The agribusiness asset class is divided into two broad categories: forestry and non-forestry.

Forestry MIS

Forestry managed investment schemes have the purpose of establishing and tending trees for felling in Australia. An investment in forestry involves financing the initial cost of planting trees with a relatively low amount applied for ongoing maintenance. These schemes are typically longer in duration than non-forestry investments as it usually takes longer to reach maturity. Further, it is generally at the point of harvest that the projected return is expected.

Which species?

Within forestry, there different types of trees to choose from. They differ not only in species but in the length of project, the end uses and end markets.

Eucalyptus
Hardwood Eucalyptus species are highly regarded in the pulp and paper industry due to their superior fibre qualities and ability to provide consistently high pulp yields, which is advantageous for papermaking.

Typical species like Eucalyptus Globulus and Eucalyptus Nitens are currently the preferred hardwood chip species for export to Japan where the main export market for pulpwood has been for the past 30 years. Japan currently imports approximately 20 million tonnes of hardwood woodchips each year with Australia being the principal supplier with a market share of approximately 37%. There is a strong correlation between increased GDP and increased paper and paperboard consumption.

Australian Sandalwood
Australian Sandalwood is Australia’s most valuable native tree species. There is increasing demand for sandalwood in Asia with Taiwan being the largest importer of Australia Sandalwood from Western Australia. The main markets for this species are in South East Asia and China where the wood has traditionally being used for incense production. World consumption of wood products is rising, especially in the Asia Pacific region.

Indian Sandalwood is subject to government controls on production and exports in its native countries of India and Indonesia. Due to the export bans world trade is dominated by Australian Sandalwood at around 2000 tonnes per annum. Despite the financial market volatility, the value of Sandalwood has increased substantially. Products produced from Sandalwood include logs for carving, oils for use in cosmetics and ceremonies, and sawdust, powder and chips for manufacture of incense sticks.

Indian Sandalwood
Indian Sandalwood is the most valuable species of Sandalwood in the world. This tropical hardwood has been used for thousands of years in perfumes, religious worship, carvings and incense. Supply of natural Indian Sandalwood is rapidly depleting due to high demand and an unbridled black market. Australia has the only known large scale commercial plantations of Indian Sandalwood in the world.

Indian sandalwood is used for high end perfumes, cosmetics such as moisturisers and soaps. This aromatic wood is internationally prized for use in religious worship, joss sticks and to extract Indian Sandalwood oil, an important ingredient used in fine fragrances such as Chanel No 5.

Mahogany
Mahogany is the common name for a broad range of tree species, the timber from which has been traded around the world from the middle of the 16th century. Mahogany is a dense hardwood that is fast growing, adaptable to a range of environments and has good resistance to pests and diseases. The species are ideally suited for high value end uses such as decking, flooring, joinery and furniture in solid and veneer forms. Other common uses include boat, coach and vehicle building, sporting equipment manufacturing and aircraft construction.

Around the world there are reducing supplies of tropical hardwood as a result of over-harvesting and illegal logging in developing countries therefore demand for high quality plantation grown mahogany is expected to outstrip supply.

Teak
Teak is a medium weight, strong wood of average hardness. Its heartwood is one of the most naturally durable woods in the world and is particularly valued for its resistance to decay and termites. Teak is commonly used for flooring and decorative uses such as panelling and carving. Its best known purpose has been for decking in the boat building industry where its extensive use has been attributed to its beauty, durability and resistance to dry rot and extreme weather conditions. Teak is also in high demand for furniture, construction materials and reconstituted products.

The demand for Teak in Europe, North America and Japan is very high and has continued to increase over recent decades. However, supply from countries with natural Teak forests, such as Thailand and Myanmar, is decreasing due to over cutting. There are no established prices in Australia for teak however premium prices in other countries are paid for the timber due to the limited availability of natural teak in the international market.

Radiata Pine
Softwood Radiata Pine is a particularly versatile species and is widely appreciated in the manufacture of decorative veneers, structural lumber and reconstituted wood products.

The softwood timber industry in Australia is well run, world scale and internationally competitive. Markets for use of softwood timber are readily accessible and diverse, including newsprint, fibreboard, medium density fibreboard (MDF), solid wood products and building materials. The market for softwood is three times the size of the hardwood market and is continuing to grow and it is the preferred timber material for most building applications in Australia.


Non-Forestry MIS

Non-forestry managed investment schemes include horticultural investments such as nuts, olives, citrus fruits, stone fruits, applies, truffles and wine schemes as well as other agriculture schemes such as breeding animals, abalone and south sea pearls. Non-forestry investments generally have higher ongoing maintenance costs than forestry schemes in addition to the initial plantation costs. Depending on the scheme, investors potentially receive revenue from non-forestry projects earlier and more regularly..