20 Mar2000

Overstory #55 - Nontimber Forest Products: NTFP Enterprises

Written by Kim Wilkinson and Craig Elevitch.

Editor's Note

Nontimber Forest Products (NTFPs), also known as non-wood forest products or special forest products, represent a means for rural communities to meet their needs without endangering forest ecosystems. NTFPs are an important aspect of sustainable economic growth, resource management, and conservation.

The Overstory #53 introduced the subject of NTFPs. This edition provides more practical information about starting an NTFP enterprise. Key issues that rural entrepreneurs should explore when considering on an enterprise involving NTFPs are discussed. Additional resources of books, web sites, and periodicals about NTFPs are included for further information.

Introduction

NTFPs have been traditionally important worldwide. In many areas, animal and plant resources derived from forests remain central to subsistence and local economies. The FAO estimated that eighty percent of the population of the "developing" world use NTFPs to meet some of their health and nutritional needs (FAO 1997).

However, the importance of NTFPs goes beyond meeting basic needs. NTFPs are also a rapidly growing market sector. The estimated total value in world trade in NTFP is approximately US $1,100 million (SPC 1999), and the market has grown by nearly 20% annually over the last several years (Hammet 1999). Future development of NTFPs offers potential for increasing income, expanding opportunities, and diversifying enterprises in rural areas.

Potential Benefits

Embarking on an enterprise involving nontimber forest products is an appealing challenge for many rural entrepreneurs. Nontimber forest products represent an opportunity for diversifying and expanding income. For small-scale farm foresters, nontimber products can also provide an earlier and sustained source of income before the timber trees are harvested. Possibilities for a variety of rural enterprises involving not only growing and harvesting, but also value-added processing, packaging, and transport are available in the NTFP trade.

NTFP entrepreneurs may also be attracted to the prospect for other reasons. For example, indigenous peoples may use the opportunity to create cash income while maintaining and practicing a more traditional way of life. Other NTFP entrepreneurs simply value the opportunity to remain in a rural area and earn a livelihood. In some cases, the lifestyle value is a higher priority than financial gain. Some NTFP entrepreneurs, even in developed countries, choose their trade over other employment for the lifestyle benefit (Thomas and Schumann 1993).

Risks

Starting an NTFP enterprise involves a very high level of financial and personal risk. Many of the risk factors are related to the shortage of technical and practical information about NTFPs. At almost every phase in the process, from management and cultivation to marketing, harvesting, and processing, the NTFP entrepreneur may be in unknown territory. Unlike "major" commercial crops, there are usually few experts or sources of public support for NTFPs. Even where information is available, it may be difficult to apply to a new set of circumstances (New Crops News 9:1998).

Marketing information is also scarce for most NTFPs. Information such as price, the volume required by the market, and quality standards for the product is difficult to access (FAO 1995). For some NTFPs, such as essential oils or some medicinal products, buyers may have exacting specifications for the end product. Even after a crop is successfully harvested, it may not be marketable. In summary, many NTFP enterprises tend to be high risk ventures into the unknown.

Before investing time, money, and resources in a potential new venture, entrepreneurs should understand the potential pitfalls involved. Thorough research and careful planning is essential to minimize risks and develop a viable NTFP enterprise.

Planning an NTFP Enterprise: Four Evaluations

Planning and evaluating should be done up-front, before money is invested in the potential enterprise. Many small-scale NTFP ventures begin without adequate information and planning and, as a result, many of them fail. Small enterprises can enter markets selling NTFPs relatively easily, but only a small portion of these manage to adapt to the changing circumstances of supply, market demand, and competition to survive in the long-term (FAO 1995).

Prospective NTFP entrepreneurs should complete four evaluations before investing in a new venture. These include a personal evaluation, a resource evaluation, a market evaluation, and a project feasibility evaluation. Each of these is explained briefly below.

Personal Evaluation

A personal evaluation identifies and prioritizes the personal outcomes needed or wanted from the venture. These include the level of income necessary from the venture, acceptable levels of risk, and an assessment of the personal and family resources available for the enterprise (Thomas and Schumann 1993).

Resource Evaluation (Excerpt from FAO 1995)

A first step in developing any viable forest enterprise is to understand the capacity of the forest resource. It is impossible to manage the resource wisely or profitably without knowing about its natural growth and production, and the human environment that affects it.

Many people assume that harvests of NTFPs have less impact on a forest than logging. However, this assumption is unfounded. Forest ecosystems have such complex interrelationships that harvests of some non-wood resources can affect plant and wildlife populations as negatively as logging. Without a sound knowledge of the resource and regular monitoring, harvests of certain non-wood resources can have a disastrous impact that is not noticed until it is too late to remedy. For example, overharvesting of fruits or seeds of a tree species can drastically reduce regeneration to the point of local extinction without any visible effect. Large individual trees may remain and the system might appear undisturbed. Only years or decades later, when the large trees die and no individuals replace them, will the environmental damage become evident (Peters, 1994).

Steps must be taken to understand and inventory the area's nontimber resources. Based on this, a community or enterprise can begin to prepare a plan for management.

