Publication

Export Citation
Report
RP0287-12
TitleImproving economic outcomes for smallholders growing teak in agroforestry systems in Indonesia
AuthorDede 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
Year2012
InstitutionACIAR
CityCanberra, Australia
Report NumberFR2012-11
Number of Pages64
Call NumberRP0287-12
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 6 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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