Timber is wood in its aspect as a material for making things: building houses and crafting furniture. Ordinarily we want straight timber for such things; imagine trying to build, say, a set of bookshelves out of something like this:
(image from http://www.woodmagazine.com/woodworking-tips/techniques/skills/dealing-with-wood-defects1/)
So Kant is saying that humanity is so irregular that you cannot make anything perfectly straight from it.
Note, however, that this is a translation from a German original whose nuance is unusually difficult to express. There are interesting discussions here and here, which may help you understand not only the sentence itself but the great range of considerations which go into translating even so simple a sentence as this.
Here is my own translation, somewhat 'free', of the passage in question:
Every man will try to abuse his freedom if he doesn't have somebody over him who exercises power in accordance with the laws. But the highest authority should be just in himself, and still be human. This is the most difficult task of all; in fact, its complete realisation is impossible; such crooked wood as man is made of cannot be shaped into something entirely straight. All that nature demands is an approach to this idea.