Value Chain Analysis of Eucalyptus Wood Products in the Blue Nile Highlands of Northwestern Ethiopia

Abstract

Eucalyptus wood products contribute significantly to the income of smallholder growers in many parts of Ethiopia. This has incentivized smallholders to convert arable lands to Eucalyptus plantation. Given the limited attention and availability of empirical evidence, this study examined the Eucalyptus wood products value chain in terms of the actors engaged, the type and importance of channels, margins analysis and the overall value chain governance in the main Eucalyptus growing areas of the Blue Nile highlands of Northwestern Ethiopia in 2019/2020. Sources of data were randomly selected 388 Eucalyptus grower households and 166 Eucalyptus wood traders, complemented by an interview with key informants, group discussions and direct observations. The results reveal that a total of 2,051,114.75 m³ of Eucalyptus wood was produced in the study area and Eucalyptus plantations are expanding over crop lands at a rate of 102.35 ha a year on average. Many actors involved handle a large volume of wood in eight main channels with a high disparity in the shares of the margins. We found that Eucalyptus is the main source of cash earning, contributing about 45.76% to the total annual income of smallholder growers. Little policy attention, a lack of sectoral integration, missing infrastructure and an absence of modern wood processing factories are among the key challenges impeding the performance of the wood sector value chain. There are however existing opportunities for the development of the wood sector value chain such as favorable growing conditions and the spectacular growing demand for wood products. The study provides valuable insights about the wood sector value chain and actions towards ensuring sustainable value chains and the commercialization of the sector.

1. Introduction

Eucalyptus is one of the most planted short rotation tree genera in the world next to Pinus and Cunninghamia and it is among the most important forest tree species for industrial raw materials [1,2]. For their economic importance and especially for energy production, short rotation tree plantations are attracting the attention of many countries in the world [3]. Short rotation plantation trees including Eucalyptus, willow, poplar and Robinia have a quick growing habit grown closely together and are harvested within 2 to 20 years [4]. They have been cultivated in various countries and have been considered as an option in modern agriculture for biomass energy and fiber production for more than 40 years [5]. Constituting a genus of more than five hundred species, such short rotation plantation trees provide multiple economic advantages and social benefits including employment, income from sale of forest products, watershed management and climate change mitigation [6]. Forest products also make an enormous contribution to the success of industrialization as they provide the raw materials required for downstream activities including pulp milling, paper manufacturing, saw milling and furniture manufacturing which could be considered as the value chain activities of the wood sector [7].

The growing deficit of wood and wood products in the world has forced policy rectifications for the establishment of fast-growing plantations and recently, there has been a rapid large-scale shift from conventional food crop production to short rotation plantations which will certainly have positive and negative implications on a range of environmental issues [8,9].

Eucalyptus is largely planted by smallholder growers with a yearly expansion trend [10,11]. Due to its fast-growing tendency and quick return potential, Eucalyptus is preferred as the most advantageous tree in terms of employment creation, provision of goods and services and its overall contributions to livelihoods [12,13,14].

In recent years, owing to the escalating demands of Eucalyptus wood products for different purposes, growers have converted crop lands to Eucalyptus plantation regardless of the fertility status and productivity of the plots in many parts of Ethiopia [15]. There are different reasons for such land use changes. At a large scale, the global market for Eucalyptus wood products and the interest in wide-scale planting for the production of biofuels are the driving factors for the expansion of Eucalyptus as woodlots [16]. The prevailing soil degradation in the highlands of the country related to soil acidity is causing disarray among food crop growers. In addition, soil fertility is also declining year to year as a result of rapid population growth and changes in agricultural activities [17,18]. Along with this, poor households cannot afford to manage the escalating price of fertilizers, seeds, lime and other agrochemical inputs. So, they opt to plant their land with Eucalyptus and move to urban areas in search of off-farm income. In addition, Eucalyptus plantation does not require as much input as crop production does. Its vigorous growing habit and quick return, high potential of coppicing, reduced labor requirements, the increasing demand for its multipurpose wood products and the emerging wood market opportunities are the main driving factors for the expansion of Eucalyptus over crop lands as woodlots [10,19].

Given the positive economic attributes of the tree, there has also been criticism regarding ecological challenges such as the impact on soil health, the depletion of ground water and the suppression of undergrowth. A study by Forstmaier et al. [20] reported the invasive behavior of large-scale plantations of Eucalyptus as a major ecological challenge. Eucalyptus leaf litter accumulation has also been reported to have allelopathic effects in the root zones of cultivated crops and Eucalyptus planted on fertile crop lands creates shading effects on adjoining plots which lead to a significant reduction in productivity [21,22]. Eucalyptus also depletes ground water which aggravates watershed degradation [23].

On the other hand, several ecological advantages of short rotation coppices of such fast-growing plantations on arable soils have also been reported, including a long-term non-tillage management with increased litter content which can change the abundance and diversity of the soil fauna [9]. Structured plantations of short rotation trees have also been reported to have a positive impact on ecological conservation and biodiversity [5]. With these arenas, a rapid increase in population and the subsequent rise in the wood market and grazing and cultivation land coupled with declining crop productivity has become a threat to the ecosystem [24]. The growing demand for wood for construction and fuel on the demand side and its high adaptive capacity in a wide range of soil types on the supply side together with the aforementioned reasons have fostered the rapid expansion of Eucalyptus [25]. Of the total of 972,000 ha of forest land in Ethiopia, Eucalyptus accounts for about 90% of the available forests covers, ranking first [26].

Eucalyptus is the main cash generating and livelihood supporting investment in the study area [16]. This requires ensuring sustainable product markets to growers and other actors to increase their competitiveness in the business. In order to empower smallholder growers and other actors and to improve their performance and commercialize the sector, it is important to examine the nature of the Eucalyptus wood value chain by examining the entire series of activities that are needed to bring a product from production to the ultimate consumers [27].

Porter [28] coined the term value chain as a representation of a firm’s value-adding activities, based on its pricing strategy and cost structure. Value chains represent the full range of activities that are required to bring a product or service from the beginning, via the intermediary production phases and delivery to final consumers [29].

Analysis of value chains provides a rational and systematical framework to describe and evaluate the roles and interrelationship of the actors in the chain [30,31]. Globally, the wood value chain adds more than double of the direct economic product contribution to GDP through the impact on value additions, income and employment in other economic sectors and strongly sustains about 75% of micro and small enterprises [18]. Even though many value chain studies [18,27,31,32] have been carried out in the wood sector in different countries, most of them have given emphasis to the processed wood products and studies that explicitly deal with the value chain development of Eucalyptus wood products are absent. A study by Lenzinger [33] examined the forest-based sector value chain in Austria and quantified the gross value additions of the sector. Another study by Johansen [34] explored the balance between regional policy interests and the industrial sector by optimizing the wood sector value chain in northern Norway taking into account national and regional economic trade-offs.

To the best of our knowledge, this study is the first of its kind in analyzing the value chains of the specific Eucalyptus wood products in Northwestern Ethiopia. Despite the choice of smallholder growers’ of Eucalyptus as a strategic income option, the actors engaged in the sector, the nature of the market, the product type and the values that are added at each segment of the chain together with the shares of each actor need to be studied. In this study, we analyzed the value chains of Eucalyptus wood products targeting the identification of key challenges and opportunities in promoting well developed value chains and the sustainable management of Eucalyptus wood and wood products that can bring about the improved commercialization of the wood sector in the study area.

