Realising the potential value in farmland

No one would willingly plant a new forest on prime agricultural soil that provides a good cash return at the end of a season instead of after forty years – and keeps on generating annual returns for all that time. However, there are large areas of Scotland that barely make it as rough grazing. This is exactly the kind of land that it is probably going to be worth farmers while to get an opinion on from a professional forester.

In fact, Jason Sinden, Investment and Property Director at forestry management and investment specialist, Tilhill Forestry, argues that farmers should be getting professional advice even if what they are considering is no more than planting up a series of wind breaks or shelter strips. “What a landowner will see from taking professional advice and following a properly devised planting plan are things like improved timber quality and a much reduced risk of damage from pests and diseases,” he comments.

All this results in higher prices when the wood is harvested. The landowner will also probably benefit from reduced expenditure on road-in construction where this is part of the plan from the outset. This is where access has to be created for the heavy trucks that will ultimately be needed to carry off the logs. Where you have well planned access from the start it can add significantly to the overall profit from the harvesting.

“We have seen relatively small, farm scale forests and woodlands recently where they have not taken professional advice and it has cost them several hundred thousand pounds in lost profit. On a large scale forest that is poorly planted and poorly managed, the losses by comparison with a well-managed and properly designed forest, can be huge,” he says.

Where a farmer is simply considering relatively small shelter strips he or she will probably not need to engage a forestry management company for the whole 35-40 year growth cycle. It will likely be sufficient to simply take professional advice at the outset and at one or two points through the cycle.

Sinden says that he is constantly surprised by how frequently farmers fail to realise just how much value there is in the woodlands they may already have on their farms. “I was at a farm recently where the farmer said he had not been in his woodland since he bought the farm 20 years ago. When we went to have a look at it, it was clear that the value of the mature woodland was greater than the value of the whole of the rest of his farm –

Sinden says that he is constantly surprised by how frequently farmers fail to realise just how much value there is in the woodlands they may already have on their farms.

which came as a real surprise to him,” Sinden recalls.

A farm with a small woodland of mature spruce, consisting of, say 50 hectares, could easily find that it has an asset worth in excess of £1million. “If you have a £2million commercial sheep farm and a shelter strip or two, the value of the woodland might well be worth at least half as much as the farm, perhaps more,” he notes.

Even where the wood is still a long way from maturity, there is much that a professional manager can do to add value. The wood may have reached the stage where the trees require thinning out, and, if there is reasonable access, that thinning process could generate significant revenue for the farmer or landowner. The forester will also be able to advise on how access to the wood can best be laid down. This is something that can be worked on gradually over the next decade and a half while the forest matures.

“Having to sort out access at harvest time could easily knock £5a tonne off the value, which would work out at around £2,000 per hectare. So a timely resolution of an access issue could add £100,000 to the value of a 50 hectare site,” he notes.

The other problem Sinden and his colleagues at Tilhill see quite a lot is woodlands that have been left beyond their natural harvest time. “What you have then are trees that are falling over and leaning against other trees. And if it has not been properly managed, then it will be too dense and trees will not have grown at their maximum rate. Drainage will also probably be a major issue and sodden soil will result in more trees being uprooted when the wind gets up,” he notes.

A mistake he sees some landowners making after harvesting is that they will sell a high value spruce or conifer crop and replace it with what they imagine to be native broadleaf. In effect, this means replacing a high value crop with a worthless crop, which no crop farmer in their right minds would do. “Birch, Hawthorn and Blackthorn all have a role, but they need to be part of a properly designed forest. This is true even if all you are doing is putting in a shelter strip,” he says.

For example, the best kind of shelter strip has a J-shaped edge, with shrubs at the very edge, then broadleaf, then conifer. The wind then starts to rise over the shrubs, goes through the broadleaf, hits the conifer and gets slowed before it goes over the top of the conifer. If you just plant conifer all that happens is the wind rises over the top then descends again at pretty much the same speed, giving a much reduced benefit.

Where farmers are thinking of new plantings, Sinden points out that Tilhill can bring a great deal of added value to the table. “We benefit from tremendous economies of scale. One of the forests we planted out in 2016 had more new trees than the entire planting for the year south of the border,” he comments. Tilhill sources over 10 million spruce trees a year, giving them a massive price advantage.

“The grants for new planting are very generous and will cover the costs of both planting and fencing. If you are doing any kind of scale planting, then it is worth contracting out the management of that through the life of the forest. There is an outgoing for this, but it is more than covered by the added value at harvest time,” he says.