Local stories in a global commodity

Local stories in a global commodity new insights on palm oil smallholders in Indonesia 2

Thijs Pasmans

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Index Introduction................................................................................................................................... 6 Palm oil and smallholders in Indonesia........................................................................................... 7 Facts and figures........................................................................................................................... 9 Stories from the field...................................................................................................................... 10 • Building extension services with independant smallholders in Rantau Prapat............................ 11 • Together or alone? Mixed land management systems in KKPA smallholders in Riau and west Sumatra.................................................................................................................... 16 • Working towards RSPO certification: two independent smallholder groups in Jambi................ 23 Discussing smallholders................................................................................................................ 30 Recommendations........................................................................................................................ 34 Acknowledgements....................................................................................................................... 35 About............................................................................................................................................ 36 References.................................................................................................................................... 37

Local weighman on his way through a smallholder plantation.

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Introduction

Palm oil and smallholders in Indonesia

This report is about palm oil smallholders in Indonesia, their work, their life and their ideas, reported by a listening foreigner. During a three month learning project at palm oil company Musim Mas, I lived and worked at the upstream part of the palm oil supply chain. I got the opportunity to talk to farmers, listen and discuss sustainability issues and see progress and challenges in the field.

producer and between Europe and Asia.

“I believe that sharing stories is the key to improve our understanding and cooperation for more sustainable palm oil”

Linking these worlds is helpful to ask different questions, rethink assumptions and get new perspectives on palm oil and the way it is produced. I believe that sharing stories is the key to improve our understanding and cooperation for more sustainable palm oil. By sharing this report I want to contribute to a world with more sustainable palm oil.

The report focusses on three different smallholder settings in Sumatra. It combines my personal view and assumptions taken from my work on sustainable palm oil in Europe with the local practices and reality I encountered on the ground. As such this report is about linking office and plantation, between consumer and

Most consumers associate, when aware at all, palm oil with large plantation companies and sustainability issues in tropical countries.

However, the products containing palm oil that we consume on a daily basis around the world also use palm oil produced by smallholders.

Producing forty percent of the global palm oil production the role and importance of these smallholders is significant. In Indonesia, the largest palm oil producing country, smallholders create income for around two and a half million households. Average oil yield per hectare at smallholder farms, however, is significantly lower compared to company plantations. Noncertified seedlings (with a lower oil yield) and less established agronomic practices are one of the key concerns1 that lock this potential. The same goes for poorer environmental management, no legal documents or continuous use of fire.

Smallholders plant new oil palms between rubber trees to bridge first years without FFB production.

Also, we know that smallholder inclusion into certified sustainable supply chains is lagging behind. The total certified acreage of smallholders represents ten percent of the total global acreage2. Additionally, reports on unfair practices lack of transparency. Conflicts between companies and smallholders have been published from the 2000s onwards3 as are stories on inequality and corruption within

Smallholders showing borderstone between their farms.

Smallholders produce on average 1,5-2 MT oil compared to 6-7 MT oil per hactare per year (Molenaar et al. 2010, IFC, 2013).

333.000 smallholder hectare out of 3.1 million hectare total certified area is currently RSPO certified. When taken into account that independant smallholders only represent around 5,7% of that, it is even less (RSPO, 2017).

3 E.g. Sawit Watch and Forest People (2006) publication on ‘Ghost on our own land’ or Friends of the Earth et al. (2008) ‘Loosing Ground’ report on the vulnerability of smallholders in increased debt, receving little or no agronomic support from companies or untransparent pricing or lose of land.

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Smallholder family living on their RSPO certified farm in Jambi.

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Many stakeholders in the palm oil supply chain acknowledge or already work on better smallholder inclusion. State interventions to promote palm oil among smallholders in the producing countries were already active

Facts & Figures Smallholder palm oil production area (hectares)

Smallholder palm oil production volume (tonnes)

5,000,000

12,000,000

4,000,000

10,000,000 8,000,000

3,000,000

40%

2,000,000 1,000,000 0

6,000,000

of palm oil area in Indonesia is farmed by smallholders

34%

of palm oil production in Indonesia is produced by smallholders

4,000,000 2,000,000 0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

between the 1970s and 1990s7. Currently, smallholder development seems to be more desired then ever. In Europe governments, civil society organisations and leading consumer goods manufacturers demand more sustainable palm oil, including smallholders. In Indonesia plantation companies are dependent on the supply of high quality Fresh Fruit Bunch (FFB) production, but also take up their role as sustainability leaders and set up extension services and training programs for smallholders.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

farming cooperatives themselves4. Palm oil has clearly shown its potential to bring development and reduce poverty in Indonesia5. How this new wealth is distributed, is highly variable and different per village6.

