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Belmontx;
I do tend to believe that TATF tree owners will eventually start receiving proceeds from TATF, although this is not a sure thing. I also am confident that these proceeds will be far later and far less than what TATF has projected.
My main problem with TATF all along has been that they projected high returns for years when their own results clearly showed that these high returns would not happen. The basic reality is that teak from 7, 10, and even 13 year old trees has very little value in the market. The other issue is that TATF has apparently fallen a couple of years behind in its thinnings. If we start seeing that thinnings from 17 year old teak are not resulting in any distributions to tree owners, then I think we should really start to conclude that TATF is a complete scam. These distributions should start to occur in 2010 (for owners of 1993 teak), so, if no-one on this board has reported distributions from the 17 year thinnings by the middle of 2011, I will start to conclude that TATF is a complete fraud. Until then, we will just have to wait and see.
In regards to the 1993 teak, Leo Rivera mentioned in his e-mail to Matty, which I posted on this board, that there were more than 500,000 board feet of teak from that thinning. My calculations indicate that Raleo is only buying 80,000 board feet per year from TATF (and this amount may decrease due to recent economic conditions). So I expect it to take 6-7 more years before everyone with 1993 teak gets paid for their 7 year thinnings. Thus it's not surprising that the few posters on this board with '93 teak have not received any proceeds.
In regards to my statement about non-Brunner family members getting paid before Brunner family members, I seem to recall that Steve Brunner made a statement to this effect in one of the posts on this board. I took his statement to mean that, for thinnings of a given year, the thinnings not owned by the Brunner family would be processed and sold before the thinnings owned by the Brunner family. However, all of the thinnings from a given year will always be processed and sold before thinnings from later years. My basic point in post 603 is that the statement about TATF having distributed over $1 million in distributions to tree owners is, even if accurate, highly misleading, because the tree owners who received most of the $1 million were the Brunners themselves.
My basic belief is that TATF misrepresented the likely returns from buying teak and other species of trees from them for many years, in order to attract investors. I don't believe that they intended from the start to not pay any returns to investors.
Only time will tell.
A1
Belmontx; I do believe TATF is paying the owners of the '93 teak for their 7 year thinnings. However, based on some calculations that I reported in a previous post, at recent usage rates, it will take Raleo several years to finish paying owners of '93 teak for their 7 year thinnings.
Also, the 13 year teak that can supposedly be sold in world markets for $3.00 per board foot on average is almost certainly coming from the Brunners' 1992 teak, and will be for some time to come.
Continuing my calculation from post 603, if the Brunners planted 40,000 1992 teak for their own account, they should have thinned 6,000 trees at the 13 year thinning.
At 118 board feet per tree, per TATF's projections, this works out to 708,000 board feet. If TATF is truly trying to sell this at an average price of $3.00 per board foot, it will be years before they can sell all of it, and owners of the 1993 and later teak can start getting paid for their 13 year thinnings.
In short, I think we can all expect to wait for several more years before we see any payments from TATF. I'm still hopeful, however, that we will eventually start to receive payments.
A1
How much has TATF paid to non-Brunner family members?
I tend to believe that TATF has actually paid out ~ $1 million to tree owners. However, I believe that much of that $1 million has actually gone right back to Steve Brunner or his family and close friends.
If you read through the various Tree Owners News, and articles about TATF, it's clear that most of the 1992 teak is owned by Brunner and his family. Thus, much of what Raleo has paid out so far has gone right back to them. Also, the first teak sold from the 13 year thinnings very likely will be teak owned by the Brunners. I believe at one point they said that they put other tree owners ahead of themselves, but this only applies to the wood from each year. In other words, if non-Brunner family members own teak from a specific year, they will get paid before Brunner family members who own teak from the same year, but the Brunner family members will get paid before owners of teak from the next year.
TATF planted about 60,000 trees in 1992. If we assume that 40,000 were teak owned by the Brunners, 10,000 of these would have been thinned at the 7 year thinning, and bought by Raleo, for a total of ~ 10,000 trees * 25 board feet per tree * $2.50 per board foot = $625,000. (TATF originally projected 29 board feet per tree at the seven year thinnings, and is now projecting 21 board feet per tree, so I took the average to arrive at the 25 board feet per tree number.)
Similarly, the 13-14 year old teak being sold in the world market is likely from 1992, ie, owned by the Brunners, so the money is going back into their pockets.
So, I tend to believe that the $1 million dollar figure paid out by TATF is accurate, but as much as 75% of this money was paid to the Brunners.
A1
The future price of plantation teak.
TATF currently uses an annual price increase of 5% in their return on investment projections for teak. In the past, they used a 6% annual price increase assumption. The justification for this assumption was that, as natural forests are depleted, the supply of teak will decrease, resulting in price increases. This logic may be valid for other tropical woods, such as ebony or cocobolo, but doesn't apply to teak. According to this link
http://www.itto.or.jp/live/Live_Server/666/tfu.2004.01.e.pdf
there were about 5.7 million hectares of plantation teak worldwide in 2000. According to another reference that I can't find right now, there were about 23 million hectares of 'wild' mixed forest that was being managed for teak production, primarily in Myanmar and India. If we assume that 20% of the mixed forest trees are teak, this works out to an area equivalent to an additional 4.6 million hectares of teak plantations, for a total of 10.7 million hectares. Very little teak production comes from cutting trees from virgin, unmanaged tropical forests, almost all of which are in Africa, Indonesia, and South America, and contain no teak. The plantations and the managed mixed forests are being managed for long-term teak production. Especially in Asia, the teak plantations and forests use 50-60 year rotations, which means that supply of teak is in no danger of dropping for several more decades.
