Since it started, CostaTierra has concentrated its reforesting efforts on teak. The reasons for this focus are

  • high value characteristics of this wood
  • high resistance of teak to pests and plant diseases
  • high international demand for teak
  • attractive profitability of investing in teak

 

About Teak

Teak is among the fastest growing hardwoods. Five-year-old trees in our farms have trunks with a diameter of 10 to 15 cm and can be as tall as 10 meters. At the ideal harvesting age of 20 years, the tree trunks can be 25 to 35 cm wide and reach as high as 25 meters.

Planting and maintaining teak trees in the suitable soil and climatic conditions prevalent in Costa Rica is relatively easy. Teak trees are very resistant to plant diseases, drought and forest fires.

The harvested teak wood is characterized by its beautiful color and grain, which it gets thanks to its high oil content. It diminishes water absorption by the wood, giving it greater resistance in outdoor uses.

After 8 years, trees on our farms will reach trunk diameters of 15 to 20 cm, and heights of 12 to 15 meters.
Its durability makes teak wood the main choice material for outdoor furniture.

Nachfrage nach Teakholz

Because of its outstanding qualities as a building material, cultivated teak wood has several applications.

  • Outdoor furniture and decks
  • Parquet flooring
  • Doors
  • Indoor furniture
  • Construction

The most important markets for teak wood are India, China, Indonesia, the United States and Europe. However, even in Costa Rica itself, the demand for this wood is rising, especially in construction. As a result of this wide international demand, teak wood producers are not dependent on the development of a single market.

Maintenance of a Teak Farm

All of CostaTierra's teak farms are reconverted cattle pastures. Forests are under strict protection in Costa Rica and cannot be cut down to make farmland. This is why our farms are insterspersed with 50% forest areas.

Factors that influence the suitability of a plot of land:

  • Climatic conditions
  • Soil quality and profile
  • Altitude
  • Topography
  • Road access and availability of electric services
  • Possibility of additional uses, like building a cabin

 

To plant a teak farm in the beginning of the rainy season, we use selected seedlings raised from certified seeds. The young trees are planted at a distance of 3.5 meters from each other and fertilized.

 

In the dry season the lateral branches are removed from the trees.

During the first three years of a teak farm, constant weeding is extremely important. Vines and other competing plants are cut back mostly with machetes, until the seedling reaches a height of around 5 meters and can fend for itself. Another constant task during the development of a teak tree is the cutting of its lateral branches, so that the growth can concentrate on the trunk and eventually yield an 8-meter long, knot-free log. Thinning is carried out at around years 5, 9 and 13, so that out of the original 800 trees per hectare, they are reduceed to 250 – 350. This gives the remaining trees more room for growth and allows them to develop thicker trunks.

The ideal harvesting time for teak trees is after about 20 years, as after that point the volume of wood increases only slowly. The logs can either be loaded at the farm into containers for export or cut into squares for the local or foreign markets.

 

Profitability

The profitability of an investment in a teak farm is determined by several factors: the purchase price, the maintenance costs, the growth rate of the teak trees, and the price of the teak wood at the time of the harvest.

CostaTierra sells a hectare with 3-year-old trees for US$ 22-25,000. In comparison to other professional sellers, this is by far the most competitive price per hectare for a teak farm. This price already includes the cost of maintenance up until the second replanting. Die weiteren Bewirtschaftungskosten können weitestgehend durch die Ausforstungserlöse gedeckt werden.

We base our calculation of profitability on a teak farm with 300 trees per hectare, which can be cut at age 20 years. With a usable length of 8 meters and an average diameter of 26 cm, these trees yield about 127 cubic meters of wood per hectare. The current price in India for a cubic meter of wood of logs with this diameter starts at US$ 650. Subtracting the cost of harvesting the wood and transporting it to a harbor in India, we obtain a nett price of US$ 395 per cubic meter, or US$ 50,000 for the wood in each hectare of farm.

 

Considering a yearly inflation rate of 3%, after an investment period of 18 years, about US$ 83,000 per hectare can be made off the sale of the trees. The appreciation of the land brings in another US$ 8,000 per hectare, yielding an 8% yearly return on investment.

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It is also possible to sell the farms before the harvest. Like other brokers in Costa Rica, we will gladly help you find a buyer if this were the case.

Natural risks that apply to any forestry investment are storms, forest fires and insects, as well as plant diseases. However, since Costa Rica lies outside the hurricane zone and teak trees are very resistant to fire and illnesses, these risks are contained.

In Costa Rica, revenues stemming from farm sales are almost tax free, and after the new bilateral agreement between Germany and Costa Rica, they are not taxed in Germany either.

Please let us know if you would like for us to send you detailed information regarding return on investment and investment risk for one particular teak farm.