Tag Archives: industry
Trees Best Left To Generate Carbon Credits
Taxpayers are losing money on native forest logging in NSW. It makes better financial sense for the native forests of southern NSW to remain un-logged and left to generate carbon credits, a new report suggests. NSW taxpayers would be able to generate carbon abatement, conservatively valued at about $222 million over the next 2½ decades, and use some of the money to fully compensate timber companies, according to the analysis by think tank The Australia Institute. The NSW government disagrees, saying the report is based on an unrealistically high carbon price. Cut carbon not trees. Photo: Michele Mossop Taxpayers are presently losing money on native forest logging. ”Stopping harvesting and using the native forests of the Southern Forestry Region to generate carbon credits offers a viable alternative to commercial forestry,” the report said, citing public data about the profitability of all current logging operations, government subsidies, and company tax received from logging corporations. The NSW government has reviewed the report, but said it used incorrect assumptions. “One such error identified is the assumed net financial benefits from carbon sale quoted at $222 million,” a spokeswoman for Primary Industries Minister Katrina Hodgkinson said. ”This estimate is over-inflated and based on a carbon price of $9 increasing at 2.5 per cent real from 2015, where in reality the carbon price is likely to be around $5 flat.” While most sawmillers turn small profits, the industry overall loses money, and the losses are largely borne by the government-run Forestry Corporation of NSW. The details of their contracts remain commercial-in-confidence, but net losses via subsidies between now and 2033 are estimated to be about $77 million. ”Under current and likely future market conditions, the harvesting and processing of native logs in the Southern Forestry Region is likely to generate substantial losses, and the aggregate net financial benefits are likely to be significantly higher if commercial harvesting is stopped and the native forests … are used to generate carbon credits,” the report said. The main glitch in the proposal is that native forestry logging operations are not yet eligible to generate carbon credits under the federal government’s Carbon Farming Initiative. However, both the government and the federal opposition have said they intend to expand the scheme soon. ”The growth in eucalypt plantations has been massive, and these are now coming online and muscling in on native forest logging,” said the report’s co-author, Andrew MacIntosh, associate director of the Centre for Climate Law and Policy at the Australian National University. Read more: http://www.smh.com.a…l#ixzz2Ye9Nl6LU Continue reading
Four Reasons Farmland May Be the Investment of the Decade
By Igor Zhitnitsky and Victor German NEW YORK ( TheStreet ) — Over the last several years, U.S. farmland prices have seen astounding gains, outperforming most other asset classes by a lot and leading some to speculate that farmland is the latest in a series of asset bubbles set to burst. But while the run-up in agricultural land is cooling off for the moment and the market may be ripe for a temporary pullback, the overall trend is fundamentally positive. Here are four reasons the long-term outlook for U.S. agricultural land is strong: Foreign demand for meat: The rapidly expanding middle class of the developing world has a growing appetite for meat. While China has been able to meet its own demand, its grain production capacity is inadequate to feed its livestock, which cannot be sustained on grazing alone. Per-acre grain productivity is much lower in China than in the West, and so the country has turned to the U.S. and other large producers for feed grains. This foreign appetite has led to a sharp increase in demand for corn and soybean-producing land in the U.S., and that pressure will only increase as the Chinese and other developing world consumers continue to increase their meat consumption. That points to the increasing importance of agricultural land. Historically low grain supplies: The 2012 drought showed that supplies of corn and other grains are unusually low. Average stocks-to-use ratios — an industry standard for measuring the amount of supply cushion available to the market — is historically low and has been trending down over the decade. That indicates that growth in demand is generally outpacing supply, and price shocks like last year’s will likely become more commonplace. Historically low debt levels: During the 1980s, when farmland did go boom and then bust, the market saw high levels of debt. Farmers racked up loans and rushed to buy out their neighbors’ properties before prices went any higher, leading to a crash in land values when grain prices faltered. In this decade, however, farmers’ debt levels are very low and stable. In addition, agricultural lending institutions and Farmer Mac ( AGM _ ) have heeded lessons learned from the 2008 credit crisis and kept lending practices on the conservative side. Technologically driven productivity gains: The per-acre production of U.S. farmland has grown consistently and rapidly for decades, outpacing both the productivity of agricultural sectors in other countries, as well as other industries in the U.S. In this decade, many high-tech productivity drivers are emerging, ranging from the use of GPS for precision farming to the bioengineering of more efficient grain strains. The trend hasn’t gone unnoticed by the elites of the investment community – Ray Dalio’s Bridgewater Associates holds a sizable position in Monsanto ( MON _ )and Warren Buffett’s Berkshire Hathaway ( BRKA ) made a long-term bet on Deere & Co. ( DE _ ) So how can a sophisticated investor benefit from this macro trend? Investing in established companies that dominate the industry is one route, the one taken by some high-profile names. A more ambitious investor willing to take on more risk might also do well by picking winners from among smaller more volatile agricultural ventures springing up in the sector. Companies based outside the U.S., like Adecoagro ( AGRO _ ) and Cresud ( CRESY _ ) are examples, but one should weigh carefully the potential instability and political risks that loom over the agricultural sectors of developing countries. The best way to benefit from rising land prices is the obvious one — to own a geographically diversified portfolio of land. There are unmatched advantages to directly owning farmland, including high reliable yields and tax advantages that other asset classes lack. Owning land, however, is very involved. It comes with complexity many smaller investors don’t think they can navigate on their own — CSR ratings, proximity to transportation and irrigation, working with land managers, protecting land from erosion, commodity hedging, complying with a multitude of state laws affecting absentee landlords and liquidity issues. But for those motivated to finding opportunities in the Corn Belt, a gold rush for fertile land may be the investment frontier of the decade. At the time of publication the author held no positions in any of the stocks mentioned. This article was written by an independent contributor, separate from TheStreet’s regular news coverage. Continue reading
Plantation Land Sales Interest Resumes
Posted Sun Jun 30, 2013 PHOTO: John Hewitt says interest in timber plantation land sales is returning (Jack Hewitt) AUDIO: John Hewitt at Harcourts Rural is seeing a revival of interest in plantation land (ABC Rural) MAP: Launceston 7250 The failure of three managed investment schemes with hardwood plantations in Tasmania gutted the market for timbered land in the state. But confidence is starting to return to the sector, as woodchip exports resume. That’s the view of John Hewitt, a director of the rural real estate firm, Harcourts Rural. He says another positive factor is the Macquarie Group’s continued interest in securing plantation assets from Forest Enterprises and Gunns MIS schemes. Macquarie has been looking to take over the plantation assets of Gunns and resolve issues around ownership and liability for the schemes. And John Hewitt says Macquarie is offering landholders with Gunns plantation leases between $20 and $50 per hectare to terminate the forestry rights. “The land owners will get their land back unencumbered and they’ll own the trees,” he said. “It’s up to the land owners to assess what’s in their best interests. “It’s a tangled web as we all understand it “But because there’s a bit more confidence in the industry with some sales going ahead, when we get some clarity about which way the land will be sold, whether it goes to Macquarie or the MIS is carried on and some land owners opt out of it, or some opt in, or they’re all in or all out, it will be clearer. “But either way, there will be some land that becomes unencumbered and land owners will own their trees. “There will be interest in that land. “We’d be interested in putting together a list of those properties so we could market them to the people who are coming to us.” Continue reading