2. Materials and Methods

2.1. The Study Area

This study was conducted in the Blue Nile highlands of Northwestern Ethiopia covering the three major Eucalyptus growing districts, namely Gozamin, Sinan and Machakel in the East Gojjam zone (Figure 1). The study covered an area of 128,000 square kilometers with altitude ranges between 2500 and 3900 masl. The area has cool humid (Dega) and cool sub-humid (Woinadega) climatic zonation and experiences a unimodal rainfall type with average annual rainfall ranging from 1000 to 1700 mm and an average annual temperature of 18 °C. The area had a total population of 2.45 million in 2014 with an average population density of 89 persons per square kilometer. The vast majority of the population in the zone (86.5%) lives in rural areas where agriculture is the predominant economic activity [35].

East Gojjam is characterized by diverse topographic features with slopes ranging from nearly plain to very steep (greater than 45%) slopes. The area permits the growth of a variety of agricultural crops. The lower altitude areas support maize, sorghum and teff (Eragrostis tef) while mid-altitudes are suited for the cultivation of teff, wheat, maize and other crops. In the highland places, barley, wheat, faba bean, pea and lentil are dominantly grown. White Eucalyptus (Eucalyptus globulus) is widely grown across this study area [36].

2.2. Sampling and Sample Size

Multi-stage sampling procedures were followed for generating primary data from grower households. In the first stage, the East Gojjam Zone was selected purposively for the prevalence of large Eucalyptus stands. Secondly, three districts within East Gojjam were chosen on the basis of Eucalyptus coverage. Information obtained from the report indicated that Sinan, Gozamin and Machakel districts took the first, second and third rank in terms of Eucalyptus percentage cover, respectively [37]. From each district, 4 kebeles (micro level formal administrations) were chosen based on their Eucalyptus coverage. From each kebele, respondents were randomly chosen. The sample size was determined using the Yamane [38] sample size formula. The actual number of Eucalyptus growing households and the respective samples taken are shown in

Table 1. Eucalyptus growing households and samples by kebele.

Districts	Kebele	Number of Eucalyptus Growing Households Fulfilling the Criteria	Sample Size
Senan (17 kebeles)	Wolekie	632	27
	Gedamawit	854	36
	Yeted	1393	40
	Chabi	714	30
Gozamin (25 kebeles)	Gedemala	618	26
	Kegn Abu	671	29
	Giraram	852	36
	Enerata	836	36
Machakel (25 kebeles)	Shafogalat	989	42
	Degasegnin	751	32
	Debre Kelemo	710	30
	Temamagn	554	24
Total 9574			388

.

A total of 406 questionnaires were dispatched for data collection but 18 were improperly filled and rejected. Finally, 388 sample (with a response rate of 95.6%) respondents were used for analysis. In addition to the formal questionnaire, three consecutive focus group discussions were carried out and each group had members ranging from 8 to 12 persons.

The sample from Yeted kebele (40), which should have been 56, was less represented due to the absence of sufficient number of growers who fulfilled the criterion of owning at least 0.25 ha of Eucalyptus plots. However, the sample was compensated by increasing the samples in the rest of the kebeles. Then, the actual number of licensed value chain actors was identified in each market center. Legal registration/license ownership was a criterion for considering traders as sampling units. As the actual number of traders was limited, we used census sampling (i.e., almost the entire population) with the exclusion of participants who were unwilling to participate in the survey and thus 166 out of 188 registered traders were taken as the final sample (

Table 2. Number of actors sampled per market center.

Value Chain Actors	Market Centers				Total
	Dega Segnin	Amanuel	Debre Markos	Rebu Gebeya
Construction wood retailers	9 (16)	12 (13)	33	9 (12)	63
Fuel wood retailers	8 (11)	8	4 (7)	6 (9)	26
Wood processors	4	6	19	6	35
Collectors	2 (4)	-	4	2 (5)	8
Walling wood splitters	4 (9)	6 (8)	8	2 (6)	20
Wood trading growers	0	6	4	4 (7)	14
Total	27	38	72	29	166

Note: Parenthesized figures are number of licensed traders that fulfill the selection criteria. Dega Segnin and Amanuel market centers are found in Machakel district while Debre Markos and Rebu Gebeya are located in the Gozamin and Senan districts, respectively.

). Two successive key informant discussions were also carried out with traders to complement the data obtained using a questionnaire. Data including the type and volume of wood product traded, taxation and legality were requested and obtained from traders. The study period was the 2019/2020 production year.

2.3. Data Analysis and Value Chain Mapping

Data related to the volume of wood produced and the products handled, the costs incurred and the gross margins obtained by each actor were analyzed. Then, key value chain actors together with enablers were identified. Value chain actors included growers, construction wood retailers, fuel wood retailers, wood processors, collectors, walling wood splitters and wood trading growers. These value chain actors are explained in detail in Section 3.2.

By using data from formal interviews and discussions with key informants, potential market routes of Eucalyptus wood products were identified and the actual value chain map was traced with industry or product case studies value chain analytical approaches [39]. Using the gross margin model, marketing margins were calculated for each actor along the chain [40].

The gross margin was calculated as:

$$GMM=\frac{ConsumerPrice-MarketingGrossMargin}{\mathit{Consumer}\mathit{Price}}\times 100$$

(1)

Similarly, we calculated the net margin using the following formula:

$$NMM=\frac{Gross Margin-Marketing Costs}{ConsumerPrice}\times 100$$

(2)

where, GMM is the gross marketing margin and NMM is the net marketing margin.

For each actor along the value chains, gross margins were calculated using a one-season price (January 2020). This is because the price of Eucalyptus wood products significantly varies with time.

In order to estimate the expansion rate of Eucalyptus over crop lands in the study area, we carried out a time series analysis of Eucalyptus land holdings of growers from 1980 to 2020. We applied the Autoregressive Moving Average (ARMA) model which is one of the most popular and frequently used stochastic series models [41,42]. ARMA is a combination of the Autoregressive (AR) and Moving Average (MA) models as it is appropriate for univariate time series modeling. In an AR model, the future value of a variable is assumed to be a linear combination of p past observations and a random error together with a constant term which can be expressed as:

$${{\displaystyle Y}}_t=c+{\epsilon }_1+{\displaystyle \sum _{i=1}^{\rho }{{\displaystyle \varphi }}_i}{{\displaystyle Y}}_{i-1}+{{\displaystyle \epsilon }}_i$$

(3)

where Y_t is the actual value, c is the constant and ${{\displaystyle \epsilon }}_t$ is the error term.

On the other hand, the MA model uses past errors as explanatory variables as:

$${{\displaystyle Y}}_t=\mu +{\displaystyle \sum _{j=1}^q{{\displaystyle \theta }}_j}{{\displaystyle \epsilon }}_{t-j}+{{\displaystyle \epsilon }}_t$$

(4)

where $\mu$ is the mean of the series, ${{\displaystyle \theta }}_j$ are the parameter and q is the order of the model.

Therefore, the ARMA model can be expressed mathematically as a combination of the above two models as:

$${{\displaystyle Y}}_t=c+{\epsilon }_1+{\displaystyle \sum _{i=1}^{\rho }{{\displaystyle \varphi }}_i}{{\displaystyle Y}}_{i-1}+{\displaystyle \sum _{j=1}^q{{\displaystyle \theta }}_j}{{\displaystyle \epsilon }}_{t-j}$$

(5)

where p and q are the model orders referring to p autoregressive and q moving average terms.

