TREE OWNERS NEWS
Summer 2010
Thank You!
Sherry and I thank you all very much for your wonderful enthusiasm
and support. We appreciate every one of you for whom we are growing
trees and will continue to do everything we can to be a blessing to all
of you. Thank you all very, very much!
We are excited to bring you the following excellent news!!!
Overview (much
more below)
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We are growing again! We had slimmed down last year but
are now growing and hiring again. It’s wonderful to be moving
strongly forward.
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We will soon begin this year’s plantings, focusing on
cocobolo, Cuban mahogany, and our fastest growing species - teak,
nargusta, gmelina, suradan and mangium.
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We have evaluated our capabilities and concluded that we
will continue to plant trees for tree owners and prospective tree
owners.
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We recently commissioned a market study and the results
for both our value added products and for the upcoming hardwood lumber
demand are very, very positive - beyond anything we had anticipated.
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Our value-adding that we wrote about in our last Tree
Owners News has taken on increased importance for all of our wood.
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We
have completed defining our value added products, hired key production
and marketing personnel, leased additional production space, acquired
and installed the first phase of the additional production equipment,
and are now focused on funding and acquiring the remaining additional
machinery and equipment to hopefully very soon be in full production.
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Not long after our last Tree Owners News we made the
decision to delay further thinning during the softer hardwood market
and are now genuinely excited that as soon as we can add the balance of
the value adding equipment and begin full production and marketing of
our value added products we will be able to resume full thinnings and
distributions for all tree ages, irrespective of the hardwood market.
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One group of our value added products that we are
especially excited about is veneer. With the addition of some new,
specialized equipment we can now slice veneer from our thinned trees.
The veneer is exotic and beautiful. This ability to slice veneer can be
a wonderful benefit for every tree owner.
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Our tree prices will be going up very soon.
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The 30% special
discount will also be ending very soon.
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This year’s rainy season has begun. Everything is
beautiful, lush and green and our trees are all continuing to grow and
mature, irrespective of the daily news or the direction of the stock
reports.
Creating Value
In our last Tree Owners News we wrote that we were turning our focus
to developing high volume, value-added products to utilize and create
value for the less marketable wood from the earlier thinnings as well as
any less desirable wood that the older thinnings may produce, such as
the smaller, upper logs that tend to have more knots and the outer mixed
sap and heartwood of the teak logs. Developing an economically viable
use for the less desirable parts of the logs from older trees would then
allow us to open the older logs to obtain and sell at a better price the
more valuable inner heartwood.
Value adding has now taken on added importance as tropical hardwood
prices have softened with the economy. Once we acquire the balance of
the production machinery, we can value add for all of the wood from the
farms, including even the best adult hardwoods while the hardwood market
is softer. Then when the hardwood market firms up, we can market the
best wood directly into the market and continue the value adding as
planned for the less desirable wood.
  
Unloading and placing new value adding
machinery for the factory
Regarding hardwood markets, one very important fact that we learned
from our recently completed market study is that during this softer
market many other plantations, in an effort to maintain needed cash flow
and offset the impact of declining prices by increasing wood volume
production, have sacrificed future production by prematurely thinning
their trees, sometimes selling at or below their production costs.
Others have resorted to cutting their best trees first and leaving the
least desirable trees to grow. Other plantations have simply clear-cut
and sold all of their wood at whatever price they could obtain.
The immediate result of the added wood from the premature and/or high
grade thinnings and clear cuttings coming into the market has been to
temporarily further dampen current hardwood lumber prices.
Panel layup machine
The upcoming impact however is that this sacrificing of future
production will soon exacerbate the impending shortage of hardwood
lumber supplies, likely dramatically increasing hardwood prices. More on
this topic in Hardwood Scarcity below.
Instead of thinning early or cutting the best trees first, we slimmed
down our operations last year and have focused intently on developing
high volume value added products to add value not only for the less
marketable lumber, but right now for all of our wood, rather than wait
for the hardwood market to rebound.
Industrial moulder
We have completed defining high-volume products sufficient to create
value for all of the wood coming from the farms if necessary. The volume
value added products include solid wood panels, veneer and veneered
panels, wood trim, solid wood flooring, doors, volume
hospitality/contract furniture, and similar products – all mid-market
products that can be produced at reasonable costs and marketed in volume
to create value for significant volumes of wood.
