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Balsa: Biology, Production and Economics in Papua New Guinea

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Balsa: Biology, Production and Economics in Papua New Guinea Balsa: biology, production and economics in Papua New Guinea ACIAR TECHNICAL REPORTS 73 ACIAR TR73 (2).fm Page 1 Sunday, June 27, 2010 1:17 PM Balsa: biology, production and economics in Papua New Guinea Stephen Midgley Michael Blyth Neville Howcroft Dao Midgley Alan Brown Canberra 2010 ACIAR TR73 (2).fm Page 2 Sunday, June 27, 2010 1:17 PM The Australian Centre for International Agricultural Research (ACIAR) was established in June 1982 by an Act of the Australian Parliament. Its mandate is to help identify agricultural problems in developing countries and to commission collaborative research between Australian and developing country researchers in fields where Australia has a special research competence. Where trade names are used this constitutes neither endorsement of nor discrimination against any product by the Centre. ACIAR TECHNICAL REPORTS SERIES This series of publications contains technical information resulting from ACIAR-supported programs, projects and workshops (for which proceedings are not published), reports on Centre-supported fact-finding studies, or reports on other topics resulting from ACIAR activities. Publications in the series are distributed internationally to selected individuals and scientific institutions, and are also available from ACIAR’s website at <www.aciar.gov.au>. © Commonwealth of Australia 2010 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at <http://www.ag.gov.au/cca>. Published by the Australian Centre for International Agricultural Research (ACIAR) GPO Box 1571, Canberra ACT 2601, Australia Telephone: 61 2 6217 0500 <[email protected]> Midgley S., Blyth M., Howcroft N., Midgley D. and Brown A. 2010. Balsa: biology, production and economics in Papua New Guinea. ACIAR Technical Reports No. 73. Australian Centre for International Agricultural Research: Canberra, 98 pp. ISBN 978 1 921615 97 9 (print) ISBN 978 1 921615 98 6 (online) Technical editing by Mary Webb, Canberra Design by Clarus Design Pty Ltd Printing by Elect Printing, Canberra Cover: A plantation of balsa, six months old, Vudal, East New Britain (Photo: Stephen Midgley) Foreword The Australian Centre for International Agricultural Research (ACIAR) seeks to promote poverty alleviation and livelihood enhancement through more productive and sustainable agriculture emerging from international research partnerships. Papua New Guinea (PNG) is one of our most important partner countries. Communities living on islands in the Pacific face significant difficulties in developing successful economies. Transaction costs are of paramount significance—transport adds to the cost of all imports, including fuel, and detracts from the returns for goods produced, while the small size of individual communities increases dependence on external trade. Crops that have high value and afford opportunities for local processing are especially important. They must of course be well adapted to the relevant environmental conditions, be amenable to production by smallholders as well as larger operators, mature within an acceptable time and, to the extent possible, have a stable market. Balsa is a crop that potentially meets these criteria for some areas in PNG. It is locally significant in East New Britain province (ENB), where high rainfall and fertile soils derived from volcanic parent material are conducive to rapid growth of high-quality wood on sites close to a port. Most of the balsa traded globally is grown in Ecuador and exported to the United States of America, although markets in Europe, India and China have grown in recent years. Balsa wood is used in the marine, wind-energy and transport sectors, principally as core material in panels and other composites. Polymer foams compete with balsa in this application. As well as the level of global economic activity, issues of quality and elasticity of supply are very relevant to the competitive position and continued prosperity of the balsa industry. Balsa cultivation is an attractive land-use option for smallholders and larger landowners in PNG, including cocoa growers affected by cocoa pod borer. ACIAR supported this scoping study with a view to identifying researchable issues across the PNG balsa value chain—issues whose resolution, by the industry itself, by partnerships involving ACIAR, or by other agencies, will underpin the continued viability and potential expansion of PNG’s balsa wood industry. Using a careful blend of literature review, interviews with key industry stakeholders and economic analysis, this study provides