24/03/2016
Pine Growing —[email protected] (+256-732408880)
Recommended Trees
Pine and Eucalyptus are the most feasible trees to grow in Uganda. They are relatively high value given the time they take to mature. Pine takes 15-18 years to mature, Eucalyptus 10 years. Other tree species include Mahogany (40 years), Muvule (40 years), Musizi (15 years). Although Musizi takes a relatively short time to grow and is a low maintenance tree, it’s not high value and takes too much space to grow. We’ll focus mainly on Pine growing.
Inputs
One needs land, seedlings, labor, capital. Initial costs include cost of clearing land, buying seedlings, planting seedlings, transportation costs, seedling handling costs. Main monthly running costs include transportation costs to visit farm, security costs to safeguard against tree theft and/or fire. After year 3, maintenance costs for Pine drop significantly. Unlike Eucalyptus that’s susceptible to termites and needs a regular dose of pesticides, Pine can grow without issue in termite infested land. However each tree requires some level of care against pests and disease.
Data
440 seedlings of Pine are recommended on every acre of land.
Each seedling costs about 400/= ($0.15).
Cost of clearing an acre of land is about 150,000/= ($58)
Cost of planting seedlings on an acre is about 50,000/= ($19)
The first 3 years are the most hectic in terms of maintenance costs, making sure the trees get off to a good start. A worker can look after up to 20 acres of land. So to benefit from scale, given that the running costs for 20 acres is about the same as the running costs for a farm less than 20 acres, if you have the land and initial capital to cover planting costs, you may as well do 20 acres.
See Figure 1 for a breakdown of costs and returns assuming a 20 acre tree farm 40km outside of Kampala.
Figure 1: Cost and Return breakdown for Pine Tree Growing in Uganda
Twelve years looks like the meaty part of the curve in terms of annualized returns and time requirement. If you’re a patient investor you could go out to 40 years. There’s not much value add to the price of Pine after 40years.
Given the long time frames required for Pine investments, to help generate some interim cash flows some folks plant both Pine and Eucalyptus. A 7-year Eucalyptus log is worth 40,000/= ($15) while a Pine log is 10,000/- ($4).
The returns from Pine growing look healthy, assuming today’s prices reflect at a minimum the price of pine 10 or so years from now.
Challenges
Long Time Horizon
Hefty Capital Requirement
Easy loss due to fire and theft
Price risk at maturity although this can be hedged away by securing a price contract
Most investments have challenges, the question is, can you handle the pain?