Lumber in line to go into value adding
Some of our value added products will be marketed under our Raleo®
trademark, some under our TAH, Tropical American Hardwoods, mark. Others
will be under other marketing names.
A selection of TAH custom flooring mixes
(click for larger image)
Having defined the products and markets, to produce the value adding
in volume we have leased an additional 10,000 square feet of production
facility, hired critical production managers and personnel both in the
factory and on the farms, hired marketing/sales personnel to market our
wood and value added wood products, and have begun acquiring the
production machinery and equipment.
Reviewing the first
veneer
Our focus right now is to complete raising the capital and acquiring
the remaining production equipment so that we can recommence thinning the
trees, grading the logs, separating them into veneer logs, saw logs, and
those that will go into our other value added products, processing the
wood, producing and marketing the value added products in volume and
making the distributions.
It is clear that all of this is all significantly beyond anything we
initially agreed to do, but we are committed to be a blessing to all of
you, and being able to create added value, irrespective of the hardwood
market, will be a blessing that we soon will be able to offer to all
tree owners.
Examples of Value Adding
Being able to value add in volume will be a significant move forward
for Tropical American Tree Farms. We have only just begun and as soon
as we complete the added production capacity we will be able to create
value for large volumes of wood from our farms. Examples of volume
projects for which we have already begun production are:
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We have begun the first deliveries for a two-year project
for 5,000+ doors and hundreds of thousands of lineal feet of solid
hardwood trim.
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Another project that our hotel furnishings have been
specified for is all 160 rooms of a new Holiday Inn. We have delivered
the model room.
Gmelina is the specified hardwood for both of these large projects.
Gmelina is increasingly specified because it takes a wide range of
stains and finishes and its wood and veneer are gorgeous.
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Another project for which we have been specified and have
shipped the first items is a 200 room hotel in Europe. Teak is the
specified hardwood.
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Another is to provide all of the furnishings and
decorative wood paneling and trim for the complete refurbishing of
another hotel, including 100+ suites, the reception/lobby, lounge,
restaurant, and bar, and the pool deck and pergola areas. Several of our
hardwoods are specified including teak for the pool deck and pergolas.
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Another exciting order developed by a very kind tree owner
is for nearly 25,000 milled, dimensioned and surfaced custom teak
“blanks” for a teak furniture manufacturer. This order will be completed
and shipped by the end of this month.
Newly installed TAH
estandar teak floor
It is truly wonderful to again be growing and moving strongly
forward!
Beautiful Veneer
We have long thought, and sometimes written, that slicing our
hardwoods into veneer held the potential of creating the best values for
all of our species. Now with the wonderful support of an astute group of
tree owners we have had manufactured to our specifications a pair of
custom veneer slicing machines specifically designed to process even
smaller diameter logs from our thinnings. This ability to produce exotic
tropical hardwood veneers adds a wonderful and valuable dimension to our
value adding operation.
  
Nargusta, Suradan and Teak transition
veneers
Until we add more slicing equipment, the majority of logs coming from
the farms will still be sawn, but after we add additional slicing
equipment we expect to separate the veneer logs and saw logs for
processing to create the best value for all.
As you can see from the accompanying photos of our first veneer
slicing, some are truly exotic and all are beautiful.
“Puro Oro” - Pure Gold
As our production team were setting up the new veneer machines, they
test-sliced veneer from each of our fast growing species – teak,
nargusta, suradan, mangium and gmelina. Sherry and I were out of the
office on the day of the tests, so we called to find out how the
test-slicing went. We already knew from previous tests that the teak
veneer would be beautiful, and imagined that the other species would be
too, but we wanted a first-hand report.
Mangium and Suradan
veneers
When we called and asked our factory manager about the veneer tests,
he responded instantly “Puro oro!” Pure gold! He had seen our prior test
of teak veneer and had worked with gmelina veneer before, but he had not
previously seen veneers of young nargusta, suradan, or mangium. He was
stunned that the veneers are so exotic and beautiful. He just repeated
“Puro oro” over and over again. The following day when we got to the
factory and saw the veneers ourselves, we couldn’t agree more.
Hardwood Scarcity
While the market study that we recently commissioned focused on Costa
Rica, it is an example of what is happening throughout the tropics. Like
most countries in the tropics over the last decades, Costa Rica has gone
from being a net exporter of tropical hardwoods to being a net importer.
