the Government has already been providing incentives for afforestation in recent years.

“Ireland has a lot of young, new plantations. One measure for Ireland could be to further expand your forest area, but also find synergies with maybe more variation of forestry sources,” Geert Jan Nabuurs of Wageningen University told the Irish Farmers Journal. “If you only have plantations on drained peatlands, your carbon benefits may not be that large,” the lead author of the study added.

Listen to an interview with Geert Jan Nabuurs in our podcast below:

The European Forest Institute recommends a policy that encourages “climate-smart forestry”, which looks for the most cost-efficient climate benefits based on each country’s characteristics and circumstances.

In Ireland, the Department of Agriculture has signalled that it was planning incentives to convert the least efficient pastures for livestock grazing to forestry.

Yet the rest of the agriculture and land use sector should not expect a free ride from the development of forestry. The EU will decide next year whether emissions from agriculture and gains from trees should be accounted for in the same basket. Regardless of the final outcome, all observers in Paris reckon that every sector will be asked to make a significant contribution to emissions cuts, regardless of offsets found elsewhere.

Read more

Full coverage: agriculture and climate change

Friday, 27 November 2015 15:17

Winner at the Forestry Awards

Ivor Clegg won the Silver Medal at the Irish Forestry Awards. Read More

For his plantation of Oak greater than 15 hectares, Ivor was awarded the silver medal for the recognition of excellence in the management of production forestry. Ivor with Pearse in front of the Oak

Working with Pearse Gath of Green Belt, Ivors forestry was rewarded for the use of sound silvicultural management on their farms to produce an excellent forest crop.

 

Thursday, 19 November 2015 17:22

170 acres Farmland for sale in Galway

REA Hynes in Athlone are bringing 170 acres of farmland to auction.

The date set is December 8th, 2015 with an AMV of €699,000.

Green Belt does not have any direct interest in this parcel of land other than seeking to plant and manage the lands on behalf of the new owner.

The land is not approved for forestry, but if approved would be subject to a full planting grant and premiums of €35,000 per annum for 15 years. These figures are subject to change and approvals from the forest service etc.

full details are to be found here

Thursday, 12 November 2015 11:04

Farmers must act on 'off kilter' emissions

Tom Arnold believes more forestry required if ag sector wants to maintain national cattle herd. Read More
Adam Cullen, Farming Independent. Published 11/11/2015


Farmers have been warned to stop 'codding' themselves into thinking that their lower-than-average greenhouse gas emissions will save them from any limits on expansion in the future.

By 2020, the EPA environmental watchdog has estimated that industries, including agriculture, will be releasing 6-11pc more carbon than allowed under the national emissions ceilings.

Based on current trends, farming will be responsible for 45pc of those emissions in Ireland, with transport the next most important sector.

"Somebody is going to pay for this, and it's time for us to be honest," said Tom Arnold, the former Concern chief executive-turned-boss of the Institute of International and European Affairs. "Agriculture is not going to get a freepass on this, even if Irish producers are among the most carbon efficient in the world. TOM ARNOLD

"There may have to be a trade-off between the size of the national herd and the forestry sector in the medium to long-term future to allow Ireland to become more sustainable," said Mr Arnold, who addressed the ICOS sustainability conference in Dublin.

"Obviously trees consume carbon and cows emit it. At the moment, the balance between the two is off kilter." The warning comes as Bord Bia yesterday launched new 'green' targets for the country's multi-billion euro agriculture industry.

Bord Bia claimed Ireland's beef industry could become the most carbon efficient in Europe, while generating an additional €300m on-farm income a year. The analysis claims greenhouse gas emissions from agriculture could be slashed by 6pc, or a million tonnes of carbon if sustainability measures on the lower-performing beef and dairy farms reached the national average.

Currently Ireland's dairy herd has the joint-lowest carbon footprint in the EU, while the beef herd is ranked at number five.

Global Discussions have been intensifying ahead of world leaders meeting in Paris next month to strike a global deal on curbing emissions over the coming decades.

Mr Arnold said that the industry needed to start analysing the numbers behind the latest growth plan in Food Wise 2025 for the food sector.

"We are not going to be able to cod ourselves on this," he added. He also stressed the importance of delivering higher genetic merit animals to reduce emissions.

"That should be the priority before adding to numbers. We can make great strides through better breeding programmes and that has to be a priority," he said.

Eddie Punch, the ICSA general secretary, said there was a compelling case to maximise production of beef and dairy in Ireland as it is a sustainable grass-based system.

Mr Punch said that grass also sequesters carbon but it was often "ignored" in the debate. Both Harold Kingston, the IFA's environment spokesman, and the ICMSA's John Comer argued that simply reducing emissions to cut production would be counter productive as it would be produced in less efficient areas.

Mr Arnold warned that the environmental issues go beyond the farm gate, and processors and retailers also have a role to play. He added that incentives would have to be put in place to ensure farmers invest in biomass crops such as forestry.

Former ESRI Economist John Fitzgerald said the odds are "stacked against farmers" who want to grow biomass crops.

Mr Fitzgerald said there was "no simplistic" answer but a system was needed that benefitted both farmers and the environment.

"We need more biomass carbon-consuming production. Do we need to reduce our cattle numbers for that? It is much too early to tell. We need more research," he said.

Indo Farming

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