Smallholder destribution in Indonesian provinces, 2015

Riau (30%) Jambi (10%) Sumatera Utara (9%) Sumatera Selatan (10%) Kalimantan Barat (8%) Other provinces (33%) Different types of palm oil smallholders

Schemed palm oil smallholders working with a plantation company

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Schemed palm oil smallholders working with a plantation company and independent land

BPS, 2015

Molenaar et al.(2010) describe the disfunctioning of farming cooperatives, yet also lay out the potential well functioning cooperatives for oil palm can have.

5 Palm oil is Indonesia’s largest agricultural export product and has the potential to increase rural income (Bungaran; Drajat, 2010). Villages with Nucleus Estate (NES) programs have shown lower poverty levels compared to national average (Rival and Levang, 2014) and palm oil gives better incomes, especially per labour hour, compared to rice or rubber farming (Feintrenie et al. 2010).

6 McCarthy (2010) describes how the arrival of palm oil has create different outcomes between villages in Jambi.

7 In Indonesia NES programms have been roled out by government from the 1970s untill the 1990s promoting trans migrants and locals to take on oil palm farming. From the 1990s onwards, these responsibilities have been shifted to private companies and decentalised to the village level in private – smallholder partnerships. For more information see the IFC (2013) and McCarthy (2010).

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Independent palm oil smallholders

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Stories from the field

Building extension services with independant smallholders in Rantau Prapat

This report focusses on three cases of palm oil smallholders in Sumatra. They are based on farmer interviews, field visits and group meetings in the respective regions during a three month period in 2017. The first case focusses on the emergence of extension services networks between the Indonesia Palm Oil Development Scheme (IPODS) and independent oil palm smallholders in the Rantau Prapat region in

north Sumatra. The second focusses on the interaction between scheme smallholders and plantation companies in Riau and west Sumatra.

The final case is set in Jambi province where the Non governmental organisation (NGO) Setara Jambi has organised trans migrant and local independent smallholders and been able to reach certification.

Case 1 - Building extension services with independant smallholders in Rantau Prapat

Case 2 - Together or alone? Mixed land management systems in KKPA smallholders in Riau and west Sumatra Case 3 - Working towards RSPO certification: two independent smallholder groups in Jambi

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The palm oil landscape At first sight the Rantau Prapat area seems a rather monotone landscape. Dominated by oil palm trees, mixed with some rubber every now and then, monoculture production seems the norm. The basics of this observation cannot be denied. Indeed, Rantau Prapats agricultural economy, located in the Labuhan Baru district in north Sumatra province, is based on two commodities: palm oil and rubber. With the former slowly taking over the latter during the past decade. When taking a closer look however, subtle changes refer to very different modes of production. Multinational plantation companies have their 1000+ hectare oil palms in ‘clean lanes’ with best available seedlings producing palms that bear high yielding fruits.

Good pruning and fertiliser make sure the leaves reach their maximum length. Across the road the palms might well look just the opposite. Small or medium sized regional plantation companies with 100+ hectare can show a bad upkeep.

Their lanes look slightly messy and palms show deficiencies of nutrients in yellowish leaves.

Similar, or even worse, can be found on a two hectare smallholder plot further down the road.

A field with some palms reaching maturity, some growing crooked or just don’t grow at all. The owner probably lives in the village a few kilometres down the road. Next five kilometers comes a block of ‘grey palms’: old producing palms poisoned to make space for young palms planted just a few meters next to it. Next, the

otherwise always green rumbut (undergrowth) suddenly changes to yellow, and then continues to be green again. A farmer most probably sprayed his entire block with herbicides instead of the more recommendable inner ‘circle’ around the palm which as followed in good practice.