It's possible that teak will be substituted for other woods, such as mahogany, ebony, or cocobolo, as these other woods become more scarce, but I think it's unlikely, as these other woods have substantially different characteristics.
Thus, I think it's more realistic to expect that the price of teak will increase at or slightly above the rate of inflation for the forseeable future. So, on an inflation-adjusted basis, I expect the average annual price increase for teak to be ~ 0 - 2%.
A1
TATF is no longer making extravagant projections for the proceeds tree owners will receive from the 7 and 10 year thinnings of their teak.
But they're still making extravagant (ie, dishonest) projections for the proceeds tree owners will receive for the later thinnings.
The 13 year thinnings are a case in point. TATF is claiming that the lumber from the 13 year thinnings can be sold into the open market, at an average current price of $3.00/board foot. TATF is also projecting that this price will increase by 5% per year.
The problem is that TATF's own figures show how dishonest this statement is. TATF has stated that they have paid over $1 million in proceeds back to tree owners. If we just look at the 1992 and 1993 plantings, both of which should have been thinned, milled, and sold by now (according to TATF's projections), we can see the following:
1992 planting: 62,000 trees
1993 planting: 170,000 trees
Total: 232,000 trees
If we assume 65% of these are teak, we get ~ 150,000 trees.
Fifteen percent of these (or 22,500 trees) should have been thinned in 2005 and 2006. According to TATF's projections, each tree should yield 118 marketable board feet of lumber.
This works out to 2.655 million board feet of lumber.
At $3.00 per board foot, this works out to $7.965 million , which if TATF's updated projections were accurate, is what should have been paid to tree owners by now, just for the 13 year thinnings of the 1992 and 1993 teak. Once again, the only conclusion I can draw is that TATF is either lazy, incompetent, dishonest, or some combinations of these three.
If the average market price for TATF's 13 year old teak is truly $3.00 per board foot, they should have been easily able to sell this wood, and send the proceeds to the tree owners. My own belief is that the average market price for this wood is in the neighborhood of $1.00 to $1.50 per board foot, before the $0.30 per board foot that TATF will subtract for processing.
So, either tree owners will have to wait a very long time for their money from the 13 year thinnings, similar to the case for the 7 and 10 year thinnings, or they will have to accept much less money for the thinnings than TATF is projecting. I'm sure TATF knows this, but they continue with their dishonest habit of projecting unrealistic returns.
A1
TATF has removed references to Raleo buying lumber.
Unless I'm missing something, TATF no longer includes purchases by Raleo in their projections for returns on a purchase of teak trees from them. They're now projecting only the proceeds that can be had by selling the young teak on the local market, for (currently) $0.65 per board foot. Also gone are the claims that, with its current rate of growth, in six or seven years. Raleo will be using young lumber as fast as TATF can produce it.
This is a step in the right direction, but more needs to be done - see my next post.
A1
Matty;
Good catch on the new offering on the TATF website. Over the years, TATF has come up with an impressive array of new offerings for suck..., er, investors. Of course, all of these offerings involve the suck..., er, investor, sending TATF the entire investment upfront, and TATF promising to pay returns on the, er, investment, over a period of decades.
I did a quick search on jatopha and pongame. I found an article on jatopha on Wikipedia. A few quotes:
Goldman Sachs recently cited Jatropha curcas as one of the best candidates for future biodiesel production.[3] However, despite its abundance and use as an oil and reclamation plant, none of the Jatropha species have been properly domesticated and, as a result, its productivity is variable, and the long-term impact of its large-scale use on soil quality and the environment is unknown.[1]
and
Estimates of Jatropha seed yield vary widely, due to a lack of research data, the genetic diversity of the crop, the range of environments in which it is grown, and Jatropha's perennial life cycle. Seed yields under cultivation can range from 1,500 to 2,000 kilograms per hectare, corresponding to extractable oil yields of 540 to 680 litres per hectare (58 to 73 US gallons per acre
http://en.wikipedia.org/wiki/Jatropha
TATF doesn't say how many jatropha trees per hectare they plan to plant, but, since they sell the jatropha in minimum quantities of 500, compared to a min quantity of 100 for the other trees, I'll assume that they plan to plant 5500 per hectare, compared to 1100 per hectare (3m X 3m spacing) for the other trees.
TATF is projecting that each tree will produce 3 kg of seeds per year. So, this works out to a projection of 16,500 kg per hectare per year, about 10X what is reported in the Wikipedia article.
I was also able to find a Wikipedia article on pongame.
http://en.wikipedia.org/wiki/Pongamia_pinnata
This article referenced another article about research in pongame in Australia.
http://www.news.com.au/couriermail/story/0,23739,23046031-3122,00.html
Although the research looks interesting, it's at a very early stage. Any investment in pongame at this point should be considered highly speculative, even without considering TATF's track record.
A1
Just;
Thanks for the reply. When someone whom I trust, such as yourself, posts information like you posted in your last post, it just makes me shake my head.
You mentioned that you have 1994 amarillon (also known as nargusta), and 1995 ron ron (goncalvo alves). TATF no longer offers goncalvo alves, but they are still selling nargusta. Your nargusta trees are 14 years old, so TATF should have substantial information about the growth rates of this type of tree, but they have absolutely no information on their web site about the growth rates of nargusta or any of the other species they sell, except for teak. Even the teak growth rates are projections, which haven't changed for years, not actual growth rates.
When I asked Steve Brunner about the size of my trees, his reply was basically that TATF had 2 million trees, and they couldn't measure that many trees. I responded that they only needed to take a sample, say every tenth tree, or 200,000 total trees, to get a good idea of the size and growth rates of all their trees.
