Benefit-cost analysis of smallholder teak plantations in Northern Thailand: de facto practice and high input scenarios

Teak ( Tectona grandis ) is a commonly recommended tree species for forest smallholders. While market prospects may look promising, forest smallholders may face constraints. This study assesses the financial viability of smallholder teak plantings in Thailand. Real-world scenarios based on key informant interviews, timber market surveys and plantation inventories were developed. Most smallholders apply short rotation low-input management with internal rates of return (IRRs) of 14 and 28%. In contrast, a long rotation high input model was designed resulting in IRRs of 15 and 18%. Net present values (NPVs) were positive for discount rates ranging from 5% to 15% except for the low input scenario under poor growing conditions. However, long gestation periods, restrictive regulations and uncertain revenues discourage smallholders from investing in teak plantations. In terms of policy recommendations, increased transparency regarding thinning, harvest and transportation permits as well as on price regimes would be attainable through digitization.