Oil palm smallholders have problems with falling prices, pandemic restrictions

Oil palm smallholders have suffered losses through the ongoing health crisis from the falling value of fruit bunches (FFB) and pandemic-related restrictions, a farmers’ union has said.

During the pandemic, the cost of FFB, an essential component in the development of crude palm oil (CPO), fell to significantly less than Rp 1,000 (0.71 US cents) per kilogram for independent farmers, according to Mansuetus Darto, the secretary basic of the Palm Oil Farmers Union (SPKS).

Farmers who've partnered with palm essential oil companies have seen FFB rates between Rp 1,200 and Rp 1,300 per kilogram, Mansuetus added.

“A cost below Rp 1,100 per kg is quite tricky for farmers with more than two kids, kids pursuing advanced schooling or people that have dependents to feed,” Darto said.

As 70 percent of CPO development is exported, the trade-reliant palm essential oil industry is taking a particularly hard hit from the COVID-19 pandemic, which includes brought international trade to a non permanent halt.

The same restrictions which have impeded manufacturing also have affected farmers, because they are struggling to sell their FFB but must still purchase fertilizer and the services of middlemen.

“Because so many independent farmers don't have the means to ship their products to factories, they rely on middlemen to provide this service. But the restriction of activity and flexibility related to COVID-19 influences them and their income source largely because they cannot deliver their fresh fruit bunches to customers,” stated Rukaiyah Rafik, a senior adviser at the Indonesian Sustainable Palm Oil Farmers Forum (Fortasbi).

PT Astra Agro Lestari, a subsidiary of conglomerate PT Astra International, reported earlier this month that its FFB creation fell by 8.5 percent year-on-year (yoy) to at least one 1.1 million tons in the first quarter of the entire year and CPO creation fell by 14.6 percent yoy to 354 tons in the same period.

Of the ten largest palm-oil generating provinces in the country, only West Sumatera has officially imposed province-wide large-scale social restrictions (PSBB), although this area only makes up about 1.7 percent of the nation’s confirmed COVID-19 cases.

Only about thirty percent of palm oil farmers have alternative resources of income, a 2018 SPKS survey shows.

About 6,000 farmers from 26 farming groups still were able to publication sales of palm oil with sustainable certificates through the pandemic, said Guntur Cahyo Prabowo, manager of smallholder courses at the Jakarta branch of the non-earnings Roundtable on Sustainable Palm Oil (RSPO).

Through its RSPO Credit scheme, the business has disbursed $1.5 million to 30 RSPO-certified independent smallholder groups from the sale of certified palm oil between May 2019 and could 2020.

“As RSPO-authorized farmers, our members received support of staple foodstuff and fertilizer,” said Zainanto Hari Widodo, a good representative of the Indonesian Palm Essential oil Farmers Association.