THREE SECRETS TO OWNING A PLANTATION IN COSTA RICA

“Hello,

“I am interested in either purchasing a plantation that is already started, or starting one myself. I would like to do reforestation. Can you help me? I have seen the numbers, and it looks like a good way to make some money, help the environment, and have a nice vacation spot—maybe even a place to retire to.”

This is an example of an e-mail that Finca Leola gets several times a month. Since we say that we are willing to share information and advice, people feel free to ask us about doing their own plantations, and we’re glad of it. It gives us a chance to really explore with them what it means to have their own project compared to having someone like us grow trees for them. The truth is that we don’t need to plant another tree—we have enough to provide for our own future. But if we keep on planting for other people, we’ll protect more rainforest.

You might think that you can make a lot more if you plant your own trees. However, this might not be true. To illustrate, will you make more if you own a part of Microsoft or if you start your own software company that makes operating system software? Depends how much money and experience you have.

Three things they don’t tell you but that you have to understand

A plantation owner is in the lumber business, and every business has its secrets. If you understand the secrets, then it’s possible to do well, but if not, then you won’t achieve the results you expect. The lumber business has three things so well known that they will rarely be mentioned, because everyone will assume you already thought about them.

1. What makes you happy won’t necessarily make your trees happy.

The best-grown trees need conditions ideal for them, not you. The conditions they like probably won’t be what you’re looking for in a place to live. They don’t care if there’s an ocean view or a mountaintop panorama—in fact, the constant breezes will twist them. And they sure aren’t trying to save money by selecting cheaper soils. Have you ever visited a greenhouse? That’s a lot like what it feels like to live in the lowland rainforest climate where teak thrives. It’s probably too oppressive for you to be comfortable, especially in your retirement years.

If you’re thinking about applying for residency based on reforestation, there’s no reason to live on a plantation. Owning trees with an approved reforestation project qualifies, and then you can live—and move around—anywhere you want.

2. Loggers and sawmills only want the best trees.

We can show you stand after stand of poorly grown plantation trees where people thought that if they grew teak, they would be rich. Nothing could be simpler: Buy some inexpensive land, put trees in the ground, and come back in a few years to rake in the dough.

It didn’t work out that way. Teak has a lot of value as a straight-grained wood free of knots with a high percentage of heartwood. To achieve this quality, during the first 3 years, you must keep it free of competition and prune regularly. Good teak is worth about four times as much as poor teak.

Rarely will anyone buy trees less than 7 to 8 inches in diameter, because they produce too little good wood. Unless your planting density is correct, you’ll throw out your first, skinny thinnings or sell them for fence posts at about a dollar each.

So, your return is based largely on what you do the first 3 years. Did you buy good soil? Did you plant good seedlings, correctly? Did you keep them free of competition? Did you prune when they needed it?

We spent some time looking at older plantations and found none worth buying. Especially poor are those planted around 1998. The government in Costa Rica gave away teak seedlings and even helped plant them, but there was no instruction or money provided to care for them. There is a market for this wood, but you won’t get very much for it. The photo shows some of this teak, which may not look so bad—until you cut it open. Planted too close together and left to drop limbs naturally, this wood has heart rot and knots.

3. You have to sell those trees sometime…. It’s pretty easy to find someone to buy trees, just like it’s very easy to sell a used car. Ah, but how about selling that used car for a good price?

Unless your plantation is big enough to justify buying and running a portable sawmill, you’ll have a logger cut down the trees and haul them to a mill (where they only accept good wood, remember). Expect the logger’s crew to make a mess of things. The normal mode of operation is to bring a big tractor-trailer, drag it onto the property with a bulldozer, and drag the trees close to the truck. When they leave, all the tops and branches are left for you to clean up.

Whether you or the logger brings them to the sawmill, the mill will cut up the logs and sell the green wood, which then often goes to a broker. The broker then takes the green cants (or boards) and sells them to a distributor who receives the shipment in North America and sells directly to the end user or to a lumberyard for sale to either contractors or end users. Let’s look at the numbers (all rates mentioned were as of 2005).