It is, off course, not just oil palm trees that are included in these landscapes. The people that farm them live directly next to them. In the back (or front) yard, opposite the road and if you ask they will tell you they have some land a few kilometres outside the village. Most of them will also tell you they switched from rubber, which used to be the main cash crop before. Low rubber pricing, diseases and the increasingly more attractive option of palm oil eventually made them switch. Farmers also say that oil palm is much easier to harvest. “We only have to go into the field every ten days. Rubber you have to harvest every day”. Some switched just as recent as one years ago. Others already more than a decade. Famers often say they see and learn about oil palm from friends or neighbours and pick up the necessary skills. One farmer bought his land in 1974. He had it cleared from forest to plant rubber – the wood just burnt, because there were no access road yet to transport the timber – but now planted a total of fifteen hectare of oil palm, spread among a few blocks around the area. Even though it looks one crop at first sight, oil palm fields in Rantau Prapat all have their own story.

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Palm oil logistics Less visible, but as much infringed into the landscape are the palm oil logistics.

Smallholders do not process FFB themselves.

They depend on mills to extract the oil for further processing. Vice versa, an oil mill also depends on the smallholders to supply enough FFB to produce oil. In between is the agent. Or sub agent. Quite often also the sub, sub (or even sub, sub, sub) agent. Smallholder plots harvest FFB every ten to fifteen days. One farmer said he was in contact with three different agents who, depending on the prices they offered, could pick up his FFB. Others worked together with one agent that picked up all the FFB around the village at specific times.

(collection point from which FFB get distributed to mills), depending on the quality FFB. Rolling out extension services Oil mills depend on a constant FFB supply for their mill. In the region of Rantau Prapat oil mills do not necessarily have sufficient plantation to supply the mill. Next to that, sourcing quality FFB to produce the oil with the highest extraction rate and low amounts of free fatty acids is important as well. To be able to enhance the knowledge of the farmers and improve the quality and access, an extension system or platform would be helpful. However, how do you reach out to a supply base that is scattered around ten thousand or more production units and do not necessarily always sell to your mill? The IPODS project in Rantau Prapat aims to bring these independent farmers up to efficient farming’s standards. This extension service platform is a collaboration between Musim Mas and the International Finance Cooperation (IFC) to close the gap between current practices and those required for sustainability certification and is part of Musim Mas endeavours for a more inclusive supply chain. The paragraphs below reflect on some of the activities undertaken by the IPODS project in Rantau Prapat area.

“In between is the agent. Or sub agent. Quite often also the sub, sub (or even sub, sub, sub) agent.

The mills receives FFB everyday via (sub) agents throughout the region. These are either independent mills that do not have a plantation at all, or mills belonging to larger companies, often in combination with a plantation.

Approximately one hundred trucks arrive every day, depending on the size of the mill. Upon entrance quality and weight are graded. Low quality FFB that is over- or under ripe or show damage are returned, and will find their way to another mill for a lower price. Most farmers are aware of the mills prices and quality checks as mill information is shared via phone or WhatsApp messages. One farmer noted he brings FFB either to the high quality mill or to the ram

“How do you reach out to a supply base that is scattered around ten thousand or more production units and do not necessarily always sell to your mill?

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Farmer field meetings To join the IPODS extension service platform, farmers are organised in groups. These groups vary in size between around twenty farmer, based on geographical location and lead by a group head. A field assistant of the IPODS project coaches the groups, organises trainings and collects field data. Creating groups requires time and patience. According to the IPODS local manager it took around a year to engage and socialise the farmers with the project and gain there trust. At the moment three thousand farmers of the estimated twelve thousand independent farmers in the region join the program. It remains a challenge however to have all of them attend all meetings. Spending a meeting a day in the field for a field assistant can easily take half a day including one hour drive to the village, sit and wait for all farmers (or call them) to attend, organise your meeting or training, share dinner and drive back home (often after sunset). At the same time, attending a meeting is a time cost for the farmer as

well. They have to travel and leave their work earlier. Those that do attend say the effort is worthwhile learning, especially learning on best management practices and harvesting.

“Before we only used one type of fertiliser. Now we know there are different types” Learning on harvesting, fertiliser and weeding Oil Palm is a new crop to many of the independent farmers. Not indigenous to the region, there is little historical knowledge to rely on. Most information on agricultural practices is shared from farmer to farmer as oil palm grew towards a dominant land use.

