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Oil Palm Smallholders Suffer from Falling Prices, Pandemic Restrictions

A worker gathers oil palm fruit bunches at a plantation in Lampung. (The Jakarta Post/R. Berto Wedhatama)

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

During the pandemic, the price of FFB, a key component in the production of crude palm oil (CPO), fell to less than Rp 1,000 (0.71 US cents) per kilogram for independent farmers, according to Mansuetus Darto, the secretary general of the Palm Oil Farmers Union (SPKS).

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

“A price below Rp 1,100 per kg is very difficult for farmers with more than two children, kids pursuing higher education or those with dependents to feed,” Darto said.

As 70 percent of CPO production is exported, the trade-reliant palm oil industry is taking an especially hard hit from the COVID-19 pandemic, which has brought international trade to a temporary halt.

The same restrictions that have impeded manufacturing have also affected farmers, as they are unable to sell their FFB but must still pay for fertilizer and the services of middlemen.

“Since many independent farmers do not have the means to ship their products to factories, they rely on middlemen to provide this service. But the restriction of activity and mobility related to COVID-19 affects them and their source of income largely because they cannot deliver their fresh fruit bunches to buyers,” said 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 production fell by 8.5 percent year-on-year (yoy) to 1.1 million tons in the first quarter of the year and CPO production fell by 14.6 percent yoy to 354 tons in the same period.

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

Only about 30 percent of palm oil farmers have alternative sources of income, a 2018 SPKS survey shows.

About 6,000 farmers from 26 farming groups still managed to book sales of palm oil with sustainable certificates during the pandemic, said Guntur Cahyo Prabowo, manager of smallholder programs at the Jakarta branch of the non-profit Roundtable on Sustainable Palm Oil (RSPO).

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

“As RSPO-certified farmers, our members received support of staple food and fertilizer,” said Zainanto Hari Widodo, a representative of the Indonesian Palm Oil Farmers Association.


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