A simple calculation:
Measure 200,000 trees at 50 trees/hour = 4,000 man hours.
Cost per man hour = $2.50
Total cost = $10,000
Double this to take into account overhead, data compilation, etc. Total cost = $20,000.
If TATF does this every two years, their cost per year to measure their trees is only $10,000. This is small potatoes compared to the millions in revenue they generate. If they sell 200,000 trees per year (which was Brunner's stated goal for 2007) at an average price of $40/tree, this works out to $8 million dollars. So their cost to determine the size and growth rates of their trees is slightly more than 0.1% of their revenue.
The bottom line is that there's no excuse not to inform existing and potential tree owners about the size and growth rates of their trees unless TATF is lazy, incompetent, dishonest, or some combination of these.
A1
Just;
Have your 14 year old trees received their 13 year thinning yet?
And if not, have you received a pre-thinning report for the 13 year thinning on them yet?
Thanks,
A1
Matty;
My calculations in post # 511 were not for my trees, but for the average for all of TATF's 1996 teak, so the calculations I did in post # 511 are appropriate for comparison to TATF's projections. A difference of 18% between the number of board feet per tree that TATF is projecting, and what will actually be achieved on average on the 13 year thinning of the 1996 teak, is not huge, but it's not insignificant either.
A1
Some TATF teak growth information...
A few months ago, I received some information from Leo Rivera of TATF about the size of my teak trees after 11 full growing seasons. Leo also provided the average size of all 11 year old TATF teak, (from the 1996 planting).
According to Leo, the average size of all 11 year old teak trees at TATF is: diameter at breast height (DBH) = 10.3 inches, and usable height: 30.9 feet.
My trees were average in DBH, and about 5 feet taller than average in usable height.
I certainly appreciated receiving this information, but...
I compared the average numbers to TATF's projections. TATF doesn't provide projections for 11 year old teak, but they do provide projections for 10 and 13 year old teak. TATF's 10 and 13 year projections are for the trees they thin, rather than for the average size of all the trees. They have also stated that they thin the smaller trees, and leave the larger trees for later harvests.
If TATF's 11 year old teak grows at the average rate that they've projected for their 10 to 13 year old teak for the next year or so, the average size of these trees after 13 full growing seasons should be about 11.6 inches DBH, and 35 feet of usable height. If we take into account that TATF will thin out the smaller trees at the 13 year thinning, I estimate that the average size of the thinned 1996 teak trees will be 11 inches DBH, and 34 feet usable height. This compares to TATF's projections of 12 inches DBH and 35 feet of usable height for the 13 year thinning.
Using TATF's volume calculations (in notes 6 and 7 on their projections page), this works out to 96 board feet per thinned 13 year old teak tree, which is about 18% below their projections.
A1
Matty;
Here's a copy of TATF's projections that were on their website for many years. I've slightly changed the column headings to make them fit in the Ihub format.
Tree # Trees Usble DBH Mktbl $ Gross Hrvst Net TATF Net Cum.
Age Trees Cut Height (in) Wood Per Hrvst Costs Hrvst Fee Prof. Net
(ft) Per Tree ($) ($) ($) ($) ($) Prof.
Tree ($)
(Bd Ft)
100 15 (loss)
7 85 25 22 7 29 73 1,825 210 1,615 0 1,615 1,615
10 60 18 29 10 56 176 3,168 364 2,804 0 2,804 4,419
13 42 15 35 12 118 755 11,325 1,094 10,231 879 9,352 13,771
17 27 10 40 15 268 2,165 21,650 2,093 19,557 1,173 18,384 32,155
21 17 6 44 18 425 4,330 25,980 2,511 23,469 1,408 22,061 54,215
25 11 11 45 20 536 6,902 75,922 7,339 68,583 4,115 64,468 118684
Teak Price Quote from Premium Company in Ecuador
Note this quote is for wood from trees at least 20 years old:
TEAK
Item: Teak wood.
Origin: Ecuador.
Latin name: Tectona Grandis.
From: Forest plantation, trees of 20 years minimum.
Cut: Planks and strips, as international standard. We accept
customer’s sizes order.
Dry: AD 16% to 60%. KD available.
Specs: Teak strips, S4S, grade A (100% heart teak one face),
grade B (80-20% heart-sap), grade C (60-40% heart-sap), no
defects, few live knots allowed.
Use: Hardwood flooring for exteriors and interiors.
Colour: Golden yellow teak to dark brown.
Measurement: Thick, width and length in mms.
Sizes:
Thick: 4/4, 6/4, 8/4.
Width: 150 mms and wider.
Length: 6’, 7’ (mostly).
Packing: Wrapped export packages.
Delivery time:
AD planks: First shipment within 30 days after received
purchase order and payment.
KD planks: First shipment within 60 days after received
purchase order and payment.
Minimum delivery order: 1 container.
Availability for this contract: Up to 4 containers 40 Ft. Ct.
HC per month.
Delivery x week: Up to 1 FCL per week.
40’ Ft. Ct. capacity: Up to 30 m3 approx.
20’ Ft. Ct. capacity: Up to 20 m3 approx.
Note: 1 m3 is equal to 35,31 ft.3
1” inch = 25.4 mms.
Conversions: http://www.metric-conversions.org/download-
conversion-calculator.htm
Prices FOB Guayaquil port, Ecuador:
Grade A at $ 1400 per m3, or $ 3.30 per Bd. Ft.
Grade B at $ 1100 per m3, or $ 2.59 per Bd. Ft.