As a consequence, agricultural practices and management are not always up to date. This can be as basic as correct timing of harvest and collecting of loose fruits, to more technical fertiliser application dosages and know how on weeding.

Oil palm circle at smallholder farm joining IPODS program. Farmer will do manual weeding soon, whereafter he will apply fertiliser.

Joining IPODS training session on weeds and weeding practices

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groups actually pooled their money together so one of them could buy fertiliser every two weeks.

This collective approach referred to as arisan (regular social gathering by group of people) is more common in community management in Indonesia, but new in palm oil.

Some farmers combine palm oil with having cattle. Farmers feed their cattle in the evening, which can be conflicting with attending farmer field meetings.

and application is not always straightforward.

Much weed control can be more environmentally friendly done by manual weeding and to know what weed species are competitive and which are not.

The farmer group I visited was relatively new to palm oil. It used the training to learn more on the crop. They especially refer to harvest timing or “seeing when the FFB is ripe to harvest” and the different types of fertiliser available for specific nutrient deficiencies (common fertiliser include urea, for Nitrogen, KCL for Potassium and RockPhosfate for Phosphate). “Before we only used one type of fertiliser. Now we know there are different types”. The farmers receive specific fertiliser application schemes based on soil and leaf samplings coordinated by the IPODS project. Another important element is weeding.

Herbicides are available, but correct knowledge

Creating access to fertiliser Although knowledge on fertiliser is picked up very rapidly by the farmers, the actual access and application of fertiliser remains a challenge. Most of the farmers said they had difficulty creating credit to buy correct fertiliser.

Sometimes government subsidies on urea, but these are not always available. One of the farmer 14

Smallholder farms Smallholder oil palm farms are different from plantations and not only in size. When planted around the house, there is a direct link to the house and family, former or other land uses and other villagers. Smallholders step out of their door and walk into their plantation. Others take their motorbike and drive down a side road for a few kilometres until they reach their specific block. That does not mean they actually work on the plantation themselves. Especially those with larger amounts of hectares have labourers (family and friends from the village) working on their land to harvest and management. The labourer is instructed and supervised by the landowner on management and harvest practice. In the IPODS project landowners attend the field meetings and communicate their learnings to their employees.

Additionally other trees such as durian are also planted (to harvest own fruits and sell the oversupply). Pinang trees are planted along the farms border and its seeds are used for traditional medicine. Cocoa trees, from former land use are still around the house or in the plantation. In some cases farmers also have coconut or mangotrees, chicken, ducks or cattle live on the plantation. Oil palm however, still remains the largest source of income for their household.

Arisan in practice: IPODS farming group collecting money to allow one of their members to buy fertiliser.

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Together or alone? Mixed land management systems in KKPA smallholders in Riau and west Sumatra hesitant towards palm oil at the same time.

Sorek farmers eventually decided to “find a palm oil company” to become included in the palm oil development model. The company’s role was to assist in planting and extension services, but farmers had to harvest and manage their respective blocks individually. The farmers retained some level of autonomy on their land, while trainings, plantation establishment and pricing and contracts with the company are handled as a cooperative. Sorek two KKPA’s have been running for over seventeen years and structured in separate farmer groups covering together 1500 hectares. The groups within a KKPA are based on geographical area and membership numbers vary between 20 and 70 farmers per group.

To better understand the relationship between smallholders and their associated companies I visited two different Kredit Koperasi Primer Anggota (KKPA) scheme locations. The first location is referred to as Sorek and is located in the Riau province. The second is referred to as Air Hagi and is located in western Sumatra.

Sorek KKPA Increasing benefit and income from oil palm by trans migrant farmers in the regions became increasingly visible to local farmers at the end of the 1990s. However, so did stories about lack of transparency and examples of conflicts between scheme smallholders and plantation companies as well. Former rubber or shifting agriculture local farmers were attracted but also

The kepala kelompok is always present when labourers are harvesting, “just to keep an eye out”.

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Air Hagi KKPA For local farmers, it is not an easy decision to decide how to work with a company. In the village of Air Hagi the ‘bad palm oil stories’ also go about. Farmers refer to them as partnerships lacking fair pricing from the company and discipline and commitment to work with KKPA’s.