2.4. Selection and Prioritization of Eucalyptus Wood Products

Three consecutive meetings were carried out with Eucalyptus value chain actors to prioritize the major Eucalyptus forest products. Then, by setting the prioritization criteria and developing a ranking matrix, major forest products were identified. Farmers were able to prioritize the Eucalyptus forest products on the basis of their needs. Accordingly, the ranking matrices indicated that fuel wood, split wood, rod/atana and log were ranked in descending order. Accordingly, the analysis considered these products.

2.5. Wood Volume Estimation

Note that in order to estimate the amount of wood produced and transacted, the volumetric wood measurement method was used. There are different formulae for measuring wood volume which include the Smalian, Huber, Newton, centroid and two-end conic methods, each of which has its strengths and weaknesses depending on the dimensions of logs and forms of stem [43]. We also employed the sectional volumetric method for quantifying the volume of stacked wood as explained in a study on manual and automatic volume measuring methods for industrial timber [44].

3. Results

3.1. Characteristics of Growing Households

Table 3. Characteristics of the sample growing households.

Demography	Indicator	Value (N = 388)
	Family size	6
	Dependency ratio (%)	64
	Age	48
	Gender (%)
	Female	10
	Male	90
Literacy status	Can not read and write	7.42
	Read and write	40.98
	Religious school	4.12
	Grade 1–6	5.15
	Grade 7–12	1.29
	Land size (ha)	1.51
Farm resource and income	Average annual income (ETB) from:
	Crop	16,117.35
	Eucalyptus	28,237.17
	Livestock	10,576.92
	Non-farm sources	6775.19

below presents the characteristics of grower households. From the entire sample of Eucalyptus growers, 90% were male and 9.5% were female heads of household. The majority of respondents (89.9%) were found to be within the working age of 31 to 65 years, about 5.4% were under 31 years and only 4.6% were above 65 years. The average size of families was about six persons, which is a larger than the national average. Similarly, 48.5% of respondents could not read and write, 41% could read and write, 4.1% followed their education in religious schools, 5.2% were grade 1 to 6 and only 1.3% followed formal schooling of grade 7 to 12.

The findings reveal that the average land holding of growers was 1.51ha which is utilized for the production of food crops, the plantation of Eucalyptus and homestead gardening. The average annual income of households from Eucalyptus alone was found to be 28,237.17 ETB, covering about 46% of the total annual income. The annual income from crop production was 16,117.35 ETB, which constitutes about 26% of the total income. Income from non-farm activities (off-farm and remittance) and livestock rearing were found to be 10,576.92 ETB and 6,775.19 ETB, taking shares of about 17% and 11% of the total annual income of households respectively.

3.2. Eucalyptus Wood Production and Marketing

In the study area, Eucalyptus is the major source of cash earning. It is extensively planted by smallholder growers with a yearly expansion rate for various socioeconomic and environmental reasons and overall comparative advantage. Its fast-growing habit and quick return potential, its minimal management requirement and land administration regulation which permit the renting out land for up to 25 years are among the major driving factors for the expansion of Eucalyptus over over crop lands.

In order to estimate the expansion rate of Eucalyptus plantations over crop lands, we employed the stochastic series of the Autoregressive Moving Average (ARMA) model. The results showed that Eucalyptus plantations have expanded at the rate of 102.35 ha each year on average (

Table 4. Result of the ARMA model.

Source of Variation	Sum of Squares	Degree of Freedom	Mean Square	Number of obs	=	41
				F (1, 39)	=	916.36
Model Residual	60,132,449.50	1	60,132,449.50	Prob > F	=	0.0000
	2,559,219.48	39	65,621.012	R-squared	=	0.9592
Total	62,691,669	40	1,567,291.72	Adj R-squared	=	0.9581
				Root MSE	=	256.17
Total area (ha)	Coeff.	Std.Err.	t	$P\mathbf{>}\mathsf{\left|}t\mathsf{\right|}$	[95% Conf. Interval]
Year	102.35	3.381	30.27	0.000	95.513	109.192
_Constant	−20,2381.80	6,762.435	−29.93	0.000	−216,060.1	−188703.4

). The model gave highly significant (p < 0.01) outputs and a high coefficient of determination (R-squared = 0.96) indicating its goodness of fit in accurately predicting the magnitude of the yearly expansion of Eucalyptus plantations over crop lands.

Figure 2 below shows the trend of expansion of Eucalyptus over crop lands from 1980 to 2020.

The meaningful expansion trend of Eucalyptus plantations shows the existence of a surplus supply of wood in the study area. The top prioritized Eucalyptus wood products include construction wood/post, rod/atana, fuel wood, log and split wood.

Table 5. Average Eucalyptus wood production of growers (2019/2020) (m³).

Product Type	Average	St. Dev.
Pole/post	5155.97	2101.81
Rod (Atana)	5578.10	4136.82
Fuel wood	3999.93	1768.40
Log	4663.17	1693.27
Split wood	3546.46	584.64

Note: Rod/Atana = Entire thin wood from base to terminal with base circumference of 12 cm. Log = A large volume of Eucalyptus wood cut in a manageable size with average base circumference of 190 cm.

below shows the mean production of Eucalyptus wood in the study area during the 2019/2020 production year.

In the Eucalyptus wood market, there are no collective marketing decisions involved. As per the information obtained from key informants, self-initiative marketing decisions are made by growers and there is no collaborative market planning and price determination. Eucalyptus growers set prices to their wood lots and felled trees on the bases of type of trees and location (accessibility). Growers sell Eucalyptus wood at different stages of growth depending on its intended purpose (starting from thin rod wood to big size logs).

The results show that for rod/atana, the average time of the harvest is approximately 4–5 years (when it is harvested from the first stand the production will be halved when it is from coppice). For roofing, wall or fuel, it takes about 10 years. Production of logs however needs longer periods (about 15–25 years) in primary stands. Respondents confirmed that the time of harvest diminishes by half if the harvest is from coppicing. This is one of the reasons that made Eucalyptus the most preferred tree in the study area.

3.3. Characteristics and Roles of Eucalyptus Wood Value-Chain Actors

The Eucalyptus wood value chain actors can be identified along the chain, as shown in

Table 6. Summary of the characteristics and roles of Eucalyptus wood value chain actors.

Value Chain Actor	Average Family Size	Average Age	Male/Female (%)	Volume of Wood Traded (M3)	Supply Source	Market Destination	Main Activities of Actors	Total Cost Incurred (ETB/M3)	Profit (ETB/M3)
Construction wood retailers	4	34	100 (0)	1,025,557.10	Growers	Construction sector Wood trading growers	Collecting Sorting Retailing	128.89	409.22
Wood processors	5	43	100 (0)	4663.17	Growers	Construction sector Furniture enterprises	Felling and log collection Lumbering Processing Selling	155.72	11,594.62
Fuel wood retailers	4	40	86 (14)	328,178.47	Growers	Fuel wood consumers	Splitting, arranging in bundles and retailing of fuel wood	120.32	2373.27
Wood collectors	5	39	66 (34)	40,236.23	Growers	Walling wood splitters Furniture enterprises	Felling Collection Splitting Selling	98.23	84.38
Walling wood splitters	6	44	100 (0)	123,067.31	Growers Wood collectors	House builders	Felling, Splitting, Retailing	163.03	2120.46
Wood trading growers	4	42	100 (0)	123,067	Own production and other growers	Construction sector	Sorting wood, resizing logs, splitting and arranging wood splits in bundles	37.77	17.26
F-value	6.01	4.13	__	18.66 ***

*** indicate level of significance at 1% probability.

. They include input suppliers, growers, construction wood retailers, wood processors, fuel wood retailers, wood collectors, walling wood splitters, wood trading growers and final consumers. The details of their characteristics are explained in sections beginning from 3.3.1. The results show that there were no significance differences among the traders’ characteristics such as family size and age. Significant (P < 0.01) differences were observed in the volume of wood handled by actors.