Grade C at $ 800 per m3, or $ 1.88 per Bd. Ft.
KD: Please ad $ 60 per m3 for KD.
I estimate the average, or 'run of the mill' price for this wood is ~ $2.50 per board foot. Hard to see how TATF will be able to sell significant quantities of 13 year old teak for an average price of $3.00 when another company is willing to sell 20 year old teak for an average price of ~$2.50.
For many years, TATF projected that 13 year old teak could be sold for an average price of $6.40 per board foot. They now acknowledge that they can only sell 13 year old teak for an average price of $3.00 per board foot. From the information I've been able to gather, $3.00 per board foot is still far too high. They may be able to sell small quantities of teak at this price, but if they want to sell container loads, which they need to if they want to sell all of the wood TATF is producing from their 13 year thinnings, their price will have to be substantially lower. I guesstimate that the net price received by tree owners for their 13 year teak thinning (after subtracting processing costs and TATF's commission) will be around $1.00 per board foot.
A1
Mass45; I think Raleo does exist.
However, I think Raleo's main purpose is to entice investors to send their money to TATF. If Raleo didn't exist, TATF would not have any basis to make the projections for distributions from early thinnings that they've made for so many years, and TATF would have a more difficult time attracting investors.
Bottom line, the few million $ Steve Brunner has spent on Raleo could be considered an advertising expense for TATF, so that TATF could continue to entice gullible investors to send them tens of millions of dollars based on unrealistic projections.
A1
Belmontx, I noticed the same thing as you.
Fjonas makes many of the same statements, and in the same style, as Steve Brunner.
Hmmm....
A1
Fjonas;
I bought ten year old teak in 2006, and early 2007. It is now 12 years old (the planting season for teak seedlings is typically April through August, so I presume my teak was planted in April through August of 1996, and is therefore now 12 years old. When I mentioned that I would be very happy to get $3.00 per board foot for my teak from the 13 year thinning, I was referring to a future thinning, which should occur next year. From what I've seen, however, TATF is a year or two behind on their thinnings, and much further behind than that on their distributions. That's why I'm anxiously waiting to see when and how much someone like you or Fawtsc, who have older trees than I do, gets paid for the lumber from their 13 year thinnings.
A1
More info on TATF's projections page
When posting the link in my reply to Fjonas, I noticed that TATF had added more information to their projections page.
Here's a quote from the new information:
Below are the approximate current prices for the lumber from seed-grown teak thinnings and final harvest of trees at the ages shown. For example, teak lumber from the thinnings of 7 year old teak trees is worth today about $0.65 per board foot or $276 per cubic meter on the local market, while teak lumber from 25 year old trees is worth about $3.75 per board foot or $1,590 per cubic meter on the international wholesale market.
7 year old teak - $0.65 per board foot or $276 per cubic meter
10 year old teak - $0.75 per board foot or $318 per cubic meter
13 year old teak - $3.00 per board foot or $1,272 per cubic meter
17 year old teak - $3.25 per board foot or $1,378 per cubic meter
21 year old teak - $3.50 per board foot or $1,484 per cubic meter
25 year old teak - $3.75 per board foot or $1,590 per cubic meter
I would be quite happy to get $3.00 per board foot for my 13 year thinnings. Frankly, I think it highly unlikely that 13 year old teak is only $0.75 per board foot less than 25 year old teak. From what I've seen, most large customers won't consider buying teak from trees less than 20 years old.
I'd love to hear Fjonas of Fawtsc or someone else on this board report on what distributions they've received from the sale of the 13 year thinnings of their trees. Until that happens, I will remain highly skeptical of TATF's numbers.
A1
Fjonas;
Please look at the link to TATF's projections. They continue to project distributions after 7, 10 and 13 years. Yet, you have only received 1 distribution (each) for your 1992 and 1993 trees, which are now 16 and 15 years old, respectively.
It's hard for me to understand how you can say TATF has over-performed to their projections, when their projections indicated that, by now, you should have received ~$13,000 per 100 trees, rather than the $1701 and $1587 you have actually received.
http://www.tatf.com/projections.htm
A1
Fjonas;
Welcome to the board!
I'm glad to hear that you have, in fact, received distributions from TATF, even though they're way late.
I'm somewhat surprised that you're happy with your investment, even though it has underperformed TATF's projections so significantly.
As Matty has mentioned, one of the things that many on this board have a problem with is that TATF continues to project that the 7, 10, and 13 year distributions will occur shortly after the thinnings, even though this has never happened in TATF's 16 year history. Continuing to project distributions that happen much sooner than has ever happened in TATF's history is just very dishonest, and has made me and others wonder if anything TATF says can be trusted.
Your post gives me hope that TATF will in fact pay distributions to me and other tree owners, even though they may be less and later than indicated in TATF's projections.
Please keep the board updated on your dealings with TATF.
A1
TATF has updated their projections for teak.
I noticed recently that TATF has updated their projections for teak planted from seed.
They now project distributions as follows:
7 year thinning: $1,084
10 year thinning: $2,984
13 year thinning: $8,253
17 year thinning: $14,651
21 year thinning: $19,884
25 year final harvest: $64,943
Total distributions: $111,799
The numbers used to be:
7 year thinning: $1,615
10 year thinning: $2,804
13 year thinning: $9,352
17 year thinning: $18,384
21 year thinning: $22,061
25 year final harvest: $64,468
Total distributions: 118,864
These new projections are marginally less unrealistic than the old projections. However, there's still no mention on the projections page of the actual distributions paid to current tree owners, which, of course, are far lower than the number in TATF's projections.
