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Thursday, April 24 2014 @ 10:25 PM EDT

A Couple Of Days In The Interior - Looking At Teak Plantations

Teak & Reforestation #Panama - By DON WINNER for Panama-Guide.com - I spent Friday and Saturday last week with Jeff Duda, the President of Panama Teak Forestry, looking at some of their plantations, installations, and facilities in the interior. Jeff's been quietly building his plantation teak business in Panama over the past ten years, and they now have a complete saw mill to process the lumber for export. They've also built a kiln that's practically ready to go - once they finally can jump the hurdles necessary to get the electrical connections to the mill upgraded to have enough juice to turn it on. The saw mill and kiln are located next to a relatively small town outside of Santiago, and there simply isn't enough electricity being supplied to run both the town, the saw mill, and the kiln. Jeff has been working with the electrical company to get a hefty upgrade installed, but as usual, "this is Panama" and nothing happens overnight. It turns out the electrical company was doing what they needed to do, but the whole electrical upgrade project was being held up by a need for government approvals of plans, stamps, and paperwork which has now been done. So, slow and steady progress. Jeff's operation is really very impressive, very "green" and environmentally friendly. They buy farms that were previously being used as pasture and grazing land for cattle. Normally when Panama Teak Forestry buys the land, the existing soil is so burned out it can barely support even one head of cattle per every two hectares, if that. The soil has been abused for so long it's normally exposed to the elements and eroding into the neighboring streams. If you look hard a pasture land in Panama currently being used for cattle, you can easily see the bright red clay soil (exposed) carrying a relatively thin cover of grass. Once Panama Teak Forestry buys the land, they plant about 1,100 teak trees per hectare (initially) and use environmentally sound agro-foresty management techniques such as organic fertilizers, the recycling of all byproducts such as sawdust, tree bark, and animal manure. The end result is land that is recovering, teak trees that are healthy and growing, and soil that is getting better and healthier with each passing day.



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More Than 500,000 Trees Already Planted: Panama Teak Forestry currently owns a total of about 750 hectares (1,853 acres) of land, mostly in the areas of Santiago and Penonome in the interior provinces of the Republic of Panama. One of their largest single tracts of land is in the Sona Valley, where they have about 285 hectares of teak planted. All told, in the past ten years Jeff has already planted more than half a million trees, and he's still going strong. Right now the concentration of carbon dioxide in the atmosphere are peaking again. Scientific data based on ice core samples taken in Antarctica indicate we are currently experiencing a peak, and CO2 levels in the atmosphere are at their highest levels in the past 125,000 years. Photosynthetic plants are crucial for converting CO2 to oxygen and regulating the climate. It’s tempting to hope the Earth’s forests can soak up our excess carbon and solve our greenhouse problems, however in reality the population of the world continues to rise, people and urban developments continue to expand into areas that were rural countryside or virgin forests, and the numbers of trees in the world is shrinking due to deforestation. Panama Teak Forestry has found a way to do several things at once. They are reforesting land that was originally virgin rain forest, clear cut many generations ago for use as cattle land. They are planting teak trees, which are essentially very efficient "carbon sinks" that capture atmospheric CO2 through the natural process of Biosequestration. What's more, Panama Teak Forestry's model is environmentally responsible, sustainable, as well as exceptionally profitable. You might think Jeff Duda is a bit of a "tree hugger" at heart. Well, I thought the same thing myself, but this weekend I stumbled onto a little more proof...

Jeff Duda, President - Panama Teak Forestry - "Treehugger Extraordinaire"

What is teak? Panama Teak Forestry grows teak - scientific name Tectona Grandis - using seeds originally from Burma. Many years ago investors imported seeds from Burma to Costa Rica, and then those seeds were imported from Costa Rica to Panama. Scientifically speaking - on a genetic level - there is no difference whatsoever between the naturally occurring "jungle teak" in Burma and the plantation teak being grown by Panama Teak Forestry. It's the same stuff. Teak is a very dense tropical hardwood naturally occurring in jungles and rain forests around the world. Teak is a very hard, heavy, durable, and strong wood, distinctively oily to the touch. The naturally occurring oils and silicates in teak make the wood perfect use in outdoor furniture, boat decking, and anything exposed to the elements. You see, Tectona Grandis evolved in a very tough neighborhood indeed. The trees developed resistance to the rot, fungus, and boring insects found in the jungles of the world in order to survive. These characteristics, evolved over time, and they make teak a very valuable commodity in our modern world. When first cut, teak has a tawny golden color streaked with dark brown and gold. The color lightens as it dries and can look almost white once it has been aged and sun bleached, as on boat decks. Outdoor furniture made out of teak will probably out live all of us.