The reasons are the same as we have written on our website and in prior
issues of our Tree Owners News – hardwood production declines as the
forests are eliminated for competing uses such as agriculture,
development and other non-forest uses, and at the same time the demand
for hardwoods continues to increase with the rapidly growing population
and growing affluence.
These two trends are accelerating and together creating growing
hardwood scarcity in tropical countries around the world.
Costa Rica’s national consumption
and production of wood were near equilibrium in 2004, with both
consumption and production at approximately 465 million board feet for
the year.
By 2010, Costa Rica's wood
consumption had grown to 520 million board feet, while the annual wood
production from all sources had fallen to 138 million board feet, for a
shortfall of 382 million board feet. That
shortfall was covered by wood imports, mostly from Chile.
By 2020, just 10 years from now, Costa Rica’s national consumption of
wood is projected to continue to increase, to 630 million board feet of wood per
year, while production from all sources is projected to fall to only 120
million board feet per year, resulting in a shortfall of more than 510
million board feet. As the same trend is replicated throughout the
developing world, unlikely that the shortfall can be covered by imports.
The projected 2020 wood
shortfall in Costa Rica is more than 100 times the total annual wood production
from our farms. Because this same trend is playing out throughout the tropics, this
lumber shortfall represents a nearly unlimited opportunity for those of
us who are growing tropical hardwood trees for harvest.
This impending unsatisfied
demand is why we will be
increasing our planting this year, and why we are
happy to share this outstanding opportunity with you.
Growing Again
After being essentially in a holding pattern this last year as we
prepared for the value adding products and markets, it
feels wonderful to now be growing again. As we wrote in our last Tree Owners
News and have expressed before, in every difficulty lies the seed of
equal or greater opportunity. The downturn in the economy has not only
added impetus to our value adding program, it has also resulted in the
availability of top quality managers and workers as we now are hiring
again.
Some of our most valuable employees who had left over the years for
“greener pastures” have come back to the company, bringing with them
years of precious experience in working with other companies in the
industry.
Others have come to us in response to ads. We now have the best team
we have ever had in each area of the company.
Our value adding has grown to nearly 60 employees and as we fund,
acquire and install the remaining needed equipment we expect to soon be
at or near 100 workers.
As our value added production takes hold and we recommence thinning
and milling in increasing volume, we will be hiring again on the
farms as well.
This year’s plantings will also be
creating additional jobs on the farms.
This added employment on the
farms will be a critical lift for the communities near our farms
because there are nearly no other job opportunities nearby.
We encourage all of you to have us plant trees for you this year,
both because of the huge and growing opportunity but also
because you will be providing critically needed jobs for wonderful
families in rural Costa Rica.
As we wrote in our last Tree Owners News, 2007 and 2008 were extra
rainy in our area of Costa Rica, the soils were wet in among the trees,
and we did little thinning. We had intended to catch up in 2009, but as
the lumber market continued to decline, in factoring in economic
considerations as agreed, we made the decision to delay further
thinnings until either the hardwood market rebounds or until our volume
value adding is in full production and we can create value for the
thinned hardwoods.
As a quick background, there are two basic strategies in planting and
growing tropical hardwood trees for harvest. One is to plant the trees
and allow them all to grow with no thinnings or interventions prior to
the final harvest. We are aware of two large stands of teak here in
Costa Rica that followed this no-intervention strategy, each owned by
large, capable companies. Both stands produced large quantities of
beautiful adult teak.
One of the two plantations was near one of our
farms and several years ago when the time came for the final harvest we
watched as day after day, week after week, container after container of
beautiful teak was harvested and shipped off for export.
The other, more widely practiced strategy is to remove the least
desirable trees in periodic thinnings to provide more space, nutrients
and light for the superior trees that remain after the thinnings.
Under either strategy, the wonderful fact is that the trees continue
to grow. The difference between the two strategies is that the
no-intervention strategy allows more trees to reach maturity and final
harvest, while the thinnings strategy allows for greater growth of the
superior trees.
Of the two, the thinnings strategy is considered to be the better and
is the one that we adopted for all of our trees and farms.
Even though for purposes of making projections we have assumed
specific ages for the thinnings, as underscored by the no-intervention
strategy, it is not necessary that the thinnings occur on a fixed
schedule although during a longer delay the growth may slow somewhat.