TATF continues to choose to be highly dishonest in its projections, with all that implies for returns to existing tree owners.
A1
Raleo's prices:
From a 2003 article in Forbes FYI:
"Prices range from $3,700 for the smallest piece up to $12,800 for the largest."
http://tropicaltreefarms.com/htm/articles/forbes_fyi_summer_2003.htm
With these kinds of prices, Raleo's upside is fairly limited. The market for furniture this expensive, and, shall we say, exotic, is quite limited.
A1
A few comments on the reply from Leo Rivera of TATF:
Leo Rivera (in post 402) wrote:
"All of the owners of our 1992, 1993, 1994, 1995, 1996 and 1997 teak, our tree owners who have been waiting the longest for the proceeds from their first thinnings, were informed that their first thinnings would yield no return"
Of course, TATF still continues to project that there will be a return to tree owners from the first thinning of their teak.
In regards to Raleo, Mr. Rivera wrote:
"Our 1993 teak was a large planting and the trees are growing very well. The first thinning produced more than one half million board feet of lumber."
and
"After testing designs and prototypes, Raleo finally started production in 2004. We have distributed nearly $1 million to tree owners for the wood from their thinnings "
In the 2007 Tree Owners News, about 14 months ago, Steve Brunner wrote that TATF had distributed about $750K to tree owners. So, TATF has recently been distributing about $200k/year to tree owners for wood from the first thinnings, all of which comes from sales to Raleo. They've been paying $2.51 per board foot to tree owners for the first thinning. So, in 2007-2008, Raleo has been buying thinnings from TATF at an annual rate of about 80,000 board feet. This does not compare well with the 500,000 board feet from the first thinning of the 1993 teak, especially since the amount of wood from the ten year and 13 year thinnings is much larger than that from the seven year thinnings. The wood from the 10 year and 13 year thinnings combined is about 4X the wood produced from the 7 year thinning, according to TATF's projections. Some of the wood from the 13 year thinning (perhaps 25%, at best), can be sold directly into the world market, if you believe TATF. If you take this into account, the total amount of wood from the 7, 10 and 13 year thinnings of the 1993 teak that Raleo needs to buy to keep up with production from TATF is about 2.1 million board feet. The 80,000 board feet that they actually purchased is far below this number.
The latest figures from TATF continue to support what I have stated in my earlier posts - the delay from the time when early thinnings are performed to the time when tree owners will receive distributions from those thinnings will be very long - decades in most cases. This delay will be longer for later purchasers of trees, because of the huge backlog of unsold thinnings from trees that were purchased earlier.
A1
Matty;
Not sure why you didn't post this directly, but here it is for everyone.
Dear Matthew,
Thank you very much for your August 27 e-mail and follow-ups.
We appreciate your observations and taking the time to write.
Yes, as we reported in our previous e-mail, Raleo is working on utilizing the first-thinning lumber from the 1993 teak trees. Our 1993 teak was a large planting and the trees are growing very well. The first thinning produced more than one half million board feet of lumber.
Because you became a tree owner in 2007, you may not be aware that back in 1998 we wrote to everyone on two different occasions, publicly in our Tree Owners News, that our foresters had advised us that the first teak thinnings would have no value.
All of the owners of our 1992, 1993, 1994, 1995, 1996 and 1997 teak, our tree owners who have been waiting the longest for the proceeds from their first thinnings, were informed that their first thinnings would yield no return. After receiving that news from our foresters, we invested several years and several million dollars in developing Raleo to create value for the wood from the first thinnings.
Most of these tree owners are very grateful for our having made that effort and investment for their benefit. Unfortunately, some have apparently forgotten.
After testing designs and prototypes, Raleo finally started production in 2004. We have distributed nearly $1 million to tree owners for the wood from their thinnings. Some tree owners have received more in distributions than they paid for their trees, and their best trees are still in the field and growing!
We wrote pretty extensively in our last Tree Owners News - that we started Raleo as a service or benefit for our tree owners, to utilize and create a higher value for the young wood from the earliest thinnings, that Raleo’s production started 12 years after we started our tree farms, and for that reason it is taking time to build Raleo up from scratch to the point it is utilizing all of the wood from the early thinnings.
Because Raleo’s production did not start until 12 years after our tree farms began, our earliest tree owners will have waited the longest before receiving their first thinning distributions. As I explained above, all were notified of this delay and all who have not yet received their distributions elected to wait for the higher yields that Raleo can produce. Our most recent tree owners will have the shortest wait.
As Raleo continues to grow, even if it grows at only ½ the rate of its growth so far, in 6 or 7 years its sales and utilization of young wood will be more than enough to create value for all of the young wood from the early thinnings as fast as the trees are thinned and the young wood can be milled and dried.
We are also developing other, non-Raleo, higher-volume value-added uses for the young lumber that are lower in market price and will utilize the young lumber in much greater volume than Raleo. With the additional higher-volume value-added products specifically being developed for the young lumber from the first thinnings, we expect to dramatically speed-up the utilization of the young teak.
Our projections on the web are for new or prospective tree owners whose trees will not be thinned for 7 or 8 more years and accurately reflect the above.
In response to your comment about our projections stating that there is a “max of 1 yr from thinning to Raleo to $$” the actual note in our Notes to Projections is “Please also note that if you elect to have us sell your hardwoods for you, several additional months after any thinning or harvest will be required to mill, dry and grade your lumber and prepare it for the international export market. An additional year or more may be required for the earliest thinnings, because young tropical hardwoods are less known, or even unknown, in the world markets.”
I have attached a summary of all that we have written about the thinnings in our Tree Owners News, all of which is available on the web if you would prefer to review the issues of the Tree Owners News in their entirety.