Plantation Teak in the Republic of Panama: The idea of growing teak on plantations to make money is not new. However, many people have tried to grow plantation teak and failed. Teak only grows well in a very narrow band within 10 degrees of the equator. If you look around the world close to the equator there are a lot of oceans, a lot of desert, and a lot of unstable governments. Panama offers all of the right conditions where teak will not only survive, but thrive. With proper care and forestry management plantation teak in Panama can produce excellent results in terms of healthy trees, good growth rates, and quality lumber. Teak also requires a distinct wet and dry season in order to produce good heartwood, the most valuable part of the tree. All of the leaves fall off during the dry season, and this is when the tree produces the "heart wood", the most valuable part of the tree. Some plantations have made poor choices in terms of land selection, and while their trees might appear to be growing big and tall they might contain relatively small amounts of heartwood, due to a lack of a distinct wet and dry season. Teak can and will grow very well in Panama, but plantation management starts before the first seedling is planted, with proper land selection. Soil conditions, soil composition, drainage, and topography are all very important - part of the sophisticated knowledge Panama Teak Forestry has developed over time.

Heartwood: This stack of logs from a 12 year thinning demonstrates a good ratio of the darker "heartwood" in the middle of the tree, to the lighter "sapwood" in the outer rings.

Teak As An Investment in Panama: Many people have a desire to "do something" about greenhouse gasses and the environment, but few are ready to dump their modern lives, stuff it all into a backpack, and head off to the rain forests of the Amazon in Northern Brazil to fight hand to hand against illegal logging activities. Panama Teak Forestry has developed a way to invest in a project that's environmentally sound as well as economically attractive. The only way a plan to "do something" to help the environment will work is if it also makes money as a business model. Fortunately, teak is one of the most valuable wood commodities in the world. It's natural resistance to insects, rot, mold, and mildew make it a natural choice for use in outdoor furniture, boats, decking, and in anything that will be exposed to the elements.

Long Term Strategic Growth Plan: Right now, today, Panama Teak Forestry already owns about 750 hectares of land, however the company's long term strategic goals include an eventual expansion to a total of 5,000 hectares planted with teak. This would allow for an annual harvest of 200 hectares, or just 4% of the total planted area, every 25 years. The remaining 96% would still continue to grow, unmolested. The rest of the plantation continues to sequester massive amounts of atmospheric carbon dioxide (CO2). The trees get bigger and fatter. And of course, as soon as the 200 hectare section of mature trees is harvested, it's immediately planted again with 1,100 new trees per hectare. At maturity there are about 260 trees per hectare, so a total of about 52,000 mature trees will be harvested. Before that lumber is even processed through the saw mill, those mature trees will be replaced by 220,000 newly planted seedlings on the harvested 200 hectares. Each year this harvesting and replanting cycle will continue. So the obvious question is, how much lumber will be harvested every year?

Panama Teak Forestry's 285 Hectare Sona Valley Plantation

What's A "Board Foot"? In the lumber industry, large volumes of wood are typically discussed in terms of "board feet." A board foot of lumber is a piece of wood measuring one inch thick, square with 12" per side. So, a board that's one inch thick, six inches wide and two feet long contains one board foot of lumber. A board that's 1/2" thick, six inches wide, and four feet long also contains one board foot of lumber.