3.3.1. Input Suppliers

Public nurseries owned by the Ethiopian Ministry of Agriculture (district level agriculture offices) and private nurseries are the main supply sources of the white Eucalyptus (Eucalyptus globulus) seedlings in the study area. Eucalyptus seeds are collected from local sources (matured Eucalyptus trees) for both public and private nurseries. There are 4 public and 32 private nurseries in the sampled kebeles. However, public nurseries focus on the raising of fruit and other indigenous tree seedlings and private ones mainly engage in the raising of Eucalyptus seedlings.

Agricultural offices are responsible for providing expertise for nursery management and the raising of Eucalyptus and other tree seedlings. Both public and private nurseries sell their seedlings at spot markets with no pre-arranged contracts. Eucalyptus seedlings are usually distributed to growers at optimum prices with an average price of 0.50 ETB (Ethiopian Birr) with a lump sum cost of 5717.08 ETB/ha. However, 32.0% of respondents confirmed that they utilize seedlings raised at their own nurseries while 66.2% obtain seedlings from public nurseries and only 1.8% was found to use seedlings from both nurseries. This is mainly because raising Eucalyptus seedlings requires little nursery management.

The majority of private nursery owners had access to nearby potential water sources and were aware of raising seedlings in pots. For the simplicity of purchase process, farmers prefer privately grown seedlings over public ones. The main challenge with private nurseries is that seedlings from private nurseries exhibit a lower survival status in the field compared to public nurseries that raise seedlings in pots. The challenge related to the public nurseries is that growers cannot obtain the number of seedlings they need as distribution is on the basis of a quota system.

3.3.2. Eucalyptus Growers

Cultivation of food crops complemented with livestock rearing is the dominant economic activity of growers in the study area. However, growers have shown a tendency to focus on plantations of Eucalyptus as wood lots. Focus group discussions held with respondent farmers indicated that this is mainly due to diminishing land productivity, the accelerating rise in demand for wood, the rapid vanishing of other natural wood sources, the depletion of livestock feed sources, reduced cultural/management requirements, a rapid growing tendency and existing land administration regulations. In addition, respondent growers confirmed that Eucalyptus has excellent area adaptability, a fast-growing tendency and multiple uses. Eucalyptus is becoming the most important livelihood supporting tree species in the study area.

3.3.3. Construction Wood Retailers

All of these actors could read and write and about 67% of them had followed formal schooling. They have a good communication with growers and consumers (especially construction companies and agents). They maintain smooth market information with phone communications. Discussions with key informants indicated that more than half of them have their own houses in towns and own about one hectare of land in rural areas. Eucalyptus wood trading is the main source of income for these actors. Information obtained during discussions with key informants showed that they owned an estimated initial capital ranging from 100,000 to 245,000 ETB.

Construction wood retailers are special actors who handle a large volume of Eucalyptus wood transacted in 2020/2021. The product they handle is for construction purposes that include roofing wood, construction poles, rod/atana and wood for structural frameworks and supports. The total volume of construction (roofing wood, walling wood and rod/atana) handled by these actors were estimated at 314,514 m³ and 301,2017.20 m³, respectively. The majority of the wood transacted by these actors was consumed by the construction sector. Product destinations include construction sites (large building structural supports and frameworks, roofing frameworks).

For these actors, value addition begins with debranching which is practiced just following the felling of the forest stands. This will be followed by sorting the wood according to size and use such as roofing, poles, atana, etc. Sorting helps traders easily set prices depending on the type of product. Roofing wood is the most expensive of all wood product types in the study area. A single roofing wood (with a length of about 12 m and base diameter of about 21.2 cm) costs about 162ETB. These products are highly preferred for their straightness and fitness to the proposed construction purpose, usually for commonly made non-concrete houses. Peeling/debarking is one of the most important value addition activities carried out by construction wood retailers. Peeling is usually performed immediately after felling the trees as it takes much labor to peel as the wood becomes drier. Poles dried without peeling have significantly lower prices than peeled ones.

3.3.4. Wood Processors

The entire sample of respondents could read and write and 65% confirmed that they followed formal schooling. These value chain actors started their business as small-scale enterprises and became medium level enterprises after 5–10 years of experience. Wood processors own wood processing machines. They transacted 4663.17 m³ of logs on average and processed 1543.09 m³ of lumber annually on average. Their products are designed for making lumber for construction, roofing structures, frame works, beds, office and home furniture and others. In addition to the primary products, about 363,463 kg of sawdust is produced by wood processors on average as a byproduct which is consumed as a fuel source by traditional bakers and local drink processors.

These enterprises make different furniture products and produce lumber for construction inputs such as concrete frameworks. Previously, furniture products were made from indigenous tree species such as large-leaved cordia (Cordia Africana) and ebony (Diospyros ebenum). However, due to the successive degradation of natural resources in the study area, Eucalyptus is becoming the most popular and abundantly used raw material for wood processing enterprises. Large Eucalyptus trees with large volumes of wood (log) are in high demand from wood processing enterprises. The annual log consumption of wood processing enterprises in different towns is depicted in

Table 7. Average log consumption and production of lumber and sawdust per processor per annum.

Product Type	Quantity	Standard Deviation
Log consumed (m3)	4663.17	1693.27
Lumber produced (m3)	1543.09	917.23
Sawdust (kg)	363,462.90	101,267.01

. Sawdust is an intermediary product in wood processing which is in high demand from injera (Ethiopian common dish) bakers and araki (locally made alcohol) processors. Of all the actors in the chain, log processers add the highest value to the products.

Despite the emerging wood industries in the country, none of them are built around the study area. However, one push factor is that farmers are being informed about the huge wood demand of these factories in the future. This is another factor which initiated growers to expand Eucalyptus plantation beyond the needs of medium scale wood processing enterprises. For these actors, the value addition begins from cutting the logs into manageable sizes at the growers’ site. The logs are then transported for debarking and stocking where they lose moisture to the desired level. In order to reduce the size of logs to a manageable size for machines, primary processing/partial removal of the external wood is performed manually at stock though it requires intensive labor. Logs are then processed to produce lumber by the required type and size. Depending on the product type, packing may be important as is the case for the stacking of small size lumber for roofing and frameworks. Processed lumber is then ready for marketing which will be used for a variety of purposes including construction and furniture works. In terms of value addition, wood processors add the highest value to the product and incur the highest processing costs as compared with the rest value chain actors.

3.3.5. Fuel Wood Retailers

These actors play an important role in the fuel wood value chain in that they maintain a continuous supply of fuel wood to consumers, bridging the gap between the producers and fuel wood consumers. They handle approximately 328,178 m³ of fuel wood annually.

