1. Growth rates

Growth rates are strongly influenced by rainfall. Sites with high rainfall (over 800 mm year^-1) will generally produce excellent growth rates. Lower rainfall sites (less than 600 mm year^-1) are generally unable to grow trees at commercially viable rates.

Soils are also integral to the growth of trees. High quality soils can store moisture and provide the necessary nutrients and structures for trees to grow rapidly. Poor soils can restrict growth by limiting nutrients, limiting moisture availability or limiting drainage.

3. Wood price

The price of wood at the market destination has one of the highest influences on the profitability of a plantation investment. In recent years, the price of hardwood has escalated due to the introduction of a tender system for excess resources from public forests. As Australia continues to lock up more native forest resources in conservation reserves and pressure builds on imports from countries like Indonesia, the future price of hardwood is expected to rise. Severe bushfires in Victoria in recent years has further depleted public resources.

4. Transport costs

After harvesting, the logs from each plantation need to be delivered to a designated market. A large travel distance with a high component of low-quality roads (gravel or narrow bitumen) can incur a high transport cost. Conversely, a short travel distance over major, multi-lane roads will incur a low transport cost.

All investments with Heartwood Plantations are planned within a suitable distance to key markets. Properties in regions with no existing local markets will incur higher transport costs and lower overall returns. All expected transport costs are outlined in the Plantation Development Plans.  

Risks

The main risks for a plantation investment are from physical damage to the resource or market factors reducing prices or demand.

1. Physical Damage

Major physical tree damage or death can occur from bushfire, wind, drought, disease or insects. Although all of these factors can be insured against, there are a range of ways that the foresters at Heartwood Plantations minimise the risk of damage.

To reduce the risk of fire:

• All plantations are designed in conjunction with CFA and local council guidelines for fire management;
• Firebreaks are maintained annually with slashing, spraying or soil cultivation;
• Fuel loads are minimised within and around the plantation area through slashing or grazing; and
• High pruning trees. Although undertaken for wood quality purposes, this procedure is highly effective in preventing ground fires graduating to the crown of the plantation.

To reduce the risk of wind damage:

• Plantations are designed with suitable species for each site. Sites with high exposure to prevailing winds are designated species that are more robust; and
• Plantations are managed carefully to ensure that the trees are stable. With routine thinning, trees are able to increase their diameter-to-height ratio and are less prone to wind damage.

To reduce the risk of drought:

• All properties are thoroughly inspected to assess soil depth and climate records to ensure the most appropriate species are established on each site;
• Drought prone areas with shallow soils are eliminated from plantation development;
• Sites with long-term annual rainfall below 600 mm year^-1 are eliminated from plantation development;
• Each plantation is regularly thinned to avoid moisture stress between the trees and maintain rapid diameter growth.

To reduce the risk of insect and disease damage:

• Healthy trees are less likely to be impacted by insects and diseases. Through soil and leaf analysis, the nutrition of each Heartwood Plantation is carefully managed to ensure the trees have a strong immune system;
• Moisture stress can also increase a plantation’s vulnerability to insects and disease;
• By selecting species with suitable drought tolerance on each site and undertaking routine thinning, each plantation is equipped to withstand major attacks from insects and diseases.

2. Market Factors

Timber is a long-term investment with obvious challenges in predicting today what a market might require 25 years into the future. Despite this, timber is a low risk investment.

• It has been in demand as long as humans have been in existence and is not about to go out of fashion;
• As the world tackles climate change, the timber industry is well placed to assist. Trees capture carbon so efficiently that about half the dry weight of each tree is carbon, which remains locked up in the wood even when we use it for building products or furniture. Although there are many uncertain industries awaiting the introduction of a carbon-trading scheme, the future is bright for timber;
• As an investment, timber often does well during periods when bonds and stocks go down. Therefore it is a fantastic way to diversify an investment portfolio; and
• Unlike most agricultural investments, timber harvest times are flexible. Therefore sales can be targeted when prices are high or delayed when they are low.

Why does Heartwood Plantations deliberately chooses to grow durable, high value hardwood species rather than fast growing pulpwood?