Newsletter October 2015
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First off all I want to thank you all for your patience and understanding that you all have shown during the changes we have been doing the last- and this year.
It has been a long and necessary process but I do believe that it was worth it and that it will be in the interest for you as well as it is for RGI SA.
Last year was a year with a lot of challenges. Many of our participants follow our "News" items on our website: www.rgisa.com, which makes it easier to communicate with them. Please keep following our "News" items.
In this newsletter we will look into the current situation on the markets, climates and worldwide economic situation that either directly or indirectly has an influence to your investment. Many of you has been asking about what will happen with your investment since Teakwood International BV (TWI) no longer represent RGI SA and this is understandable. We took measurements in order to keep our website more up to date with news, information and developments regarding the projects that involves your investments.
This newsletter will give you an update of the current and historically marked for teak which has always been dominated by India and they stand for more than 96% of the purchases of teak worldwide. They have dominated the marked since the time they had natural teak themselves, during the time of natural Burma teak (still some illegal activity of cut and sales) and still till now with all the plantation teak.
Earlier this year there was a conference held in India where all the major buyers where represented, the discussion was concerning the quality, quantity and consumers demand versus the economic purchase strength.
The main important issue for us as producers and for you as investors is of course if there are expected future price development in favorable manor and stability.
This conference concluded that the situation is at a standstill and they foresee the next following 5 years’ period to continue on the same standstill due to the high production and following sales of young teak (read overproduction of young teak), this next to a regression on the exchange marked and low purchase power.
Well, not very promising for us, but remember, this conference was held by the purchasers and they of course have interests in the other end of the line. We have seen these inputs many times before but we are always fighting for better prices and we will continue to do so.
Anyhow, there are still some points in this that we do see and get worried about, it is getting harder to achieve good offers and the prices are very low even for the better wood (older and higher diameter).
To continue from the Newsletter of March 2011 where I already shared my worries concerning the changes in the climate and where we then decided to alter some thinning schedules etc. in order to meet the climate change and to reduce the negative affect to the plantations.
Worldwide the climates have changed, if not dramatically then at least to be highly worrying for the most of us. In Europe you have seen it through heavy rain, strong heat periods and floods of rivers in summertime periods etc. Costa Rica has also felt the changes and in some areas quite strongly, we have "lost" our two seasons, there is no longer a distinctive difference between summer (dry season) and winter (wet season) and these changes affect many aspects in the biological rhythm as well. For the teak it means less resistant against fungus, illness and losing the time to hardening the core (dry season).
Worldwide we have all felt some affects coming from the general regression that has followed us for some years already. Starting in The United States of America and now lately in China. Economical experts are now even talking about a new regression on its way and again in the USA. And why, the economy is nowadays so interconnected that a new recession in USA might come as a result of the situation in China because, according to the Treasury Department in the USA, more than 30% of the work that was created after the last big recession was export depending and are therefore affected by the set back in the Chinese import market.
We have during the last year been evaluating our organization and the production on all aspects, always with the weight on the best economic interest of our participants and ourselves. As a direct result of this we decided to cut the costs and to become more efficient. The contracts with sales offices in The Netherlands and Belgium were terminated; we could not keep the offices to be serving as client contacts due to the high cost. Also at the RGI SA office we had to fire some staff people, we found comparing companies for them to work. Product wise we have been spending a lot of time on evaluating the growth schedules, harvest schedules and time line research versus climate changes, diseases and values. We see that an optimal timeline for teak plantations nowadays in Costa Rica seems to be clearly less than 20 years and that 15 years is a more economically feasible timeframe for teak.
Read more concerning these subjects by our Forestry Engineer Lic. Jason Rojas and Researcher Jonathan Segura.
B. A. Jakobsen
CEO R.G.I. S.A.