As per the information obtained form group discussion, fuel wood retailers purchase Eucalyptus wood from two sources, i.e., directly from growers and from wood collectors. When a purchase is made from the growers, an agreement is made between the grower and the trader by setting the prices of trees at stands. Then, felling, debranching, cutting to manageable sizes and sorting are the primary value addition activities performed by these actors. Sorted wood and branches are then stocked for retailing. Then, splitting is performed immediately after felling before the wood is dried. Wood splits for fuel purposes are cut into lengths of about 0.9 m and stacked for retailing in large quantities (with trucks) or in small quantities using pack animals. When a purchase is to be made from wood collectors, value addition will start at the splitting of the wood which will be further packed in bundles (about 20 pieces of each 0.9 m long).

3.3.6. Wood Collectors

Wood collectors are special actors who assemble various types of Eucalyptus wood for the purpose of retailing to different customers. They supply the collected wood to different consumers who utilize the product for the intended purposes (construction and fuel). The total volume of wood collected by these actors is estimated to be 40,236.23 m³. Wood collectors play a role in the smoothening supply of fuel wood sources especially. Trading and farming are the major income sources of wood collectors. Sorting, resizing and splitting are the main value addition activities of these actors.

3.3.7. Walling Wood Splitters

Walling wood splitters are urban dwellers who are specialized in selling split wood for walling and fencing purposes. These actors usually hire special labor for splitting the large volume of Eucalyptus logs. Their main role in the chain is supplying split wood which is mainly used for walling and fencing purposes. The estimated volume of wood handled by these actors is about 123,067.31 m³ per annum. These actors purchase trees in the farmers’ fields by selecting trees appropriate for splitting.

Once trees of the required age are purchased at farmers’ fields, the felling, debranching and cutting of logs at the required sizes (usually 3.2 m) are the primary activities. Then, shortened logs will be split at the farmers’ fields or after transportation depending on convenience. Walling wood is prepared by splitting logs at a length of about 3 m. Group discussions with Eucalyptus wood traders indicated that the price of a log on average doubles when it is made ready as split wood for walling and fencing. Split/walling wood is in high demand for the construction of house walls and fences. On average, a single piece of split/walling wood costs 30 ETB.

3.3.8. Wood Trading Growers

These value chain actors are basically farmers with similar sociodemographic set ups as other growers but they support their livelihood with Eucalyptus trading. These actors purchase various types of Eucalyptus wood products from other growers at farm gate price for stacking and further retailing. Fuel wood and roofing wood are the main products transacted by these actors with an annual transaction volume of 123,067.31 m³.

Wood trading growers play two major roles in the transaction process. On one hand, they have a role of linking growers to alternative market options year-round though their purchases are relatively little as compared to other traders. On the other hand, with their supply stocks, they make wood supplies available to consumers at any season. Value addition activities carried out by wood trading growers vary depending on the type of wood transacted. Sorting wood, resizing logs, splitting and arranging wood splits in bundles are the main value addition activities.

3.4. Governance and Business Enabling Environment

In general, government bodies are responsible for controlling the overall production and marketing systems with regulatory legislation such as regional land administration regulations (on the production side) and the Ethiopian Revenue and Custom Authority. We found that Eucalyptus growers have a limited voice and have little participation in the governance of the Eucalyptus value chain while construction wood retailers have the maximum control of activities, especially price determination, among the rest of the actors. This is because the time of tree felling depends on the needs of individual farmers who are forced to sell to buyers with less bargaining power. In order to minimize their marketing costs, construction wood retailers have the power to coordinate activities on the supply side, make choices about suppliers and claim about prices set by the growers.

Public nurseries are solely managed by extension agents who are employees of the Ethiopian Ministry of Agriculture until the distribution of seedlings to farmers, whereas extension agents provide expert advice to private nursery owners. On the industry side, small and medium scale enterprises and wood factories encourage the development of Eucalyptus forest resources as input for wood processing enterprises.

Growers obtain agro-chemicals both from government and private sources. From the government side, agriculture offices are responsible for distributing inputs such as fertilizers, seeds, herbicides and pesticides at predetermined prices. On the other hand, private agricultural input suppliers provide seeds, pesticides, herbicides and other inputs. Private agricultural inputs suppliers are usually preferred over public ones in terms of timeliness and ease of procurement.

As a regulatory system, taxes are formally levied from legal traders as per the formal tax laws on annual basis. In addition, the Ethiopian Revenue and Custom Authority is responsible for controlling trades transporting wood from place to place by levying fixed payments/taxes per volume of loaded truck at selected gateways. Land administration proclamation is another regulatory organ determining the performance the wood sector value chain.

Transportation is another important service for the best performance of the value chain. Product transportation from growers’ point to consumers is carried out by private transport providers. Car (truck) transport is the main means of wood transportation in the study area. The most common vehicles providing transportation services are lorries and big trucks with a transport tariff of about 7ETB/22 m³ wood/km. However, as potential growing areas are characterized by sloppy topographic features, they are not accessible for vehicles.

3.5. Mapping the Value Chain

In order to develop the final value chain map of Eucalyptus wood products, a two-phased process of developing the value chain map was carried out. Primarily, the basic initial mapping was carried out after discussions made with value chain actors during the first reconnaissance survey. Then, the final value chain map was completed by revising the initial map, considering ideas from group discussions and the interview with key informants.

In the value chain of Eucalyptus wood products, the interlinkage of activities of different types of actors was noticed. These include input suppliers, growers, construction wood retailers, wood processors, fuel wood retailers, wood collectors, walling wood splitters and wood trading growers. Along the value chain, each actor adds value for the respective product except growing farmers. From the entire product of Eucalyptus supplied by growers, the maximum share (50%) was taken by construction wood retailers followed by wood processors (22%) (Figure 3).

Market channels were traced based on the direction of flow and volume of Eucalyptus wood transacted. Eucalyptus forest products were found to pass through seven channels. During the 2019/2020 production year, about 2,051,114.753 m³ of Eucalyptus wood was produced in the study area and transacted through eight main market routes as depicted below.

From Figure 3 above, many market channels can be traced but eight main channels were developed depending on the intensity of volume of wood transacted.

(1)

Growers → Construction wood retailers → Construction companies

(2)

Growers → Construction wood retailers → Individual house builders

(3)

Growers → Fuel wood retailers → Bakers and local drink processors

(4)

Growers → Walling wood splitters → Wooden house builders

(5)

Growers → Wood collectors → Walling wood splitters → Wooden house builders

(6)

Growers → Wood processors → Construction companies

(7)

Growers → Wood collectors → Wood processors → Furniture enterprises

(8)

Growers → Wood trading growers → Individual house builders

In terms of the intensity of the volume of wood transaction, the highest volume of wood (about 50% of the total wood volume) is transacted through Channel 1 followed by Channel 6, which about 22% of the total volume of wood passed through.

On the basis of the volume of wood handled by actors, the largest volume of construction wood (314,514 m³) was channeled from the growers’ point to construction companies via construction wood retailers and this route was the leading channel of Eucalyptus wood transaction in the study area. Another product type of the construction wood, walling wood, had the second leading volume of 301,217.20 m³ and was transacted in Channel 4. As seen in Figure 3, about 50% the total volume of wood transacted in the study area is construction wood.

Similarly, Channel 6 was the third leading route through which about 141,627.48 m³ of wood/logs was transacted. In this channel, wood processors process logs to an intermediate wood product/lumber and supply them to construction companies and individual house builders. In this channel, an estimated volume of 47,835 m³ of processed lumber was supplied to construction companies and other consumers. Fuel wood retailers are other dominant actors who transacted about 103,998 m³ of fuel wood in Channel 3. The greatest volume of wood product handled by these actors directly purchased from growers and directly sold to bakers and local drink processors. Wood collectors transacted about 440,236 m³ of wood in Channel 5. Wood collectors are special wood traders who purchase different types of wood products for stocking and retailing. Likewise, about 15,694.69 m³ of wood was handled by wood trading growers. Wood trading growers are basically farmers but specialize in marketing of different types of Eucalyptus wood products in relatively small quantities.

