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