The village I visited had in the past a similar experience with the previous company owning the plantation and was not able to establish a successful KKPA partnership until Agrowitarma – the current plantation company - came in in 1998. The KKPA named ‘Kebun Sawit Bersama’ consist of around 524 hectare and is managed by 462 village farmers. The KKPA is led by the kepala KKPA (group head), but its governance seems to be closely linked to influence of the ketua (village head) of Air Hagi.

Kredit Koperasi Primer Anggota or KKPA schemes originated in the 1990s as a new partnership model between farmers and plantation companies. Their emergence represent the shift from government to private led smallholder engagement and from central management to decentral decision making towards the village or cooperative level. Farmers can manage their 2 hectare blocks individually or as a cooperative. The plantation company is usually also actively involved in plantation management and guidance. How successful and fair a KKPA scheme is, usually comes down to the transparency on pricing and contract and commitment to best practices by both company and farmers.

The gate barrier closes off the KKPA area.

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Dividing management and labour responsibilities in Sorek and Air Haji The basic management activities between the company and the farmers are divided as followed. The company provides training, seedlings and plantation management during the first three years. Throughout the production phase the company applies herbicide spraying – spraying requires specific safety instructions, storage and material by Roundtable on Sustainable Palm Oil (RSPO) certification - and arranges FFB transport.

The farmers also buy selected fertiliser from the company which the farmers apply independently. The same goes for manual weeding and harvesting. There is regular contact with the company to discuss concerns and the company is often approached for advice or help.

too old to work or have other business to take care of. Labourers can work for several smallholders at the same time, both within the KKPA and outside. The company pays every month to the KKPA that distribute among the farmers accordingly. KKPA farmers in Air Hagi pool their blocks together and harvest and manage their land as a cooperation.

Around thirty workers are hired to harvest and weed. Harvest FFBs are picked up by the company on fixed schedules. The total yield is counted by the company and prices are set by local governments on a monthly basis.

A management fee is paid by the farmers to the company depending on what services are provided, the location and developmental stage of the oil palm tree. The fee follows the principles set out in RSPO with the KKPA members informed of the fee and what it represents. Both KKPA schemes produce around twenty eight ton FFB per hectare which is equal to the company plantation.

Sorek KKPA farmers either work on the land themselves or hire external labour. Some are

KKPA management in Air Hagi is very similar to plantation management with every harvester having its own row of palms to take care of. Harvesters are paid per FFB harvested.

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Labourer collecting FFB from field towards the road for weighing and transport pick up. He works for multiple farmers both within and outside the KKPA. He also weighs the FFB and gets paid per kg FFB.

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Going for certification The Sorek and Air Hagi KKPAs are both RSPO and International Sustainability & Carbon Certification (ISCC) certified. Farmers in Sorek also achieved Indonesian Sustainable Palm Oil (ISPO) certification (not compulsory for smallholders at the moment). “Getting ISPO is certification is easy once you can do RSPO” according to Sorek KKPA farmers, but getting the correct documents and land titles is a challenge. Before joining the KKPA, farmers did not have legal land titles. Everybody knew which land belongs to whom. Legalizing land is only a recent process, but it turns out to be a difficult process without the help of the company.

Discussing forest fire

As Riau is the hotspot for palm oil in Indonesia, it was also the hotspot for forest and peatland fires during 2015 dry season. I discussed the occurrence of fires in the region with some of the KKPA farmers. First of all, farmers say they have had a bad influence by the haze themselves as well. Fires however, did not occur on their land. “Why would we poison our own water?” meaning to say it does not make sense to set their own palms on fire. This is their first reaction when relating oil palm with fire. They refer to farmers outside the area that still use burning for shifting agriculture – which has been traditional – and, without access to machines or credit, the easiest available – method to prepare land for (re)planting. The IFC diagnostic study also finds that half of the independent smallholders still use fire to prepare land for replanting.

“Before joining the KKPA, farmers did not have legal land titles. Everybody knew which land belongs to whom.”

However, fires also occur when people have an argument or just do not pay attention. “They just throw away a burning cigarette” that can easily ignite a fire, especially in dry peatland area where the fire can spread by smouldering below ground.