3.6. Marketing Costs, Profit and Profit Margins

Because of the variation in product types, the direction of product flow and the corresponding costs and margins are highly variable. Construction wood (roofing and walling), fuel wood, log and rods/atana are the primary Eucalyptus wood products considered in this study.

Due to significant temporal variation in the price of Eucalyptus wood products, one season (January 2020) was considered for each of the product types transacted along the chain. The price setting strategy for construction wood is carried out in two main ways. The first way estimates the number and size of Eucalyptus stands in farmers’ fields. In this method of price setting, Eucalyptus stands with an estimated age of eight to ten years covering a quarter of a hectare with uniform spacing costs of about 52,000ETB. In terms of volume, this is approximately as much as one and half of the volume of a fully loaded truck which has an estimated external volume of about 23 m³. Therefore, the estimated volume of a Eucalyptus stand covering a quarter of a hectare is about 34.5 m³. This implies that the unit price construction (roofing) wood is about 1,507.25 ETB/m³. On the other hand, when tree stands are sparsely populated with irregularities in size, the price is set by estimating the volume of the product. In the study area, a fully loaded truck (Sino truck) costs about 40,000ETB or 1,739.13 ETB/m³. Then, by taking the average, the price of construction wood is 1,623.19 ETB/m³. Similarly, the respondents confirmed that the average farm gate price of construction wood is 1,343.64 ETB/m³.

In the process of transaction, each value chain actor incurs costs which are attributed to labor, transportation, processing, brokerage and electricity. The costs incurred by each actor are depicted in

Table 8. Average marketing costs of Eucalyptus wood value chain actors (ETB/m³).

Cost Item	Labor (Cutting, Peeling, Sorting, Piling, Processing)	Loading and Unloading	Transport (ETB/Km)	Brokerage	Electricity	Total (ETB)
Construction wood retailers	5.39	13.93	8.89	100.68	-	128.89
Fuel wood retailers	4.60	14.49	9.61	91.62	-	120.32
Wood processors	28.52	25	9.23	85.68	7.29	155.72
Walling wood splitters	55	14.24	11.29	82.50	-	163.03
Wood collectors	9.47	23.73	18.78	46.25	-	98.23
Wood trading growers	8.36	2.09	7.32	-	-	37.77

. Among the value chain actors, walling wood splitters incur the highest cost (163.03 ETB/m³) followed by wood processors (155.72 ETB/m³). The reason for the former was the utilization of tiresome manual labor for the splitting of logs for walling purposes and the reason for the latter was the processing cost of sawmills.

Wood trading growers incurred the minimum marketing costs (37.77 ETB/m³). This is because these actors play the role of transferring the product from the grower to the consumer (usually to fuel wood consumers) with minimal contributions to value addition of the product.

Profits were then calculated by deducting the total cost incurred by each actor along the value chain from the selling price. The results showed that producers took the highest profit of all value chain actors. The maximum (2373.27 ETB/m³) profit was taken by fuel wood retailers in Channel III followed by walling wood splitters (2120.46 ETB/m³) in Channel IV. On the contrary, wood trading growers were found to take the least (17.26 ETB/m³) gross profit in Channel VIII. The extent of variation in profit might be attributed to the degree of values added to the wood product and cost associated with the process of value additions within the chain (

Table 9. Profit obtained by actors (ETB/m³).

Value Chain Actors		Market Channels
		I	II	III	IV	V	VI	VII	VIII
Construction wood retailers	Purchase price	1343.64	1343.64
	Marketing cost	128.89	128.89
	Selling price	1815.59	1881.75
	Gross profit	343.09	409.22
Wood collectors	Purchase price					1343.64		1343.64
	Marketing cost					98.23		98.23
	Selling price					1486.45		1526.25
	Gross profit					44.58		84.38
Wood processors	Purchase price						1343.64	1486.45
	Marketing cost						155.72	155.72
	Selling price						13,236.79	13,236.79
	Gross profit						11,737.43	11,594.62
Walling wood splitters	Purchase price				1424.22	1486.45
	Marketing cost				163.03	163.03
	Selling price				3707.71	3707.71
	Gross profit				2120.46	2058.23
Fuel wood retailers	Purchase price			1343.64
	Marketing cost			120.32
	Selling price			3837.23
	Gross profit			2373.27
Wood trading growers	Purchase price								1176.26
	Marketing cost								37.77
	Selling price								1231.29
	Gross profit								17.26

).

The gross profit margins were calculated to see the share of each value chain actor from the profit earned. As depicted in

Table 10. Marketing margins of value chain actors (%).

Marketing Margin	Market Channels
	I	II	III	IV	V	VI	VII	VIII
Gross margins
Construction wood retailers	18.90	21.75
Wood collectors					3.00		5.53
Wood processors						88.67	87.59
Walling wood splitters				57.19	55.51
Fuel wood retailers			61.85
Wood trading growers								1.40
Producers’ share	25.99	28.60	64.98	61.59	59.91	89.85	88.77	4.47
Net marketing margin
Construction wood retailers	11.80	14.89
Wood collectors					3.61		0.91
Wood processors						87.49	86.42
Walling wood splitters				52.79	51.11
Fuel wood retailers			58.71
Wood trading growers								1.67

, wood processors take the highest gross margin (88.67%) in Channel VI followed by the same actors in Channel VII (87.59%). The variation in gross margins is attributed to the values added at each segment of the chain. Among the different actors along the chain, we found that wood processors add significant values for the product. This indicates that the addition of value to Eucalyptus wood products significantly increases the share of return, calling a serious look for the emergence of wood processing enterprise, which can create good job opportunities for the increasing number of unemployed youth in the area.

3.7. Challenges and Opportunities

3.7.1. Challenges

Eucalyptus plantation sites in the study area are mainly characterized by rugged topographic features. Because of this, many of the potential Eucalyptus growing locations are not accessible by all-weather roads which are among the major challenges for growers. Growers’ feedback revealed that Eucalyptus products from inaccessible locations are subjected to significantly increasing labor costs for cutting and transporting to accessible locations. In the study area, Eucalyptus lots are being sold during the dry season (usually from December to April) as the dry season allows the movement of trucks by cultivable lands.

Despite the growing potential of the area in robust production of Eucalyptus wood, the majority of products are mainly consumed with little value additions due to absence of large-scale wood processing factories in the area. The only available wood processing enterprises are small-scale sawmills that focus on the production of lumber and related products. The absence of large-scale timber processing industries and wood impregnating machines (to overcome termite susceptibility of construction wood) impede the development of the wood sector value chain. The findings of our study show that these actors took the highest net marketing margin as they are the only ones who add the highest value for the product. This shows that the more the values added in the transaction process, the higher will be the profit margin that is obtained by the respective value chain actors.

When a farmer plants Eucalyptus on his plots, farmers owning neighboring plots claim shade effect of the forest and diminishing fertility status of the plot in the vicinity of the forest which lead leads to land use conflicts. This condition has resulted in the expansion of Eucalyptus forests each year.

Such challenges are usually seen to trigger social crises and disagreement among growing farmers, who are different in two scenario choices, i.e., the plantation of Eucalyptus versus crop production (Figure 4).

