Contract tree farming and smallholders : drivers of adoption in Thailand

Abstract

Contract tree farming is a form of partnership between smallholders and forestry companies in which smallholders are largely responsible for growing trees, with forestry companies providing incentives such as improved planting materials and free technical advice, and guaranteeing purchase of wood at the end of the rotation. Contract tree farming by smallholders is of increasing importance to forest industries in many countries, paralleling the rise in contract fanning of other crops. Contract tree farming is focused on developing and emerging economies in the tropics, where tree plantations have a comparative advantage, and where many smallholders are seeking to enhance their livelihood. However, there are also long-standing concerns about the impacts of contract farming on adopters' livelihoods: the main criticisms of contract farming are the power imbalances between companies and smallholders, especially smallholders' poor bargaining position. This thesis focuses on contract tree farming from the smallholders' perspective, and addresses the limited understanding of what the drivers of adoption of contract tree growing by smallholders, based on a Thai case study. Contract tree farming has become important for both smallholders and forest industries in Thailand, where contract farming for agricultural crops is well-established. In Thailand, about 336,000 hectares of eucalypts are under contractual arrangements (70 per cent of the total eucalypt area). Eucalypt (Eucalyptus spp.) tree farming, both under and outside of contracts with pulp and paper companies, is currently a source of income for many smallholders and critical to the resource supply of the companies. In the Thai context, a smallholder is defined as one who has access to less than 100 rai (16 hectares) of land. Three large pulp and paper companies and at least 60,000 smallholders are engaged in contract eucalypt tree farming in Thailand. This research aims to provide a comprehensive analysis of the adoption of contract tree farming by Thai smallholders. The theoretical frameworks of economic theory, diffusion of innovation theory and livelihood theory provided the basis for the study, and both qualitative and quantitative methods were employed. A suite of 19 hypotheses were formulated from the theoretical and empirical literature, and tested with primary data collected in the field. From January to March 2008, over 800 eucalypt tree growers and non-tree growers were randomly selected and surveyed in four different regions of Thailand, using door-to-door household 7 survey. The mean landholding size of the sample data was 4.3 hectares. Focus groups and key informant interviews were also used to gain in-depth understanding of the issues. The combination of quantitative and qualitative data increased the reliability of information. A logit analysis corroborated hypotheses about the drivers of adoption. Qualitative analyses were used to inform interpretation of the quantitative results and shed light on the role of contract eucalypt tree farming in smallholders' livelihood. This thesis demonstrates that the adoption of eucalypt tree farming by Thai smallholders is enhanced by availability and suitability of land. Adoption of eucalypt tree growing is also correlated with innovation attributes: because it is a relatively new activity for smallholders, their perceptions rely in particular on compatibility with past experiences, complexity, trialability, observability, and stages of the innovation-decision process. In addition, perception of land tenure security matters in the adoption of tree growing, but holding a formal land tenure document does not. Adoption of eucalypt tree farming in Thailand is not part of a land-use intensification strategy. Instead, eucalypts are used as an alternative crop for low productivity land, on which eucalypts are the most profitable crop. Eucalypt tree farming also gives smallholders an opportunity to diversify their income. In addition, this alternative land use has the 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. 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 and collection of information. There was no evidence that contracts increased profit made from tree growing. 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. The analysis reveals that 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 realisation of more sustainable outcomes by establishing programs which help smallholders assess and monitor the suitability of land for planting. This research suggests that the provision of information and technical advice, and some assistance for smallholders to organise themselves into associations, would facilitate contract tree farming. Show more