In response to your questions about the thinnings, we have completed the first thinnings of the 1992, 1993, 1994, 1995, 1996, and 1997. We did not plant teak in 1998. The year 1999 and 2000 teak is in the process.
The 1992 teak has received a combined 10-13 year thinning. The 1993 and 1994 teak is in the process.
The 1995, 1996 and 1997 teak has either received its 10 year thinning or is in the process.
You may recall reading in our Summer 2007 Tree Owners News that Beto, our farms manager for nearly 13 years, had gotten behind in thinnings and reporting data and that is why we encouraged Beto to retire.
Also, the rainy season of 2007 set in much earlier than expected and our foresters determined that the fields were too wet to conduct the thinnings without the risk of damaging the roots of the remaining superior trees.
It is also quite rainy this year but Hans and his forestry team are using oxen to continue their work in the rainy season.
The 7, 10, 13, etc. thinning years are internal guidelines and the years may vary slightly. That is why our communications and projections refer to the fact that the thinnings are subject to our forester’s evaluation, which in 2007 included that the ground was sufficiently wet that we would risk damaging the roots of the remaining trees.
Once we have all the thinning data in from the farms we will send reports to the tree owners.
You probably have already seen on our What’s New page that some of the lumber from the 13 year thinning can go directly into the market without waiting for Raleo or other value added process.
Thank you again, Matthew for your observations, thoughtful suggestions and extended patience.
Warm regards,
Leo Rivera
Tree Owner Relations Coordinator
Tropical American Tree Farms
Matty;
I have absolutely no problem with TATF trying to sell lumber online. My comments in my previous message were related to how much TATF could expect to sell its (our) teak for. None of the lumber that TATF is claiming is FEQ, FAS, and FAS1 actually meets the specifications for these grades, and, as such, could only be sold as, at best, #1 common, which is a lower and cheaper grade. Alternately, the wood could be sold as 'shorts', which also commands a lower price than does wood which meets the minimum dimensions. From what I have been able to gather, for teak, any board less than 6 ft long is classified as a short, and sells for 15-40% less per board foot than does a board 6' long or longer, as can be seen at the link below.
Note the pricing at this link is a retail price for small orders, for teak from trees at least 20 years old. We should not expect TATF to be able to sell shorts from 13 year old trees at wholesale for anywhere near those prices.
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http://www.exotichardwood.com/wholesale_prices.html
TATF has two new websites to sell their lumber.
As Matty has already noticed, TATF has two new websites where they're advertising their lumber (teak and gmelina) for sale.
http://tropicalamericanhardwoods.com/tropical_hardwood_lumber.htm
http://ecohardwoods.com/
They're advertising different grades (FEQ, FAS, FAS1, #1 common, and #2 common) for sale. Since I don't know the exact definitions for these grades, I did a search to find the definitions, which I found (except for FEQ) at this link.
http://www.schallerhardwood.com/hardwood_lumber_grades.htm
As I looked at the advertised grades and sizes that the two TATF websites have for sale, I noticed a problem. According to the lumber grading link, the minimum size a board can be to be graded FAS or FAS1 is 5.5 inches wide, and 8 feet long. However, the TATF sites only offer FAS and FAS1 lumber up to 4" wide and 4' long. So, by definition, their 'FAS' and 'FAS1' lumber cannot be graded better than #1 common.
Hmmm...
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Matty;
TATF is not a scam in the sense that the trees it's selling don't exist. It's a scam in the sense that the likely returns from buying trees from TATF are far lower than TATF is projecting, and that TATF has to know this, but still continues to project totally unrealistic returns.
TATF's latest 'opportunity', its fourteen year final harvest 'elite teak clones', is a case in point.
TATF is projecting final harvest proceeds of almost $62,000 per 100 14 year final harvest elite teak clone seedlings purchased. They're basically assuming that all of the wood from the 14 year harvest can be sold into the world market, at an average price per board foot of $6.78.
However, in their Summer 2007 Tree Owners News, TATF states
"Teak for example begins to exhibit adult characteristics at about 15 years of tree age." This implies that none of the 14 year teak may be able to be sold into the world market, and that TATF is aware of this fact.
Furthermore, TATF has teak trees that are now 16 years old. They must know how much teak from 14 year old trees can be sold for in the world market. However, they haven't posted that information on their site, or included it in their pitch for the 14 year final harvest teak. I have to believe the reason for this is that they don't want potential investors to know the truth about how bad an investment opportunity this is.
I agree that, by continuing to deceive and mislead investors, they're playing a fairly risky game.
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Matty;
The answer to your questions is pretty obvious. TATF wants to entice more people to send them money. That's why they're offering 14 year final harvest teak - it's more attractive to investors than 20 or 25 year final harvest teak.
They seem completely unconcerned about actually paying money back to tree owners in the time scales and amounts they've projected - their primary goal is to get people to send them money. Why 'take the money and run' as long as they can continue to entice more people to send them money? Since they're located in Costa Rica, they're largely immune to lawsuits and criminal prosecution.
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Belmontx,
The magnitude of TATF's and the Brunner's deceptions is not clear. At a minimum, tree owners will receive returns from their investment that are much less and much later than TATF projected.
It's quite possible that tree owners will receive no returns at all from their purchase of trees from TATF. I hope this is not the case, but it certainly cannot be ruled out.
