Agro-forestry is good timber resource

Corn, coffee, cattle, and other crops can be raised on land that also supports cultivated timber. This symbiotic approach, known as agro-forestry, has clear ecological benefits – and it could become a new asset class for timberland investors.

The opportunities and obstacles to expanded agroforestry are explored by the Global Agroforestry Review, a new report from RISI Analytics, a leading information provider for the global forest products industry.

“Public concern about environmental impact is mounting on agri-businesses, and on the pension funds and others who invest in them,” said Mr John North, RISI International’s timber economist and co-author of the report, along with RISI Director of International Timber, Mr Bob Flynn.

“Timberland investment management organisations (TIMOs) and other investors should recognize the risks of current ‘monoculture’ approaches and the potential for agro-forestry to mitigate those risks. Agro-forestry is not a panacea, but it offers tangible benefits,” said John.

‘Silvo-pasturing’

The review is the first study of its kind from RISI. The report combines a survey of agro-forestry methods with in-depth analysis of their potential value for investors and the forest products sector.

Agro-forestry is an accepted practice throughout much of the world. Important cash crops, such as corn and rice, are planted in rows among eucalyptus trees in Brazil, India, and other major agricultural exporters.

Coffee and cacao are harvested from timber-producing forests in Latin America and Asia, and cattle graze among cultivated pines in Argentina – a practice called “silvo-pasturing”. Researchers and landowners in the US and Brazil, among others, are exploring how agro-forestry methods can be scaled up worldwide.

Promising agro-forestry projects include a recent investment by PSP, one of the largest pension funds in the timberland space, in a Brazilian coffee producer that integrates timber and coffee operations.

The new RISI report also describes a mixed-crop plantation developed by Global Forest Partners in Cambodia, and efforts to promote silvo-pasturing in South America by Eldorado, a major global pulp producer.

Mixed cropping

Cash crops harvested annually can support farmers, land owners, and investors while trees mature. The trees can prevent erosion and provide shade, while benefiting from the water and fertiliser applied to other crops.

Institutional investors face growing scrutiny of their practices, especially in the developing world. Agro-forestry programmes can demonstrate active support for the well-being of vulnerable farmers and ecosystems.

Agro-forestry has yet to attract significant investment from TIMOs, but John and Bob believe that the conditions are right for growth. “In our research for the review we found that the investment community believes that agro-forestry is fine for farmers, but very difficult to do on a large scale. It seems to complicate forestry operations, and there’s uncertainty around valuation of land that’s managed for multiple crops and end-users,” said John.

“Based on our review of agro-forestry worldwide, we believe that this concern about scale somewhat misses the point. It doesn’t have to be all or nothing,” John said.

Agro-forestry could comprise only a small portion of a timberland fund while adding considerable value, both through mitigating risks on-site and by improving relationships with farmers, communities, investors, and other stakeholders throughout the supply chain, he added.

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