Advantage and disadvantage of forest based industries
Answers
Answer:
Explanation:
Advantages
Many opportunities exist to advance the quality of timber stands with active management.
Timber production can be timed to provide periodic returns.
This income can be a means of paying taxes on land held for future use for heirs under an estate plan.
Timber income qualifies for capital gains tax treatment, which is considerably lower.
Reforestation investments are often eligible for cost-share programs and can be amortized as well as provide immediate tax credits up to 10 percent of costs.
Timber adds diversification to investment portfolios.
Timber prices have historically increased at a rate of 2 to 4 percent above inflation, while the annual physical growth of timber increases 4 to 8 percent.
Disadvantages
Forest investments are long-term propositions.
The risk is real in the form of fire, insects, disease and environmental/social.
Often there is a heavy front-end capital investment required for stand initiation and loans for forestry investments can be difficult to acquire.
Timber buyers are not attracted to small tracts and the costs of additional land purchases may be prohibitive for forestry investments.
Fluctuations in price may be on a longer time-scale.
Management returns are usually correlated to the intensity of management applied.
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