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Just;
I want to second Belmontx's thanks for providing the information on costs to plant teak in Costa Rica. Before you provided your information, the only cost information I had came from a company in Panama, which projected a life cycle cost of $8400 per hectare to buy land, and plant and care for teak trees throughout the 25 year harvest cycle.
http://panamateakforestry.com/English/Investments_teak/Investment-Opportunities.htm
I wasn't sure of the costs in Costa Rica, so I decided to raise my estimate for TATF's costs above what was estimated in the above link. I would guess that it costs $2000 to $3000 per hectare to care for and thin the trees until the final harvest.
So, in summary, the life cycle cost to plant and care for a hectare of teak in Central America is about $3500 on the low end up to $10,000 on the high end. Most of this cost is the cost of the land, which TATF keeps for itself once the final harvest is done.
So, it's clear that the deal TATF is offering to buyers of trees is a great deal for TATF. Thus far, it's been a lousy deal for the tree owners, and I suspect that this will continue to be the case.
Good luck with your trees - please keep us posted on their progress.
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Some thoughts on TATF's economics...
My rough estimate of TATF's costs to purchase a hectare of land and plant it with 1100 teak seedlings (on a 3m X 3m spacing) is $10,000. They sell these teak seedling, along with a promise to care for them for 25 years (or 20 or 14 years, in the case of the 'elite teak clones) for ~ $40,000. So, their profit margin on the purchase of the land, and the original planting, is 75% ($30,000 per hectare).
Their profit margin on the thinnings is zero (they just recover their expenses), until the tree owner receives his original investment back, and then 6% of the distribution received by the tree owner after that. My calculations (see posts 108 and 172) indicate that the tree owner won't recoup his original investment until the 21st year thinning, so TATF won't make any profit on the thinnings until the 21st year thinnings.
Also, if it becomes known that the distributions from the 13th and 17th year thinnings are far below what TATF projected, it will become much harder to sell teak seedlings to new investors, which is where the big money is.
This may explain why the distributions from the 13 year teak are so far behind. Steve Brunner may prefer that people suspect that the distribution from the 13 year thinning will be less than he projected rather than confirming it by sending out the distributions.
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Just, and everyone;
I don't think it's necessary to open a cautionary website, as I think many people have already found this board, or others, such as http://tropicaltreeinvestmentforum.com/index.php that have links to this board.
When I do a search on google or yahoo, with search terms such as tropical american tree farms, tatf teak, or tropical tree investments, I find it's fairly easy to find this board or other boards that provide warnings about TATF and similar investments. This may be why TATF is having to extend its latest offer for the 14 year rotation teak so many times.
Of course, if you want to start a website, please go ahead.
As far as providing a forum for selling the teak and other trees, that may be a bit premature. It has yet to be demonstrated conclusively that TATF will send any distributions to its tree owners. Steve Brunner claims that he's sent something like $850k to tree owners as of last February, but there's been no independent confirmation of this - no one has posted on this board saying they've received any money from TATF. I'm particularly concerned that we've heard from several posters with 15 year old teak who have not received any distributions. I've also received private e-mails that say the same thing. Brunner claims that some of the wood from the 13 year thinnings is salable on the world market. If tree owners with 15 year old teak haven't received distributions from the 13 year thinnings of their teak yet, it makes me wonder if Brunner has any intention of paying distributions to tree owners on any of the thinnings. With this uncertaintly hanging over the situation, frankly, I doubt anyone who knows the true situation would buy our trees for more than a few pennies on the dollar.
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Planbtotrade;
Thanks for the post, and welcome to the board! I have a couple of questions about your post:
1) Did Steve Brunner tell you why he had fired the TATF employees you dealt with on your visit?
2) You mentioned visiting both your trees and 'Show' trees. What did you mean by 'Show' trees?
Thanks,
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Matty, Juscfrall;
I have no problem with TATF offering trees for sale, or offering sales or promotions on their trees. However, I don't like their unsavory sales tactics - extending a sale deadline once might be ok, but when TATF extends it four times (and counting), it shows yet again that what this company says cannot be trusted.
As to why I care, I feel TATF has been very dishonest with me, and with many other investors who have sent TATF their money. I wish a board like this was available before I sent TATF my money. I want to document TATF's behavior so others will not be deceived as I was.
Matty (or anyone else);
If you want to make an offer on my 1996 teak trees, my e-mail is deanwins@yahoo.com
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TATF's latest 'very special opportunity' is their fourteen year rotation 'elite teak clones'.
I've been checking up on the status of TATF's latest 'very special opportunity' once a week or so. Skier58 first mentioned this 'opportunity' on this board on June 13th. So far, they've changed the deadline for taking advantage of this 'opportunity' five times. The original deadline was June 30th, then July 10th, then July 18th, then July 25th, and now July 31st.
One sentence in their sales pitch is as follows:
'We will make the limited quantity of these 2008 14-Year Final Harvest Elite Teak Clone trees available until [their latest deadline date] or until they are all spoken for, whichever occurs first. (emphasis added)
As each deadline date has passed, they've simply changed to a new date, but kept the above sentence, including the phrase 'whichever occurs first' in their pitch. If they were true to their word, they would have stopped offering these trees after June 30th. Their sales tactics are more akin to those of a sleazy used car dealer than they are to those of an ethical business.
Buyer beware!
http://www.tatf.com/whats_new.htm
Matty;
Good luck getting trying to get useful information out of Steve Brunner. My experience is that Brunner and TATF will not provide straight answers to questions if those answers would tend to contradict the claims on TATF's website. You may want to call TATF in Costa Rica, but I'm quite doubtful they'll provide you with a straight answer to your question. In any case, please keep the board updated with the status of your efforts, and TATF's response, if any, to your question.
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Msub; Yes I have asked for a refund (see my posts 23 and 24 on this board). My requests were ignored by TATF.
