Report |
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Title | Improving economic outcomes for smallholders growing teak in agroforestry systems in Indonesia | Author | Dede Rohadi, James M Roshetko, Aulia Perdana, Michael Blyth, Nunung Nuryartono, Nuning Kusumowardani, Agus Astho Pramono, Nurin Widyani, Anis Fauzi, M. Joko Sasono, Purnomo Sumardamto and Philip Manalu | Year | 2012 | Institution | ACIAR | City | Canberra, Australia | Report Number | FR2012-11 | Number of Pages | 64 | Call Number | RP0287-12 |
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Abstract: |
This is the final report of the 4-year research project entitled "Improving Economic Outcomes for Smallholders Growing Teak in Agroforestry Systems in Indonesia" (FST/2005/177) that was
implemented in Gunungkidul District, Yogyakarta Province, Indonesia. The project aimed to
improve the livelihoods of smallholders growing teak in Indonesia through work toward three
main objectives, namely: (a) to improve returns for smallholder teak producers by introducing
and adapting silvicultural technologies, (b) to provide incentives for smallholder participation in
profitable teak production by identifying and designing financing schemes, and (c) to enhance
market access by smallholder teak producers.
Teak is among the most valuable timber species in Indonesia and is used for many purposes.
The demand for teak wood for both international and domestic use is always greater than its
supply. Two major sources of teak wood are available in Indonesia, i.e. industrial teak
plantations, which are concentrated in Java, and the smallholder plantations, which are spread
across the country. While the supply of teak from industrial plantations is declining, the share
from smallholder plantations supply is increasing. In the project area within the Gunungkidul
District, about two-thirds of the region's forest is smallholder teak plantations. About 63%of the
farmers have less than one hectare of teak plantings and teak sales contribute about 12% of
household income. However, the development of smallholder teak plantations in Indonesia is
still facing various impediments. In summary, the significant impediments to profitable
smallholder teak plantations include: (a) Low quality of wood due to poor silviculture; (b) Lack of
capital to invest in teak planting and inability to wait the duration of a teak rotation before
obtaining returns; (c) Limited access to market information/linkages leading to prices that are
well below market rates, with high transaction costs for timber merchants; and (d) Unfavorable
policies in smallholder teak production and marketing.
The research project contributed to overcoming these problems by conducting various project
activities through participatory processes. Farmers need help to improve their knowledge and
practical skills in applying better silvicultural techniques. Project activities, such as cross visits,
training, establishment of Farmer Demonstration Trials and a Silvicultural Manual have
improved farmers' knowledge and skills in silvicultural techniques that will be useful for
improving the productivity and quality of smallholder teak plantations through better silvicultural
practices. Early results from the Farmer Demonstration Trials showed that diameter growth and
height increment are both increased by silivicultural treatments such as thinning, singling and
pruning. In these trials, diameter growth was increased by 60% and height increment increased
by 124% over two years. The importance of access to better teak germplasm rather than relying
on wildling seedlings was also demonstrated.
As teak plays an important role as a “household saving account”, the project found that 84% of
teak producers harvest their teak prematurely when they are faced with an urgent need for
cash. This practice prevents farmers from realizing greater potential benefits from their teak
plantations. Teak farmers need better access to funding sources to avoid this practice, but many
financial institutions are reluctant to lend money for teak plantations, because of the long
investment periods and the farmer's lack of collateral. The project has tried to improve the
understanding of farmers and decision makers of the importance of micro finance institutions in
accordance with farmers' financing needs and behaviors. Various project activities, such as
comparative studies, Focus Group Discussions and the establishment of a farmers’ micro
finance institution (the LKM Gunung Seribu), which covered 300 farmer households, have
increased farmers’ capacity by providing access to micro finance. Group-based lending
schemes, which are controlled by farmers and operate on a revolving fund basis, are
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considered appropriate for meeting the financial needs of smallholder teak growers. The
farmers do not need collateral as the group guarantees the loan will be paid back using the teak
trees as collateral. This trial showed that group managing the micro finance needs training and
support in the initial stages of operations.
In the project area, farmers sell their teak trees to middlemen who cut and transport the logs
and then on sell them to wood processors. Farmers operate from a low bargaining position and
need some assistance on developing timber marketing strategies to obtain higher teak prices.
This strategy can be advanced by providing farmers with better market information, in particular
on the grading system and quality standards of teak used in industry, and to improve their
capacity to estimate the value of teak trees. Farmers also need assistance to develop mutually
beneficial business ties with wood industries, especially the furniture industry. Teak farmers
have great potential to be involved in the processing of teak wood into value-added products.
The project supported the development of a collective marketing system, through the same
farmer group that was established to assist with micro finance, and initiated a market network
with companies producing certified teak furniture products. The project also developed policy
options to simplify the regulation of wood transport at the local authority level and thereby
reduce transaction costs.
The presence of this project has provided positive impacts to teak farmers at Gunungkidul
district and could provide useful lessons for teak farmers outside the project sites. Some
farmers are using silvicultural techniques that were introduced by the Project Team. Farmer
Demonstration Trials could be used for training activities where farmers could learn how
silvicultural treatments could improve teak growth. Some project findings have been published
and presented to wider society through presentations at seminars and conferences on both
national and international levels. Lessons learnt from the projects have been disseminated
through various meetings that will contribute to better knowledge of strategies to improve the
economic benefits from teak plantations to households. The project also provided better
preconditions for smallholder teak plantation development efforts in the District of Gunungkidul.
The experience will also be useful for developing smallholder timber plantations in other areas.
The project recommends that better strategies of business cooperation between farmers'
groups and the wood processing industries be developed. |
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