Everyone knows that money doesn’t grow on trees – don’t they? However, money can grow under trees.
We love trees for many different reasons but let’s discuss money. A forest rotation may take at least 45 years (e.g. for Britain’s fastest growing conifer Sitka Spruce), let alone the 70 (e.g. ash) to 120 (e.g. oak) years necessary for broadleaved trees. If you grow trees you are mostly likely investing for your children, or your children’s children: when the world and its markets will be inevitably very different. For a crop of trees to produce a good financial return you need not only great patience but perhaps a crystal ball and an imaginative business mind.
It’s ironic that it’s often not the trees and their timber that produce the greatest financial return but additional activities dependent on trees and woodland. We are edging ever closer to a time when the carbon value of trees and woodlands will be realised fully, and when monetary value may be attached to this. Recently woodland owners are beginning to be paid to deliver ecosystem services in cases where, for example, trees may help reduce flooding or deliver great wildlife habitat. Otherwise hunting and shooting, mountain bike trails, or paid recreation, such as paint balling, provide some means of gaining regular income from a woodland.
Another way of generating income from tree growing is agro-forestry: the combining of food growing with forestry. I wrote a previous post introducing the PINE research project: growing chickens under trees in farm woodlands. Setting up our poultry farming operation required considerable capital investment at two farms where we produced 1200 free-range birds every week under the trees, sold through Tesco. A capital investment of some £70,000 was required at each farm to start up the system but the business model was to repay the capital outlay within five years. Cash flow was positive from the first month and remained so. The income per unit area of land far exceeded that generated by conventional land use. A system such as this is capable of delivering a truly sustainable system at a time when farmers are being asked to diversify, reduce reliance on grant support and embrace their role as guardians of the countryside.
If you are interested in the detailed figures and financial models – read more below.
The business model was modelled using Monte Carlo simulation and financial performance analyses run for a 120-year period. An Internal Rate of Return (IRR) of 15.5% was predicted for the six-week system which remains viable under a `worst case’ scenario (IRR of 12.6%). Factors which affected financial performance most (decreasing in magnitude) were prices achieved for broilers, costs of brooding houses, chicks, arks, feed and timber prices. The main anticipated effects of biological interactions on financial performance (increased ranging on feed conversion and excess nutrient supply on tree health) were not supported by analysis. Further research was particularly warranted on the welfare benefits offered by the tree component and its relation to price premia. Read more.