background biological information, a summary of the historical and current status of the balsa industry, and explores the relative merits of the three main balsa production systems in PNG. The study concludes with a series of recommendations for research and development that would assist the PNG balsa industry to sustain productivity and competitiveness in the global market. Nick Austin Chief Executive Officer, ACIAR 3 Contents Foreword 3 Abbreviations 7 Currency (August 2009) 7 Acknowledgments 8 Notes on the authors 9 Summary 10 Papua New Guinea: its geography, forestry sector and population trends 12 The context of Papua New Guinea forests 12 Land ownership 13 Employment trends in Papua New Guinea 13 East New Britain province 15 Employment trends in East New Britain 17 Development of plantations in Papua New Guinea 18 Biology, forestry and uses of balsa 23 Natural balsa forests 23 Balsa plantations 25 Uses of balsa wood 28 The balsa growers 32 Balsa in Ecuador 32 Balsa in Papua New Guinea, including East New Britain 33 Trade and balsa markets 45 Tariff codes 45 Exports from Papua New Guinea 46 Exports from Ecuador 46 The global market for balsa 48 Market prospects: can balsa remain competitive? 50 Marketing balsa from Papua New Guinea 53 Quoted prices for balsa products 54 The socioeconomy of balsa smallholdings in East New Britain 56 Legislation 56 Government agencies 56 5 Company support for growers 57 The dynamics of balsa purchase 57 Regulations relating to balsa harvesting, processing and export 58 Employment in the East New Britain balsa industry 58 Issues arising from grower and processor interviews 60 Profitability of balsa growing 63 Production data and information sources 63 Profitability of smallholder balsa growing 64 Profitability of balsa grower groups in share-farming arrangements with processors 68 Profitability of balsa growing for large-scale growers, including integrated grower–processors 72 Impact of higher wages on harvesting and transport 76 Conclusions 79 General 79 Marketing 80 Opportunities for research and development 81 References 85 Appendixes 89 1 Papua New Guinea balsa log grading rules 91 2 United States of America balsa imports 93 3 Balsa purchasing agreement form 97 4 Balsa log tally sheet 98 6 Abbreviations A$ Australian dollar NARI National Agricultural Research ACIAR Australian Centre for International Institute Agricultural Research NPV net present value AEV annual equivalent value PFMC Provincial Forest Management CST candidate seed tree Committees ENB East New Britain province PGK Papua New Guinea kina FEU 40-foot container PNG Papua New Guinea FMA Forest Management Agreement PNGFA PNG Forest Authority FOB free on board PNGFRI PNG Forest Research Institute IRR internal rate of return R&D research and development ITTO International Tropical Timber UNRE University of Natural Resources Organization and Environment LAES Lowland Agricultural Extension USA United States of America Station US$ United States dollar NANDINA Andean Trade Community Standard Product Code System Currency (August 2009) PNG kina = PGK A$1.00 = PGK2.11 US$1.00 = PGK2.63 7 Acknowledgments The global balsa markets are not well documented, Cameron at PNG Balsa and their team; Mr Graeme and reliable information was challenging to locate. Stowell and Mr Paul Aisawa at the GSMC/Auszac Many generous people helped in assembling this Balsa Alliance; Mr Gunter Isensee of Gunter Balsa report and deserve special mention. Ltd; Mr Peter Hooper (the former General In Papua New Guinea (PNG), the fieldwork would Manager), Mr Mike Jackson, Mr Bob Wilson and not have been accomplished without competent Mr Anthony Rainbird at Coconut Products Limited. support from our local coordinator, Mr Tommy Kosi, In Australia, many people shared information and and the cooperation of the balsa growers on the advice: Mr Warren Meyers of Auszac Pty Ltd; Gazelle Peninsula who gave their time during a busy Ms Maree Connelly of ArtMil Australia Pty Ltd; period in the agricultural calendar. Dr Mike Bourke of the Research School of Pacific Mr Kanawi Pouru, Managing Director, National and Asian Studies, at the Australian National Forest Service (NFS), and NFS staff in Port University; Dr John Doran, Honorary Fellow, Moresby and East New Britain (ENB) offered full Commonwealth Scientific and Industrial Research support and access to marketing data and recently Organisation (CSIRO). published policies and national strategies. Internationally, the contributions of many people Mr Titi Darius, Chairman, and Mr Paul Arnold, who offered advice and valuable information are Executive Officer, of the PNG Growers’ Associa- acknowledged: Mr Bob Flynn of RISI and Alfonso
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