Forward–selling the harvest from a commercial forest using a forestry derivative: a step towards forestry co-operatives

Authors: Howard Moore
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2012, Issue N.Z.J.For. 57(1) 2012, pp 41-45, May 2012
Publisher: New Zealand Institute of Forestry

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Abstract: The author has developed a financial instrument whose value over time exactly mimics that of a commercial forest. Because its value moves like a forest, even though it is not a forest, it may be called a forestry derivative (i.e. something whose value is derived from a forest). The purpose of the derivative is to provide liquidity into a traditionally illiquid sector. The derivative allows a forest owner to manage his cash flow by forward-selling part of his stumpage income; while it allows an investor to trade in a short-term, scalable forest investment with an averaged industry risk.

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