Contract tree farming and Small landholders:

Drivers of adoption in Thailand

Source: Boulay, Axelle. 2010. Contract tree farming and smallholders: Drivers of adoption in Thailand, PhD Thesis, Australian National University, Australia

1axelle.boulay@gmail.com

Overview of the presentation

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Situation Conceptual framework Research question Limitations of existing research Theoretical framework Case study Methods Results Recommendations

Situation:Market opportunities and partnerships

Decline in wood supply from natural forests Forest industries want to out-source wood production Forest industries need land

→ Smallholders = potential sources of wood supplies

→ Partnerships between smallholders and forest industry Contract tree farming

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Government

Conceptual framework:Strategies and marketing situations

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SELL TO

Contract growers Industry

Smallholders

Research question: What factors promote adoption of contract tree

farming? Why is it important to answer the research question

for the different stakeholders?

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Policy makers- To understand all the drivers of decisions to enter or not a contract

- To provide a sound basis for improved policies

Forest industry

- To understand what conditions are more attractive to smallholders

- Better inclusion of smallholder issues in companies’ decision-making frameworks

- Business strategy

Smallholders - To improve livelihood

Limitations of existing research

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Agriculture partnerships Forestry partnerships

- Academic research: many case studies and economic articles on risk strategy

- Few comprehensive studies on smallholders’ interests

- Little academic research- Many reports from development agencies and research institutes, but most are too descriptive, superficial

- Weak socio-economic analyses

Donor agencies are highly supportive of partnerships but very few studies provide a basis for understanding where, how and under what conditions smallholders enter into partnerships.

Theoretical framework Contract theory and economic theory: Adoption of contract

tree farming is influenced by the utility function that trades off the household’s desire for more income, more leisure time, less risk and less effort.

Diffusion of innovation theory: Adoption is influenced by attributes of the innovation optional/collective/authority decision making communication channels social system change agents’ diffusion strategies incentives stages of the innovation-decision process

Livelihood theory: Adoption is influenced by each of the five types of capital the vulnerability context transforming structures and processes livelihood strategies axelle.boulay@gmail.com 7

Case study:Contract eucalypt tree farming in Thailand

336,000 ha of eucalypts under contractual arrangements = 70% of total eucalypt area

Eucalypt tree farming = source of income for many smallholders critical to the resource supply of pulp and paper companies

Smallholder = <100 rai (16 ha) of land

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Advance AgroChachoengsao

Siam ForestryRatchaburi

Phoenix Pulp and

PaperKhon Kaen

Siam ForestryKamphaeng

phet

3 large pulp and paper companies and >60,000 contract tree growers

Case study:Contract eucalypt tree farming in Thailand

Bangkok

Case study:Contract eucalypt tree farming in Thailand

The 3 companies own tree nurseries

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2008 / 01 / 29 2008 / 01 / 29 NampoKalasinNampoKalasin

Case study:Contract eucalypt tree farming in Thailand

The 3 companies supply pulp mills

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Company extension work

Case study:Contract eucalypt tree farming in Thailand

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2008 / 01 / 26 2008 / 01 / 26 AgriculturalFair_KhonKaenAgriculturalFair_KhonKaen

Eucalypt block planting

Case study:Contract eucalypt tree farming in Thailand

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Eucalypt intercropped with cassava

Case study:Contract eucalypt tree farming in Thailand

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2008 / 02 / 13 2008 / 02 / 13 KanchanaburiKanchanaburi

Eucalypt paddy-bund planting

Case study:Contract eucalypt tree farming in Thailand

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Methods

Data collection: 4 case study areas Key informant interviews Focus groups 800 Household surveys of eucalypt tree growers and non-

tree growers

Data analysis: Quantitative – logit analysis used to corroborate hypotheses

about the drivers of adoption Qualitative – used to inform interpretation of the quantitative

results and shed light on the role of contract eucalypt tree farming in smallholders’ livelihood

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Methods

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800 household surveys

Methods

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A range of livelihood assets

Methods

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A range of livelihood activities

Results

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Drivers of adoption of tree farming Drivers of adoption of contract tree farming

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Results:Drivers of adoption of tree farming

Potential financial return from eucalypts compared to rice, cassava and sugarcane

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Item Rice a

(per year)Cassava

(per year)Sugarcane(per year)

Eucalypts b

(per year)

