Cerrado Forestry
The cerrados of Brazil
have vast areas that are not suitable for field crop production
except under irrigation. These are regions that have annual rainfall
of 1200mm or less marked by frequent veranicos (dry periods
during the rainy season) of two to four weeks or longer. While common
field crops will--at best--produce low yields under such conditions,
trees such as eucalyptus, thrive.
Eucalyptus plantations
are a profitable enterprise in the cerrados. Cost of production
is low due to low land costs (R$500/ha or less) and low purchased
input requirements. Markets are excellent and expanding. The primary
market is for fuel: Brazil's dynamic iron and steel industry is
rapidly increasing consumption of eucalyptus (converted to charcoal)
as is the soybean crushing industry. A secondary, but growing market
is for cellulose; there are three cellulose plants in Bahia. An
untapped market for wood pellets in Europe may offer significant
opportunities. Additional investment inducements are for carbon
offsets (see carbon credits)
and for subsidies (credits) issued by an environmental entity (Secretaria
de Meio Ambiente e Recursos Hídricos)
of the Government of the State of Bahia. These credits offset most
of the establishment costs of Eucalyptus plantings.
Although eucalyptus plantation
investment is a longer term investment than production agriculture
in that timber harvest is in the fifth year of production, a number
of analyses show double digit internal rates of return. These analyses
demonstrate that cerrado forestry merits serious attention as an
investment option based on a current return. There may also be potential
capital gains on the land investment.
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Note:
AgBrazil is aware of and sensitive to the criticisms of the World
Bank (Eucalyptus) Plantar Project in the state of Minas Gerais.
Western Bahia has somewhat different conditions than does Minas
Gerais. In Western Bahia, there are large areas of knocked down
cerrado and abandoned pasture that currently support no population
or employment and produce nothing of value. These areas could be
turned into productive resources by planting commercial forests.
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