Wednesday, October 21, 2020

Bigger role for trees in boosting farm incomes

September 24, 2020 by  
Filed under News & Business

Rising timber prices and environmental benefits mean planting woodland could provide farmers with an opportunity to boost their income, says a report.

Planting trees can help offset carbon emissions – and has a potentially large role to play in meeting the UK’s net zero target, says the Savills UK Forestry Spotlight. Woodland carbon sequestration could also prove an important source of revenue for land managers, it adds.

Ethical investors see forestry as an increasingly attractive proposition, said Gi D’Angibau, who leads the rural team at Savills, Chelmsford, Essex. Farmers and landowners could reap the benefits of planting woodland, she suggests.

At the same time, the government looks set to encourage tree-planting on a wider scale. Pledges to increase woodland creation were included in many political party manifestoes last year – although more detail is needed on how additional planting would be achieved.

Clear benefits

“For commercial forestry, the sustainability arguments are clear,” said Ms D’Angibau. “We are producing a natural commodity in timber, which, if used in a sustainable way, locks up the carbon sequestered through the growth of trees.”

With a rising global population putting an increasing strain on natural forests around the world, woodland and forestry plantations will be required to deliver a greater proportion of timber and wood products in the UK and overseas.

Ms D’Angibau said: “Certification standards ensure there is a place for biodiversity and conservation in even the most commercially managed forests, meaning they are both sustainable and environmentally beneficial.”

According to the Savills report, while interest from new buyers was a feature of last year’s market, some recent trends continued. These include low supply, strong competition and reasonable timber prices, as well as rising asset values across all regions.

Investment market

The UK forestry investment market was worth just over over £121m during the year ending 30 September 2019. This represents a 2% reduction in overall sales value compared to 2018, according to the Savills report.

Analysis of the 2019 sales data shows the average gross value of UK forestry increased by 17% to £9,900/ha, says the report. This translates to an increase of 25% to £13,100  per net productive hectare.

“Due to the drop off in forest planting in the 1990s, even aged properties are now rare and restructured properties with a wide age range of mature and immature timber are now the market norm,” said Ms D’Angibau.

“Prices combine both the immediate value realisable from felling age timber and the expectation value that younger trees have. This allows investors to take a positive approach to pricing, with an opportunity for a phased income rather than just at the point of sale.”