How financially viable is smallholder forestry? A case study with a high-value tropical forestry species

Liz Ota; Tony Page; Rexon Viranamangga; Toufau Kalsakau; John Herbohn

doi:10.1007/s11842-022-09511-1

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How financially viable is smallholder forestry? A case study with a high-value tropical forestry species

Journal article

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How financially viable is smallholder forestry? A case study with a high-value tropical forestry species

Liz Ota, Tony Page, Rexon Viranamangga, Toufau Kalsakau and John Herbohn

Small-Scale Forestry, Vol.21(3), pp.505-525

2022

DOI: https://doi.org/10.1007/s11842-022-09511-1

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Abstract

rural development

tree theft

labour cost

agricultural credit

sandalwood

discount rate

This paper evaluates the financial performance and risk of high-value tropical forestry under the challenges faced by smallholders, using Vanuatu sandalwood as a case study. We developed a financial model to predict returns from smallholder-based sandalwood plantations. The model was used to investigate the following issues typically faced by smallholders: (i) what is the financial impact of smallholders harvesting trees at young ages because of fear of theft or cyclone damage? (ii) how does the opportunity cost of labour impact on the financial returns of sandalwood? and (iii) what are the current opportunities for smallholders to finance the establishment of sandalwood plantations and how might these be improved? Data were collected from expert interviews and relevant literature. We found that smallholder sandalwood can be a profitable investment, but tree security issues and environmental risks are leading to early harvest and an associated 64% reduction in potential returns. To improve the profitability and attractiveness of sandalwood plantations to smallholders, the following key issues must be addressed: (i) risks associated with tree theft need to be dramatically reduced; (ii) earlier returns from planting systems must be planned for smallholders with more immediate needs; and (iii) greater access to financial services is needed, including loans with competitive borrowing rates, particularly to increase the scale of planting for individual smallholders that might be constrained by labour. Theft mitigation can include fencing, patrolling, microchip tagging, all of which add significant maintenance cost. Formalised social and governance structures within and between villages, may be more cost-effective in improving tree security. Incorporating agricultural crops into systems helps produce earlier financial returns, and more rapid payback. Accessible loans can allow for upscaling of smallholder systems that are limited to household labour for plantation management, harvesting, and processing the logs.

Details

Title: How financially viable is smallholder forestry? A case study with a high-value tropical forestry species
Authors: Liz Ota (Corresponding Author) - University of the Sunshine Coast, Queensland, Tropical Forests and People Research Centre
Tony Page (Author) - University of the Sunshine Coast, Queensland, Forest Industries Research Centre
Rexon Viranamangga (Author) - Vanuatu Department of Forests
Toufau Kalsakau (Author) - Vanuatu Department of Forests
John Herbohn (Author) - University of the Sunshine Coast, Queensland, Forest Industries Research Centre
Publication details: Small-Scale Forestry, Vol.21(3), pp.505-525
Publisher: Springer Netherlands
Date published: 2022
DOI: 10.1007/s11842-022-09511-1
ISSN: 1873-7854; 1873-7617
Copyright note: This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
Grant note: University of the Sunshine Coast FST/2016/154; FST/2016/024; FST/2016/154 / australian centre for international agricultural research (http://dx.doi.org/10.13039/501100000974)
Organisation Unit: Australian Centre for Pacific Islands Research; Tropical Forests and People Research Centre; University of the Sunshine Coast, Queensland; Forest Industries Research Centre; Forest Research Institute; Sustainability Research Cluster
Language: English
Record Identifier: 99663998102621
Output Type: Journal article