How Much Wood Will Be Harvested Annually: When a hectare of teak is newly planted, the seedlings are planted at a density of about 1,100 seedlings per hectare. The plantations are then regularly thinned out over time in order to remove the less than perfect trees, and to allow more of the natural resources (sunlight, rainwater, soil minerals) to the better, healthier, and straighter trees. These thinnings occur at the seven, twelve, and eighteen year points. With each thinnning the total number of trees per hectare is reduced, to the point that at 25 years there are only about 260 trees per hectare. However, these are the large, fat, mature trees that are now ready to be harvested for the lumber they contain. Next obvious question - How much lumber will be produced by one hectare of mature plantation teak? Conservatively speaking, one mature teak tree at 25 years of age will produce about 350 board feet of lumber. Doing the math - 260 trees and 350 board foot of lumber per tree - comes to 91,000 board foot of lumber, per hectare. If 200 hectares are harvested, that's about 18.2 million board feet of lumber.

Don't Forget The Thinnings: Remember, during the same year that 200 hectares are being harvested, there will be another 200 hectare parcel being thinned at the 18 year point, and yet another 200 hectare parcel being thinned at the 12 year point. Conservatively speaking, these thinnings will produce another 12 million board feet of lumber. So eventually, Panama Teak Forestry plans to produce and export about 30 million board feet of teak per year, sawn, kiln dried, heat treated, and fumigated. And I'm not going to float any numbers or tell you how much that lumber will be worth on the market. You can find out for yourself by doing a simple Google search for "teak price per board foot" and then you tell me how much the lumber will be worth when it's harvested. Do your research, pick a market price, and multiply that times 91,000 = value of one hectare of mature teak. No, it's right, and your calculator is not broken. Any hard-nosed businessman who doesn't give two shakes about the environment, and who only cares about the math, numbers, and making money knows that teak is a solid investment.

The Panama-Guide Due Diligence Seal Of Approval: I get contacted all the time by people who make bad investment decisions in Panama, usually after it's too late, they've been ripped off, and now they are taking legal action in an attempt to get their money back. They want to talk to me because they intend to also fight their battles in the media, to the extent possible. I hear all of these sob stories and it amazes me sometimes the lack of "due diligence" investigation conducted by some of these otherwise exceptionally smart individuals. When it comes to Jeff Duda, Panama Teak Forestry, and their plantations, I've already done the work. A small group of investors have put their money into something that's growing nicely, an investment poised to produce substantial returns. Again, no promises. Do the math, and figure it out for yourself. What matters is - it's real. The trees are there. They actually own the land. There's no threat of unfulfilled promises. There are only a very small handful of people in Panama that I will stand next to and give my total, complete, and enthusiastic endorsement. Jeff Duda is one of those people, and Jeff is the President of Panama Teak Forestry. It's as close to "bullet proof" as you can get in this environment.

Recession Proof Investment: The nice thing about investing in a teak plantation is that the trees are out there, happily growing on the land, regardless of what's happening on Wall Street. The trees don't give a hoot about the unemployment numbers - up or down and they just keep on growing. The politicians in Washington DC haggle and wrestle over deficits and budgets and politics - causing turmoil in the investment markets - and fortunately the teak trees in Panama don't watch the news on Cable TV. They grow at a very steady and predictable rate, meaning it's relatively simple to calculate how much they are worth now, as well as how much they will be worth in five or ten years into the future. Some people invest in gold as a hedge against market or currency fluctuations, but the last time I checked gold doesn't grow. The price of gold has been going up lately, but the increase in value comes from unpredictable fluctuations in market prices. So, an investment in teak is relatively "recession proof" in that at a very fundamental level - trees are just trees. They grow, they get bigger, there's more wood, so there's more to sell at maturity. Pretty simply concept, really. But of course, all of that works only if they lumber is worth something on the open market.

Global Availability and Demand For Teak: Teak occurs naturally in only four countries in the world - Myanmar (Burma), Laos, Thailand, and a relatively small area of India. The the worlds supplies of naturally available teak - also known as "jungle teak" or "rain forest teak" - are quickly dwindling. Demand for teak, however, remains high and is increasing, as evidenced by the increasing wholesale and retail prices of teak lumber and things made from teak wood. Of the countries where teak occurs naturally in the rain forest;

  • Thailand: Thailand once had vast rain forests with naturally occurring teak, but the government of Thailand banned all teak logging in 1989 after extensive flooding in 1988 was blamed on deforestation. Now Thailand is a net importer of lumber, and all teak exportation has virtually stopped.