Steve measuring 1993
teak
A potentially offsetting factor is that during the delay all of the
trees, both those that would have been thinned plus those trees that
were to remain, are all being allowed to grow, and all of their wood
continues to mature and acquire the desired adult characteristics. We
may also find that the increased competition among the unthinned trees
will force them all to grow straighter and therefore may result in more
of the logs being suitable for slicing into veneer.
Even so, we very much look forward to completing funding and
acquiring the remaining value adding machinery and equipment and
resuming a full schedule of thinnings and distributions.
This Year's Plantings
We will soon begin our plantings for this planting
season. We will be
planting 15 year final harvest mangium, suradan, gmelina and
nargusta trees, 20 year final harvest teak trees, and 25 year final harvest
cocobolo and Cuban mahogany trees.
The 15 year final harvest
mangium, suradan, gmelina and nargusta trees all are very fast growing and
have the significant advantage that at all ages, their logs have very
little sapwood, meaning that almost all of the log has the desired color
and characteristics. We also now know that even their young logs produce
beautiful veneer.
The 20 year final harvest teak is also fast
growing but we are allowing the additional 5 years for more of the logs
to be the valuable heartwood.
The 25 year final harvest cocobolo
and Cuban mahogany don’t grow as fast as the 15 and 20 year harvest
trees above, but their wood continues to be even more valuable.
Now knowing the size of the impending hardwood deficit right here in
Costa Rica and extrapolating that information throughout the tropics, we
have increased significantly the quantity of trees that we will be
planting this year for our own account.
We also are happy to share the opportunity with all of you. In
addition to our own plantings we have land available to plant several
thousand trees of each of the above species for you, our tree owners.
We encourage everyone to
participate in this year’s precious plantings, not
only because of what we now know of the dramatic lumber shortages as
these trees are ready for their thinning and harvests, but also because
the more trees we plant this year, the more critically needed employment
we will be creating in the rural areas near the farms.
We very much welcome you to join us in these precious plantings.
Prices Going Up!
We have held our tree prices for nearly three years and must now
raise them. We will be posting the new prices within the next several
weeks.
In addition to the base increase, as we complete the acquisition
of the value adding equipment, we will end the 30% discount that we had
offered to fund the acquisition.
These two factors together mean that
right now would be a very good time to buy trees.
The Happiest People
A kind tree owner sent us a link to a January 7 article in the New
York Times titled “The Happiest People”. The article reports that in
three different surveys and studies of the world’s 148 countries, Costa
Rica ranks first, in all three surveys, in contentment, happiness and
life expectancy. The three studies or surveys are the World Database of
Happiness, “happy life years,” and the New Economics Foundation’s “happy
planet index.”
The factors cited in the article as reason for Costa Rica being first
in all three studies are its high levels of education, outstanding
gender equality, excellent health care, strong economy, care for the
environment and natural beauty.
Sherry and I agree. We see every day the happiness in the faces of
the average Costa Rican.
President Laura Chinchilla
Congratulations to President
Laura Chinchilla, Costa Rica’s first lady president, sworn in on May 8
of this year. Doña Laura is an accomplished leader, having served as the
First Vice President and as Minister of Justice in the previous
administration. She has also served as Deputy Minister of Public
Security, Minister of Public Safety, Chairman of the Joint Drug
Intelligence Center, Chair of the National Immigration Council, member
of the National Drug Council, National Security Council and the Academic
Council of the National Police Academy during previous administrations.
President Chinchilla at her inauguration
We believe that President Chinchilla will be an excellent leader for
Costa Rica. Congratulations President Laura Chinchilla. And
congratulations Costa Rica!
Your E-mail Address
Please make sure that we always have your current e-mail address!
It is very important that we always have on file your most current
e-mail address because our objective in going forward is to communicate
completely by e-mail, our What’s New page and our online Tree Owners
News.
Our Mailing Address
Please note that our mailing address has changed. Our mail courier
from the U.S. has moved. The new mailing address is:
- Tropical American Tree Farms
- Interlink 1238
- Box 669435
- Miami, FL 33166
Thank you very much!
Sherry and I thank God and every one of you very much for making all of
this possible. It is indeed an exhilarating journey.
Thank you all very much!
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