To: Don Hurst who wrote (1380 ) 7/31/2010 3:50:38 PM From: J.B.C. 3 Recommendations Read Replies (2) | Respond to of 4326 Well it only took a few more keystrokes, Jeremy Grantham is heavily invested in timber. Do you know when your being duped or are you that naive?Why forestry will benefit from green energy demand. Closer to home, there´s another reason why demand for wood will keep rising - the nation´s new obsession with green energy. The largest sustainable energy supply in the UK comes not from wind power, but from bio fuels. And one of the best bio fuels is wood, burnt as pellets or chips (wood is a renewable source of energy that creates little polluting waste) Edit by me...LOL EXCEPT CARBON DIOXIDE!. It is a fast-expanding sector: there are bio-energy projects that would use 3.6 million tonnes of wood fibre a year at "feasibility stage" and three of these have received planning permission, or are already under construction. The result? There is now a demand for low-quality timber in quantities that simply didn´t exist a few years ago. Biomass demand should entirely replace the demand lost to recycling, for example. All in all, says Angus MacDonald, "the macro issues look right" for timber prices and hence for investing in forestry. A rising timber price is of course a good thing for investors, but it´s not all there is to it. As Jeremy Grantham points out, if no one offers you a good price for your trees at harvesting time, you can leave them to grow on the stump and get more valuable until you can get the right price for them. So while timber prices may be volatile, the price of forestry land itself tends to hold its value: from 1992 to 2005 the FIM Timber index declined by more than 50%, but the Property Databank UK Forestry Index returned an annualised 3.7% over the same period. Over the last few years the price of forest plots has become slightly divorced from the price of timber in the UK, says Raymond Henderson. In some cases, prices have risen to levels that cannot be justified by the potential returns from timber sales. Valuing woodlands used to be easy: you looked at how much money you were going to make from growing and selling your timber, applied the appropriate discount rate (defined on page 40) and that was that - the result showed you what the woodland was worth. But today, people are paying more in the expectation of making large capital gains from the land itself, or just for the satisfaction of owning land. This is something that has already happened in the agricultural land sector and that shows no sign of coming to an end: as Henderson points out, you don´t spend £3,000 an acre on farmland in the UK in the expectation of making an appropriate return on it from growing barley. So why should woodland be any different?