Discussions with key informants also indicated that households with non-farm income sources (those residing in towns) plant Eucalyptus in rented lands using the current land use policy (that allows land rent for up to 25 years) as an opportunity. According to the revised Amhara National Regional State Rural Land Administration and Use Proclamation (133/2006), any land holder may transfer his/her use right in rent to any person. Because of the prevailing challenges, farmers in the neighborhood will be obliged to change their crop lands to Eucalyptus stands.

The current land administration proclamation permits land ownership transfers by rent up to 25 years. This was favored especially by landless farmers to rent land as much as they can and plant Eucalyptus. In addition, even though this policy allows the utilization of arable land for proper utilization only, farmers intensively plant Eucalyptus regardless of the fertility status of their plots. The trend of succession of arable lands with Eucalyptus may result in a crop production deficit.

Focus group discussions with growers revealed that households with insufficient family labor and alternative non-farm incomes convert their fertile crop lands to Eucalyptus and possess larger plots of Eucalyptus. This is because Eucalyptus requires relatively less labor for cultural management. We found that Eucalyptus in the study area is expanding over crop lands at a rate of 102.35 ha per year which is now becoming a threat for fertile crop lands.

Information obtained from key informants indicated that there is lack of coordination to work towards commercializing the Eucalyptus wood value chain. The sector’s value chain is characterized by asymmetric market information mong all stakeholders (input providers, enablers, controlling organizations) and actors. The Eucalyptus wood value chain is also characterized by a lack of sectoral integration among actors, especially between growers and wood processing firms. Because prices vary across locations, we found a high disparity in marketing margin shares among actors.

We found that a number of unlicensed wood traders were involved in the Eucalyptus wood value chain. Unlicensed traders purchase at different towns for resale. As the information obtained from key informants, there are no control mechanisms that restrict individual unlicensed wood traders. These traders handle Eucalyptus wood in small quantities and sell at relatively lower prices than licensed ones and create price distortions. We found that unlike cash commodities such as horticultural and oil seed crops, institutional programs that support the Eucalyptus wood value chain development are absent in the study area.

3.7.2. Opportunities

One of the aims of the second Ethiopian Growth and Transformation plan was to make the country a middle-income category. To assist this, there is a strategy to support small and medium-scale enterprises to involve in the industry sector. This favors the emergence of wood processing factories which in turn increases the demand for Eucalyptus wood in the area.

In the study area, natural forest cover areas have been reduced significantly owing to deforestation and Eucalyptus plantation is the only option to meet the rising wood demand of consumers. The existing natural forests have already been vanished and Eucalyptus is the most economical forest that fulfills the demand for construction wood, firewood, log, and split wood. Following the rapid emergence of wood processing companies, raw wood materials became increasingly important and farmers focused on the massive production of Eucalyptus. Currently, Eucalyptus is used as a major means of cash earning including its leaves and branches.

The costs of transport in transacting Eucalyptus forest products are mainly posed on the buyer side. Retailers buy Eucalyptus stands at farm gate price and ship the entire products to their points of destiny. This has favored growers as it reduces the cost of cutting, sorting and shipping the product to the targeted market centers. This means the main market center of Eucalyptus forests is at farm level.

Because of the spectacular rise of the construction sector in the country, demand for the respective construction inputs (Eucalyptus wood) is rising. Currently, Eucalyptus wood is used by both wooden and concrete house builders as a direct construction material and as support structures, respectively. This has ensured sustainable Eucalyptus wood products market opportunities that assimilate the product throughout the country.

In Ethiopia, fuel wood consumption is by far higher than the consumption of electricity. The immense fuel wood requirement by both rural and urban people is one of the main reasons for the rapid expansion of Eucalyptus as wood lots. Today, it is a common practice for every farmer in the study area to transport and sell fuel wood every market day. This has immense contribution to growers in terms of supporting their livelihoods.

Eucalyptus favorably grows both in highland land mid-altitude areas. As the study area has a suitable highland ecology, the white Eucalyptus (Eucalyptus globulus) grows well. On average, Eucalyptus takes about 5 years from seedling to nursery and 4 years from coppicing to become an economically important product (mainly for construction wood). In spite of environmental variations, this is a very quick time of return compared to other types of trees.

4. Discussion

The results presented in this study highlight contemporary value chain perspectives towards improving the performance of the wood sector value chain as stated in the standard approach of Porter [28] for creating market competitiveness and values in business enterprises. The methods were also devised in different studies [27,29,45]. Eucalyptus, an economically important multipurpose plantation tree, is now extensively planted by smallholder growers. It is the major source of income for smallholder growers next to food crops in the study area where there is an increasing population, diminishing percapita landholdings and a subsequent decline in the productivity of food crop lands [13,24].

For its comparative economic advantage, farmers are converting their crop lands to plantation of Eucalyptus stands. As the result indicates, the reasons are diminishing land productivity, the accelerating rise in demand for wood products, rapid elimination of other natural wood sources, depletion of livestock feed sources, lesser cultural/management requirement, rapid growing tendency and existing land administration regulations which has no land use restrictions for Eucalyptus. Respondent growers also confirmed that Eucalyptus has excellent area adaptability, a fast-growing tendency and multiple uses which incentivized them to focus on its plantation. These conclusions are in line with the studies [13,46,47].

Like that of the supply side, demand for Eucalyptus wood products is significantly increasing due to increasing market opportunities. The construction sector which utilizes an ample amount of Eucalyptus wood products is growing rapidly [25]. On the other hand, there are increasing numbers of small-scale enterprises that are engaged in the furniture industry which positively contribute to the growth of the sector. The study found that Eucalyptus provides a huge amount of biomass-based energy sources to grower households in the study area to support their daily lives. This is in line with the findings of Ullah et al. [7] who examined the impacts of fuelwood and timber consumption on the livelihood of households in Pakistan. Situation analysis of report of the National Forest Sector Development Program of Ethiopia [48] indicated that fuel wood is the largest source of wood-based production and consumption.

Generally, sustained production of Eucalyptus wood from the supply side and the growing market opportunities for wood products on the demand side can be taken as enabling opportunities for the development of the wood sector value chain in the study area. Given the production and market opportunities for Eucalyptus wood, little attention is given to the development of the wood sector value chain and systems that empower growers and other actors for increasing competitiveness are absent in the study area while the issues are call for thoughtful policy attentions.

Grower households are the ultimate suppliers of all the wood products transacted along the value chain. Unique to this study is that it forecasted the yearly expansion rate of Eucalyptus lands in major Eucalyptus growing areas as a means of identifying sustainable supply in the study area. The results show that Eucalyptus is succeeding crop lands at an alarming rate depicting a steady supply of Eucalyptus wood in the potential growing areas. As indicated in a study by Semane et al. [36], the white Eucalyptus grows well in the area while the fertility status and productivity of crop lands are declining. This implies that growers suffering from decline in productivity of food crops can support their livelihood with Eucalyptus as an alternative income source provided that there are good market opportunities for the product. The study also quantified the estimated volume of different types of wood products that were channeled from production to ultimate consumption and quantified the estimated volume of wood handled by each actor.

Input suppliers such as agricultural offices and cooperative unions, farm centers and pesticide/herbicide retailers are limited to only supplying seedlings and agro chemicals to nursery owners and other growers. Unlike food crops, production incentives from the enablers and input providers side is so weak to the wood sector and because of this plantation programs are usually based on the farmers’ own initiatives.

