Forestry Investment Analysis

Foresters engaged in the management of forest properties or who advise others on forest management must be cognizant of the economic implications of alternative choices. Generally, capital resources available to individuals and organizations for investment are limited. Capital must be allocated among competing investment alternatives. The nature of forestry investments requires a long-range commitment of resources. The time required to grow a tree seedling to maturity underscores this point. 

Forestry InvestmentThe decision to commit limited resources to a particular course of events should be based on the best information available. This translates into a need for systematically analyzing potential investment opportunities over time. Compound interest, growth, and yield models are the tools used for comparing the rate of return on a forestry investment with some other use of money.

Net Present Value, Internal Rate of Return, and Land Expectation Value are three of the decision criteria that are most commonly used when analyzing forestry investments.

Forestry Investment Analysis can provide answers to the following questions:
  1. Bare land value of a property
  2. Rate of return on a forest investment
  3. Feasibility of various forest management costs, such as fertilization
  4. Benefit/Cost Ratio of a project
  5. Comparing an investment that pays periodic returns(forestry) with an equivalent annual cash flow (agricultural crops)
  6. Optimum rotation for a forest
  7. The effect of taxes on an investment
  8. Effects of inflation
  9. Estimating cash flows
Timber growth and yield is an important component in forestry investment analysis. In order to predict cash flows, it is necessary to know how much timber the forest will produce over time. We employ SiMS 2006 to predict timber growth and yield in our forestry investment analysis. SiMS 2006 is the most advanced and powerful growth and yield simulator for southern pine on the market today. Many large industrial timberland owners and institutional investors across the south are using this program to manage over 12 million acres of timberland.

Mellette Forestry Group understands all of the essentials of forestry investment analysis, and we employ the most up-to-date computer models to project forest investment returns. Please contact us for professional forestry investment analysis and advice.