Yield (t/ha) 2.28 16.71 66.10 100

Farm gate price (baht/ton) 10,000 1,500 800 1,200

Revenue (baht/ha) 22,800 26,250 52,880 120,000

Production costs (baht/ha) 10,981 12,950 32,638 12,297 c

Profit (baht/ha) 11,879 14,688 20,242 10,243 d

a Glutinous rice is mostly grown for home consumption b eucalypts spacing 3x2 m. (approximately 270 plant/rai)c include 13,219 baht/ha in year 1; 8,687 baht/ha in year 2; 1,125 baht/ha in year 3 and 36,125 baht/ha in year

4, discounted with a 10% discount rate.d Profit at year 4 discounted with a 10% discount rate.1,000baht=32.9US$; 10rai=1.6ha. Data from 2008

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Mean characteristics of sampled non-tree growers and tree growers for variables assessed in the quantitative survey, and significance of differences

Mean for Non-tree growers

n=171

Mean for Tree growers

n=461

P-value***p<0.01** p<0.05* p<0.10

Total land owned (rai) 19.5 29.5 ***Percentage of land owned with sandy soil 43% 45%Total income (baht/month) 9,890 10,395 *Off farm income as % of household income 38% 41%

Household on-farm labour available (number of persons) 2.1 2.0Smallholder age (years) 49.3 50.0Education (scale from 1 to 5) 2.3 2.2 *

Number of middle men known 4.8 2.8 ***

Knowledge about eucalypt tree farming (scale from 1 to 5) 2.0 2.5 ***Source: Boulay, Axelle. 2010. Contract tree farming and smallholders: Drivers of adoption in Thailand, PhD

Thesis, Australian National University, Australia.

Results:Drivers of adoption of tree farming

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Previous use of plots planted with eucalypts

unused

cassava

rice

sugarcane

kenaf

fruit trees

Results:Drivers of adoption of tree farming

Results:Drivers of adoption of tree farming

Conclusions:

Adoption is enhanced by: Availability and suitability of land Compatibility with past experiences, complexity, trialability,

observability, and stages of the innovation-decision process Perception of land tenure security but not influenced by holding a

formal land tenure document

Adoption ≠ land-use intensification strategy eucalypts = alternative crop for low productivity land, on which

eucalypts are the most profitable crop. = opportunity to diversify income + advantage of requiring low

labour inputs between planting and harvest. This is particularly advantageous for many tree growers who have off-farm income or rely on hired labour for farming their land.

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Results

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Drivers of adoption of tree farming by Thai smallholders

Drivers of adoption of contracts tree farming

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Results:Drivers of adoption of contract tree farming

Mean characteristics of sampled independent tree growers and contract tree growers for variables assessed in the quantitative survey, and significance of differences

Mean for Independent TG n=169

Mean for Contract TG

n=292

P-value***p<0.01** p<0.05* p<0.10

Total land owned (rai) 28.5 30.3Percentage of sandy soil 49% 41% *Area planted with eucalypts (rai) 11.1 10.9Total income (baht/month) 10,315 10,475Eucalypts’ rotation planned (year) 3.7 4.0 ***Frequency of company’s visits (scale 1 to 3) 1.3 1.8 ***Trust in company for wood measurement 1-5 3.5 4.0 ***Experienced tree growers 55% 28% ***Growers who preferred the company’s plants 55% 97% ***Number of middle men known 4.4 1.8 ***Source: Boulay, Axelle. 2010. Contract tree farming and smallholders: Drivers of adoption in Thailand, PhD

Thesis, Australian National University, Australia.

Results:Drivers of adoption of contract tree farming

Conclusions:

The adoption of contracts for tree farming is enhanced by:

size of landholding (explained by economies of scale in adopting a contract)

previous experience with contract agriculture extension work conducted by contracting companies and especially

company change agents’ visits to the farms collection of information

There was no evidence that contracts increased profit made from tree growing

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Recommendations:Theoretical framework used

The use of a theoretical framework combining economic, diffusion of innovation and livelihood theories was successful.

The only factors that were not well predicted by this framework included the importance of the negative perceptions of eucalypts and the economies of scales in contracts.

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Forestry companies should focus on extension in order to attract more smallholders to eucalypt tree farming.

Extension needs to be supported by applied research into eucalypt tree farming, such as in tree improvement, site selection, and soil management within the context of sustainable land use.

Governments could assist the realization of more sustainable outcomes by establishing programs which help smallholders assess and monitor the suitability of land for planting.

The provision of information and technical advice,,and some assistance for smallholders to organize themselves into associations, would facilitate contract tree farming.

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Recommendations:for Companies and Governments