The study also identified the main actors involved in Eucalyptus wood value chain together with their main activities. The study also traced eight important channels of the wood market and mapped the Eucalyptus wood value chain. Of all actors involved, construction wood retailers handled the largest volume wood and exhibited trade dominance in the value chain. Relative to other actors, construction wood retailers have a good supplier–buyer relationship and have better market opportunities due to the spectacular rise in the construction sector and the increase in the price of metal structures for construction which has created increased demand. A similar finding was reported by Iqbal [49] who presented the increasing need for tall wood buildings in the world following population growth and urbanization. Sawdust is an important byproduct produced during wood processing which can also be taken as a good opportunity for the production of particle boards. A study by Boruszewski et al. [8] indicated the significant market share and economic contribution of the wood-based panel production in Poland. In Ethiopia, the demand for furniture products is increasing and this has subsequently resulted in the emergence of small-scale wood processing enterprises. The furniture industry is one of the large businesses in the world. By 2000, it was recorded as the largest low-tech sector with total global trade contributing about 57.4 billion dollars [30].

Margins calculated for each actor were found to be distributed unequally. The result showed that the highest margin shares were taken by wood processors and margin values corresponded to the values added to the commodity which indicates a need for incentivizing actors to engage in addition of values employing better wood processing technologies. In the Eucalyptus wood value chain, there is a relational type of governance with a general control system from the government bodies, mainly the Ethiopian Revenue and Custom Authority which have the power of control of the product’s formal transactions and the land administration proclamation that has the autonomy on the land for production. The interrelationship between enablers and actors however was not harmonious while collaboration is very important strategy for business performance [27]. The study shows that the interrelationship among enablers, actors and service providers in the Eucalyptus wood value chain is characterized by a lack of horizontal and vertical integration which can be taken as an indicator of the sector’s weak performance that demands a strong focus [50,51].

The study identified the key challenges of the wood sector value chain such as the lack of all-weather road networks, the involvement of unlicensed traders, the negative externalities of the Eucalyptus plantation [21,22] and good growing opportunities such as the ability of the tree to thrive on marginal lands. This calls for attention for changing the land use proclamation for advocating plantation of Eucalyptus on marginal lands for ensuring optimal land use at a win-win scheme in the absence of socio-economic crisis. A similar rationalization was given by Boruszewski et al. [8] which determined the potential of land for fast growing tree plantations in Poland considering marginal agricultural lands.

The study presents the status of Eucalyptus wood value chain which needs to be promoted for the inherent transformation of the wood sector in main Eucalyptus growing areas based on empirical evidence and actual data. Despite the plantation/production and market opportunities, the wood sector has unexploited potential for assimilating the immense labor force with a paramount economic contribution [52]. By its very nature, the sector demands the introduction of large scale wood processing industries and thus prevailing conventional wood production and timber processing system in the study areas need to be strengthened and replaced with better wood processing technologies that ensure high value additions to the product and commercialization of the sector. Authors of this study are however, aware that the findings of the study are not without limitations, which include the unavailability of empirical evidence that deal with the specific Eucalyptus wood value chain and the very vast nature of the sector. The authors believe that this study paves the way for future research directions in the wood sector value chain.

5. Conclusions

This study provides important insights into the performance of the Eucalyptus wood value chain in potential Eucalyptus growing areas of the Blue Nile highlands of Northwestern Ethiopia. In a subsistence economy where the livelihoods of farming communities rely on the cultivation of food crops, Eucalyptus is an economically important short rotation tree which can improve the competitive performance of smallholder growers. The development of the wood sector value chain makes an immense contribution to the improvement of business performance and thus the empowerment of value chain actors deserves serious program attention as its ripple effects on the economy are apparent.

The study found that the Eucalyptus wood value chain is challenged by a lack of policy focus, a lack of sectoral integration, missing infrastructure in the vicinity of growers, the absence of growing industries in the wood sector and a high disparity in the margin shares of actors from the final product price featuring weak performance of the sector.

The study showed that Eucalyptus accounts for the highest proportion of households’ income next to food crops. Due to the decline in the food crop productivity of cultivable lands, growers are intensively planting Eucalyptus as a primary economic tree with the surplus production of multipurpose wood. The steadily expanding rate of Eucalyptus over crop lands is an indicator for the presence of sustainable wood supply in the area which needs to be commercialized. A large volume of Eucalyptus wood is harvested and transacted annually which was conveyed in eight main channels. The highest share of the total volume of wood transacted was consumed by the construction sector with little value addition and only a small portion by small scale wood processors.

To the other end, the wood sector value chain has attracted little interest and is characterized by the lack of multi-sectoral coordination. Enabling growers and other actors by creating market coordination with large scale wood processing factories can improve the Eucalyptus wood value chain, thereby ensuring sustainable product markets and the improved livelihood of growers.

Product surplus and rising market opportunities for the wood products indicate that the sector has the potential of assimilating the qualified and immense workforce in the country. Despite the tremendous production and existence of continuous supply of Eucalyptus wood products in the study area, product destinations are only limited to construction and fuel wood consumers. Modern wood processing factories that can convey the products through substantial value additions are absent. The only wood processors are small scale sawmills that mainly process timber for construction purposes. The investment policy of Ethiopia shall give priority to the development of the sector through integrating small and medium scale enterprises and large-scale wood processing industries with Eucalyptus growers and encourage investors to launch large scale wood processing industries such as chip wood, plywood, and paper factories which can improve value creations and market opportunities in the study area.

The existing traditional wood production and timber processing system in the region should be augmented with better wood processing technologies that ensure high value additions to the product and help commercialization of the sector thereby contributing to substitution of huge lumber imports in the country. For this, there should be a policy initiative from the government that encourage investment options which focus on processing of Eucalyptus forest products such as wood processing factories with significant value additions.

The rising demand for construction and fuel wood, permitting land policies and the decline in crop productivity of arable lands have contributed to the rapid expansion of Eucalyptus in the study area. This poses a threat in the future as crop lands may significantly diminish, resulting in the enormous decrement of crop produce in the region. This demands a land policy permitting plantation of Eucalyptus and crop production at Pareto-optimum conditions (i.e., plantation of Eucalyptus on marginal lands and without compromising the benefits of plot owners in the neighborhood and the public).

In terms of trade benefits, construction wood retailers who handle the largest volume of wood were found to have the highest bargaining power among the rest actors. On the other hand, the highest marketing margins were taken by wood processors depicting that the more the values added at each segment of the chain, the more will be the margin obtained by the respective actor. However, the Eucalyptus wood products market is characterized by the involvement of unlicensed traders who entertain at the expense of growers and licensed traders. Thus, the Revenue and Custom Authority should pose restrictions on product transportation and handling on those who have no legal trade licenses.

Land use conflicts arising due shading effects of trees rapid succession of crop lands and revising existing land policies and land use system, encouraging emergence of wood processing enterprises and posing regulatory measure on unlicensed traders are exemplary measures for promoting well developed Eucalyptus wood value chain in the study area and thereby sustaining livelihood of smallholder farmers that are dependent on Eucalyptus wood products.

Growers have a limited voice and participation in the value chain governance structure of Eucalyptus wood products. In addition, the absence of control mechanisms and institutional programs supporting the development of the sector’s value chain are also prevailing challenges which demand the entrustment of responsibility to governmental and non-governmental institutions that will ensure sustainable wood production, good integration among enablers, growers and actors, commercialization of the wood sector and development of sustainable wood value chain.