  • Myanmar (Burma): According to the US State Department - "Burma (Myanmar) is an underdeveloped agrarian country ruled by an authoritarian military regime. The country’s government suppresses all expression of opposition to its rule. The Government of Burma held nationwide elections on November 7, 2010, the first such elections in Burma in two decades. President Obama stated that Burma's elections were neither free nor fair and failed to meet any of the internationally accepted standards associated with legitimate elections." In short, Burma is very much like North Korea, but in many ways worse. The EU and the US have imposed sanctions on Myanmars military regime, which were extended in 2007 to prohibit the import of all timber products and other materials. However, it is it has been claimed that teak products from Myanmar are still being imported into the UK, and probably other countries, via China or Indonesia. As a result, there is no legal teak on the market from Burma in the United States. Political opponents to the military regime call it "Burmese Blood Teak" because they use they money gained from slashing their rain forests to oppress their people and stay in power. The conclusion is that Burmese teak is a bad thing.

  • Laos: According to the FAO: "Teak (Tectona grandis) is one of the most valuable timber tree species. As the price of teak is relatively high and its supply is limited, the species has been introduced into large scale planting programmes in countries in the tropics. In Lao, the natural teak forest occurs throughout the north west and these stands are a continuation of the teak forest of Myanmar and Thailand where the ecological conditions are similar. The natural teak forest covers an area of about 14,000-20,000 ha in Xayaboury Province (west of the Mekong river on the Thailand border) and 10,000 ha in Bokeo Province (east of the Mekong river). Because of the rapidly increasing population in the shifting cultivation communities and associated forest fires, both the stock and area of natural teak forest have been rapidly depleted. At present the remaining natural teak forest is approximately 10,000 ha in Xayaboury Province and 6,000 ha in Bokeo Province - about 15% of the total forest area of Lao." The bottom line is that the availability of teak from Laos was already relatively small, and shrinking by the day.

  • India: India is a net importer of teak. It occurs naturally in the Gir National Park, Satpura National Park, and the Pench Tiger Reserve. The Indian people use teak extensively, and India does not export very much teak at all.

Want To Know More? If you would like more information about teak as an investment in Panama, feel free to contact me via email at don@panama-guide.com. My cell phone number in Panama is +011 507 6614-0341. I have a US "Magic Jack" number (845) 514-9893 that rings in my office in Panama City. Panama Teak Forestry currently has an expansion plan calling for a modest amount of new investment. Once those goals are met, that window will be closed.

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A Couple Of Days In The Interior - Looking At Teak Plantations | 2 comments | Create New Account
The following comments are owned by whomever posted them. This site is not responsible for what they say.
A Couple Of Days In The Interior - Looking At Teak Plantations
Authored by: oldmanandthesea on Monday, October 03 2011 @ 07:16 PM EDT

Don, a great article. One of the most important things you pointed out is that teak needs a dry season as well as a wet season. This should be sufficient warning to people not to buy into the teak farms on the Atlantic side of Panama, those will never produce high grade teak.

The last ten years that I lived in the US, I spent restoring old wooden boats, so I have a lot of experience working with teak. In those ten years I pulled out a lot of rotten mahogany, but never a piece of rotten teak, it just doesn't rot because of the oil in the cells. Many varnish manufacturers recommend against varnishing teak because of the oil content which doesn't allow the varnish to properly adhere to the wood. I developed the definitive procedure for applying varnish to teak so that it will adhere for years if properly maintained. Many of my boat restorations took first place at the Washington Wooden Boat Show.

Anyone wanting to know the proper procedure for varnishing teak can contact me at clydej@nwlink.com and I'll guide you through it.

Clyde Jenkins

A Couple Of Days In The Interior - Looking At Teak Plantations
Authored by: Anonymous on Thursday, October 06 2011 @ 03:51 AM EDT

Unfortunately, the carbon dioxide that was captured when a tree is growing is released when it is cut down.