Market Evaluation

A market evaluation is critical to the success of the project, and one of the more difficult aspects of research into NTFP enterprises. It should identify the targeted markets and locate prospective buyers. The exact specifications required by the potential buyer must also be determined, including quality, quantity, price, timing of the harvest, and other requirements. Some products have very exacting specifications. The NTFP entrepreneur must plan to meet or exceed these requirements, as well as those determined by government regulations if applicable (Thomas and Schumann 1993).

Project Feasibility Evaluation

The project feasibility evaluation examines both the technical and financial workability of the potential enterprise (Thomas and Schumann 1993). At a minimum, the financial evaluation includes a fully developed budget itemizing fixed and variable costs, and expected gross and net revenues. The amount of resources (time, money, labor, land) needed for growing, harvesting, handling, processing, transporting, and marketing the product must accounted for. The expected yield, probable price at harvest, and quality of the end product should be determined. On the technical end, the location of harvest sites, leases and permission if necessary, timing of operations, and methods of management must be addressed manner (Thomas and Schumann 1993). For NTFPs from natural forests, special attention should be given to the sustainability of harvesting the resource, and how the NTFP entrepreneur will ensure that she or he is managing in a responsible manner.

Starting Small

After careful evaluation and planning, the producer is ready to begin developing the NTFP enterprise. It is highly recommended to start small, and improve and expand over time.

There are many advantages to starting a small, pilot-scale enterprise before investing in a larger venture. Most importantly, starting small helps to minimize risk. This strategy also allows for the extra time necessary to develop good management and harvesting techniques and other effective habits of running a business. On a small scale, the impact on the environment can be observed carefully, and monitoring strategies for the future can be planned. Starting small allows for the possibility to recover from a mistake. On a larger scale, one mistake or miscalculation could jeopardize the forest resource or the finances of the producer, whereas on a small scale a mistake is more easily repaired. Also, starting small enables the producer to create a realistic time-line for future development, gauging how much of a work load is reasonable.

The following tips are offered about starting small (adapted from FAO 1995):

Start with one product and gradually diversify. Choose the easiest product that yields a good revenue for the time involved. Invest profits in the process required to produce a second market item. The income from the first product can also leverage credit for a larger operation.
Start with products for which a local market already exists. Entering an existing market allows producers to start repaying costs immediately, but creating markets for new products takes time.
Adopt a simple strategy. Complex production/marketing strategies permit more unforeseen difficulties. (FAO 1995).

Improving Management and Marketing (adapted from FAO 1995)

Understanding and managing currently available nontimber forest resources is an essential place to start. However, if demand for the NTFP product or pressure on these resources increases, systems and that once were environmentally sound must be adapted in order to meet needs for livelihood and income. Communities and enterprises can adapt systems for management that are culturally, economically and environmentally sustainable. Improving productivity, reducing waste in harvest, and improvement or domestication of key species are examples of ways to help increase the resource base.

The commercial options can also be improved over time. Creating niche markets, diversifying markets, and adding value locally can improve the income and security of an NTFP enterprise. It is also important to monitor and demonstrate the ecological viability of the enterprise. This helps appeal to environmentally-minded consumers, many of whom are willing to pay a premium for sustainably harvested materials.

References

The Australian New Crops Newsletter. 1998. Issue No. 9. Queensland, Australia.

FAO. 1995. Non-wood forest products 7: Non-wood forest products for rural income and sustainable forestry. FAO, Rome, Italy. Excerpts used with permission.

FAO. 1997. State of the World's Forests 1997. FAO, Rome, Italy.

Hammet, T. 1999. Special Forest Products: Identifying Opportunities for Sustainable Forest-based Development. Virginia Landowner Update, Virginia Tech.

Peters, C. M. 1994. Sustainable harvest of non-timber plant resources in tropical moist forest: an ecological primer. Biodiversity Support Program-WWF, Washington, D.C.

SPC/UNDP/AusAID/FAO. 1999. A Preliminary Report on Non-Timber Forest Products in Some Pacific Island Countries. RAS/97/330, Working Paper No. 6, SPC/UNDP/AusAID/FAO, Pacific Islands Forests & Trees Support Programme, Suva, Fiji.

Thomas, M.G. and D.R. Schumann. 1993. Income Opportunities in Special Forest Products: Self-Help Suggestions for Rural Entrepreneurs. USDA ADB-666, Washington, DC.

Periodicals

Non-wood News is an information-rich newsletter produced by FAO's Wood and Non-wood Products Utilization Branch, providing readers with current information on nontimber forest products and their contribution to the sustainable development of the world's forest resources. Non-Wood News, Forest Products Division, Forestry Department, FAO, Viale delle Terme di Caracalla 00100 Rome (Italy), Tel: +39-06-570-52746, Fax: +39-06-570-55618.

About the Authors

Kim M. Wilkinson is the Education Director for Permanent Agriculture Resources and editor of The Overstory. She has B.A. degrees in Anthropology and Ecology from Emory University.

Craig R. Elevitch is an agroforestry specialist with more than ten years of public and private sector experience in tropical agroforest and forest management. He has a M.S. degree in Electrical Engineering (Dynamical Systems) from Cornell University.