THE VALUE CHAIN OF TEAK GROWN BY SMALLHOLDERS: LESSONS FROM INDONESIA

IUFRO 3.08, 11-15 October 2015

Dede Rohadi, Hugh Stewart, Tuti Herawati, Digby Race

Presentation outline :

Background Methods Actors in smallholder teak value chain

system Marketing chain Smallholder selling prices Collective marketing Conclusion

About the study• Part of ACIAR funded project (FST/2008/030) - CBCF• Focus on value chain improve benefit for smallholder

teak growers

Teak produced by smallholders

Teak produced by state owned company

National timber production

2012 2013

1.32 0.40 3.43 0.43

4843

Teak log production (million m3):

• Why teak?

The Study Sites

SumbawaGunungkidul

Bulukumba

South Konawe

5

Value chain approach

KEY

QUESTIONS

Distribution

of benefits

Opportunities

to ‘upgrade’

Source: ILO (2009), p. 26.

1. ACTORS – ‘market players’ within and outside the value chain

2. ACTIVITIES – identify specific activities of different actors

3. RELATIONSHIPS & LINKAGES – between actors

4. TRANSFORMATION OF PRODUCTS – products at each stage

5. VOLUME OF PRODUCTS, NO. OF ACTORS & NO. OF JOBS

6. VALUE AT POINTS ALONG THE VALUE CHAIN – costs & profits

7. GEOGRAPHICAL FLOW OF PRODUCTS – ‘global’ market

8. SUPPORTING FUNCTIONS – knowledge &information flows

9. RULES & REGULATIONS

Mapping the value chain

Forest

productionHarvesting Transport

Middleman

traderProcessor Wholesale

Retail

Export

Value chain models (3 models, 7 cases)

1. Individual Growers Brokers Processors

(Model 1)

2. Individual growers Group of Growers Brokers Processors (Model 2)

3. Individual Growers Brokers Processors

(Model 3)

7

Mapping the value chain

Key Findings

Actors in smallholder teak value chains

Category Actors Roles

Tree Growers

1. Individual farmer • Grow trees• Sell standing trees

2. Farmer Group • Hire middlemen to harvest trees, process, sell logs or squared plank

Brokers 1. Informants • Connect growers and brokers (paid by fee basis)

2. Middlemen • Harvest trees into logs• Transport and sell logs

3. Traders • Buy and re-sell logs• Process logs into sawn timber

Processors 1. Sawmills • Buy logs, process and sell sawntimber

2. Wood based industry

Buy logs or sawn timber and process into wood based products

Marketing chains

Gunungkidul: Model 1 (Case 1); Model 2 (Case 5); Model 3 (Case 7)Konawe Selatan: Model 1 (Case 4) and Model 2 (Case 6)

Model 1: Individual growers – Brokers (Middlemen) – ProcessorsModel 2: Individual growers – Group of Growers – ProcessorsModel 3: Individual growers – Group of Growers – Brokers – Processors

Profit distribution among value chain actors

Value chain model Case Study Location Product(by ind. growers)

Price (IDR/m3)

Model 1

(Grower-Broker-Processor)

Case 1 Gunungkidul Standing trees 848,439

Case 2 Sumbawa Standing trees 800,000

Case 3 Bulukumba Standing trees 808,671

Case 4 Konawe Selatan Standing trees 536,500

Model 2

(Grower-Group of Grower-Processor)

Case 5 Gunungkidul Standing trees 1,340,270

Case 6 Konawe Selatan Squared plank 1,750,000

Model 3

(Grower-Group of Grower-Broker-Processor)

Case 7 Gunungkidul Standing trees 1,642,640

Prices of smallholder teak in different value chain models

0

1

2

3

4

5

6

Log price (IDR million)

< 13 13-22 23-30 > 30 > 45 > 54

Log diameter (cm)

Relationship between log diameter and price

Model 2

(Grower-Group of Grower-Processor)

Case 5 Gunungkidul 1.34 0.85 58

Case 6Konawe Selatan

1.58 0.54 194

Model 3

(Grower-Group of Grower-Broker-

Processor)

Case 7 Gunungkidul 1.64 0.85 94

Collective marketing (certification scheme)

Conclusions

1. There is no ideal value chain model for smallholders.

2. Middlemen play important roles in smallholder teak value chain.

3. Tree growers tend to sell small size and poor quality of logs that lead to low selling price.

4. Collective marketing potentially increase benefits to tree growers.

Thank you