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Key points

• The businesses of most smallholder timber growers are not strictly market-oriented. Consequently, opportunities to make better income from timber selling are often lost.
• Timber plantations generate important additional income for farmers. In Gunungkidul district, Indonesia, where smallholder teak plantations are grown, timber selling contributes about 15% of farmers’ total income.
• There is a wide range in timber prices at village and district levels but the farm-gate price generally lies at the lower end of the range. This is because of: (i) poor quality of logs produced by farmers; (ii) low bargaining power of farmers when selling their timber; and (iii) high transaction costs due to timber market regulations.
• Government agencies responsible for extension programs need to encourage farmers to improve their business skills in managing timber plantations. Priority efforts need to address farmers’:
  • – knowledge about timber markets and prices, market access and quality standards;
  • – silvicultural skills, in particular thinning and pruning of their timber plantations;
  • – collective timber marketing and developing linkages with timber industries.
• In order to reduce transaction costs in timber marketing, both central and regional governments need to simplify the regulations for smallholders to trade timber. Timber certification for smallholders, such as the TLAS (Timber Legality Assurance System) should provide a clear incentive to smallholders and should replace their obligation to provide a timber certificate of origin or SKAU (Surat Keterangan Asal Usul).