Let’s say that a piece of wood in the USA is going for 10 dollars a board foot. In our research, we find that normally each step of the way, the price doubles. (This is a simplification, because every step is negotiated.) This is because you are moving something that has considerable bulk and weight.

1. Customer $10.00/board foot 2. Lumberyard $5.00/BF 3. Distributor $2.50/BF 4. Broker $1.25/BF 5. Sawmill $0.63/BF 6. Logger $0.31/BF 7. Owner $0.16/BF

So, if you’re selling to the normal chain, your $10-a-board-foot tree may only bring about 16 cents a board foot. Also, as you can see, two groups lose out on this deal: the owner of the trees and the end customer.

If you have a small plantation, this is the only option you have. Good, mature teak can go for as much as $20/BF, which means you might get 31 cents a board foot.

It isn’t always this bad; sometimes you’re dealing with fewer players and you can do better, but you probably won’t be in a position to know ahead of time or to influence how many layers there will be. This is especially true if you aren’t in the country where the trees are grown, to supervise the process. If you aren’t there, you will need someone to arrange and supervise the sale, and that will cost you about 10% of your proceeds. This may also be true if you are there but don’t speak the language.

The reason we’re pointing these things out is that we don’t want people to look on our website at the results we’re getting and think they will do equally well. We’d like you to succeed—really—because there’s so much to be done to protect the forest that we can’t do it all in our lifetimes. But to help out by becoming a plantation owner, you’ll have to put a lot of time and money into your operation. It may not be the best way for you to invest in reforestation.

Discouraged? Don’t be.

If you have us grow trees for you, you’ll actually earn more than if you own a small tree plantation. We can pay our tree owners a higher price than they could ever get from a logger. That’s because their trees are already at our (portable) sawmill, and since we grow them, we know they’ll produce the high-quality wood we want. It’s also because we’ll be doing the processing. If a person wants their trees cut and sawn for their own use or if they can market the wood, that works out well, too. Then they get all the profit except for the cost of cutting the trees and turning them into boards.

Finca Leola already processes wood and sells it directly to the end user. Often we have farmers come to us offering to sell us their poorly grown teak thinnings. We’ve been paying about 25 cents a board foot ($106 per cubic meter) for this wood. With processing, that is about 50 cents a board foot ($212 per cubic meter) by the time we put it in the barn. We sell it for around $2 a board foot ($848 per cubic meter) to the local market. This is called value-added reselling: The more layers you remove, the more profit you can make.

Stronger together

Pooling our resources, we’ll all do better. If you own trees on our land, you’ll provide us with premium wood that we’ll be waiting to buy at a good price. We’ll frequently share news with you and welcome you to come visit. If you’re into doing research on growing trees, we’d like to hear what you find out.

The wildlife will also benefit from us joining forces to plant a larger area instead of having separate small plantations—this is one way biological corridors are formed and preserved. Take the jaguar. The territory of one male jaguar extends between 8,000 and 15,000 hectares (30 to 58 square miles) and does not overlap with that of other males. It’s considered an umbrella species: By protecting it, because of its habitat needs, we protect many other animals and plants that depend on the same habitat.

If reading this article just makes you want your own plantation even more, if you can travel to Costa Rica frequently, speak Spanish, and have business and marketing expertise, then go for it, but please go for it in a big way. Remember that once you purchase the land and plant the trees, you’ve just started to spend. Be sure to allow enough cash flow through the years for labor and equipment to care for and then harvest and market your trees.

Too often, when the complexities and expense of starting a plantation are revealed, people walk away and don’t invest in reforestation after all. Or worse, they buy something that looks like a bargain but that they’re bound to lose money on. That’s a shame, because all the things they’re looking for can be accomplished by owning title to trees on our plantations.

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