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Matty;
My calculation indicated fairly strongly that TATF's payouts are not increasing rapidly. Steve Brunner stated that, of last February, TATF had paid out $850k. As of the end of July 2007, Steve Brunner stated that TATF had paid out $750k. This works out to an annualized payout rate of $200k for the last year. If TATF's payouts had been doubling each year, as you suggest, the total payout would be as follows:
2007: $200k
2006: $100k
2005: $ 50k
2004: $ 25k
2003: $12.5k
for a total of $387.5k. But, according to Steve Brunner, their total payout as of last February was $850k, so the payouts haven't been doubling every year.
Looking at it another way, if the payouts had been doubling every year, and the total payouts as of last February were $850k, the payouts over the past several years should have been about:
2007: $440k
2006: $220k
2005: $110k
2004: $ 55k
2003: $ 28k
but the information from Steve Brunner indicated that the payouts in 2007 were only $200k. The available information does not support your speculation that payouts may have been doubling every year.
If we assume a linear increase in payments from 2003 to 2007, and a total payout of $850k, the payments by year look as follows:
2007: $200k
2006: $185k
2005: $170k
2004: $155k
2003: $140k
Without more detailed information, it's not possible to know exactly what the payouts were, but from the limited information Brunner has been willing to provide, it appears that the rate of increase in payouts has been quite slow. If this slow growth rate of payouts continues, it will take a long time (decades, in most cases) for tree owners to receive any distributions from the seven and ten year thinnings of their teak trees.
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Matty;
Again, I would suggest that you carefully re-read the posts on this board, and the information posted on TATF's website. If you read the Summer 2007 Tree Owner's News, published in July or August of 2007, Brunner states that TATF has paid out a total of $750,000 dollars in distributions from thinnings. If you read Brunner's post 102 on this board, dated Feb. 29, 2008, he states that TATF has paid out $850,000 in distributions from thinnings. This works out to an annualized rate of less than $200,000/year, in the second half of 2007 and beginning of 2008. TATF started paying out distributions in 2003, so $850,000 over the 5 years from 2003-2007 works out to an average of $170,000 per year. Thus, the payout rate is increasing quite slowly.
Also, since TATF is paying out $1615 per 100 trees purchased for the wood from the 7 year thinnings, payments of $200,000 per year are enough to pay the owners who purchased 12,500 seedlings per year. According to TATF's Tree Owners News, TATF planted 62,000 seedlings in 1992, and 206,000 seedlings in 1993. Assuming that 80% of these were teak, this works out to about 50,000 teak seedlings in 1992, and 165,000 teak seedlings in 1993. Thus, at current utilization rates, it will take Raleo another 10-15 years to finish using, and TATF to finish paying distributions on, the 7 year thinnings of the 1993 teak. Of course, Raleo could buy more wood than it has been buying, but it could also buy less. If Steve Brunner had come up with a substantial new market for the lumber from the thinnings, I'm sure he would have announced it, so I think it's safe to say that Raleo is the only market for the thinnings, and Raleo is not using very much of them.
I have tried to carefully read the information on TATF's website, and thoughtfully and fairly analyze the available data. Unfortunately, the results of these analyses are quite discouraging. The more I, and others, such as fawtsc, and Belmontx have looked and analyzed, the more convinced we have become that buying trees from TATF has been and will continue to be a very poor investment.
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Matty05;
I have not 'cherry picked' the data on TATF's website. Rather, I have carefully read through all of the information provided on TATF's website (in particular the information provided in the various Tree Owners News), and performed calculations based on this information. Where necessary, I have interpolated or made estimates. I have asked Steve Brunner to provide additional information so that I can improve the accuracy of my calculations (for example, see posts 148 and 166), but he has declined to provide this information.
My calculations show that TATF's projections for return on investment are grossly optimistic, and have been for many years.
Further, my calculations show that the following statements made by Brunner in the summer 2007 tree owners news:
"For new and prospective tree owners, our notes to projections on our website say with respect to distributions that “An additional year or more may be required for the earliest thinnings” because young tropical hardwoods are unknown in the world markets.
For our most recent plantings our assessment is that that note won’t be necessary because Raleo will likely reach the point where it is utilizing the young lumber as fast as or faster than it comes from the farm well before the trees now being planted reach the age of their first thinning."
are absurd. The calculations clearly shows that Raleo is using timber from TATF's thinnings at a far slower rate than it is being produced by TATF - ie, more and more wood from thinnings is piling up. Even if Raleo increases its usage by a factor of 10, it will still be decades before all of the wood from TATF's thinnings is used up.
I suggest you carefully read and/or re-read the posts on this board.
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Matty05;
In regards to how long it will take Raleo to 'catch up', and use all of the lumber from thinnings that has been produced by TATF, you may wish to read my posts 141 and 143 on this board, and Steve Brunner's responses to these posts. My calculations show that it will take decades for Raleo to use the lumber that should have been produced by TATF by now, and, rather than catching up, Raleo is falling further and further behind, since TATF is, or should be, producing far more lumber from thinnings each year than Raleo is using. I say 'should be' because it appears that TATF is not milling into lumber most of the trees they've thinned (since no one will buy the milled lumber for a very long time).
I did some rather detailed calculations, based on the info on TATF's website, and showed enough detail in my posts to allow others (Steve Brunner in particular) to check the calculations, and correct or refute them. Rather than responding with details, Brunner just called my calculations 'grossly' wrong, and issued veiled threats of legal action against me. You can conclude what you like, but Brunner's failure to provide a detailed rebuttal to my calculations shows me that my calculations are largely correct.
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