Different from a company, joining a certification scheme is not a centralised decision. With two to three hundred members per KKPA, a lot of time has to be spend on informing and convincing the farmers to join and inform them on the new practices. When involved, farmers especially see a benefit in best management practices (BMP) that reduce the use of pesticides and increase yield. At the same time farmers are keen enough to demand a specific incentive for applying RSPO practices. They want to be rewarded for the extra effort they have to put in.

KKPA smallholder at his independent farm in Air Haji. A team of harvesters from other villages comes in to harvest and do general management. The farmer says his independent palms give significant lower yields. Mainly due to lack of fertiliser.

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Same smallholder, different practices: KKPA’s independent farms Both in Sorek and in Air Hagi, KKPA farmers own individual plantations outside the KKPA. After establishing their KKPA plantations they have been able to acquire enough capital to expand their acreage. Owning additional land outside the KKPA area is quite common. The Sorek KKPA estimated that around 60% of the farmers have a separate, private piece of land outside the cooperation.

the KKPA farms. Compared to the KKPA oil palms, the independent oil palms give lower yield per hectare. Seedlings were bought from a certified centre, but not as good as the KKPA provided by the company. Farmers indicate that main lack for good yields is insufficient fertiliser.

Although they can get access to subsidised urea fertiliser from the district municipality kebupaten, they lack the credit or cash for continuous additional needed fertilisers. When discussing the farmer indicated he prefers to spend money on education for their children than on fertiliser.

In Sorek, the KKPA farmers face the same challenges and are considering to ask the company to form a new KKPA based on their independent farms.

In both Sorek and Air Hagi, but also during my visits to Jambi and Rantau Prapat, land is for sale. Prices vary as I have heard stories, or have been offered myself, prices per hectare varying from 70 million IDR to 300 million IDR. Usually it depends if the land comes with certificate, or without, is already cleared and planted or not yet and how close or far it is to a road that can provide good access. In Air Hagi I visited the five hectares independent land of one of

“The Sorek KKPA estimated that around 60% of the farmers have a separate, private piece of land outside the cooperation.”

Right-hand riverbank, buffer zone at RSPO certified plantation, left-hand bank, non-certified independent smallholder farms. Creating a 50m buffer zone would take up their entire plantation.

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Working towards RSPO certification: two independent smallholder groups in Jambi To compare different organisation models and agreements in palm oil smallholders I joined the NGO Setara Jambi to two of their field sites in Jambi province. Setara Jambi has been working with palm oil smallholders from 2006.

Its mission is find the right balance between agricultural production and community welfare.

Setara Jambi works together with international organisations such as Solidaridad and IDH, The Sustainable Trade Initiative.

to the outer islands of Sumatra and Kalimantan.

Where the state provided access to land and housing, a oil palm company was responsible for the development of smallholder plasma (plantation developed in partnership with a company) farm. Generally, migrants were provided with one hectare for subsistence agriculture (lahan Usaha 1), two and a quarter hectare (lahan Usaha 2) for plantation and a quarter hectare for housing (lahan Pekarangan).

In Mekar Jaya village the plantation land was set up as a plasma together with a plantation company. All farmers already finished repaying their debt. Many of the subsistence agricultural lands are now also planted with oil palm.

From trans migrants to RSPO certified In the Mekar Jaya village, 202 palm oil smallholders achieved RSPO certification for their 346 hectares oil palm in 2014. They are all members of the ‘Gabungan Kelompok Tani’ (GAPOKTAN), the local farmers group in Mekar Jaya, through which they work closely together with Setara Jambi. Setara enabled them to set up an organisation and implement sustainable practices on their farms. Setara Jambi is functioning as the scheme manager and prepares their audits and maintains the systems.

To be able to maintain the system, the group sells their ‘RSPO independent smallholders credits’ to downstream manufacturers committed to sustainable palm oil.

“Mekar Jaya’s farmers arrived as trans migrant families from Java in 1984.”

Although already independent, the Mekar Jaya farmers still refer to these lands as plasma land today. This might seem trivial, but is crucial in understanding the local perspective on land, land use and organisation. Unlike the ideal PIR-TRANS plan, the trans migrants did not find their plasma plots planted and prepared for harvesting as they arrived. In fact, there was not yet a company to develop their plots, neither did they know where their specific plasma plots were located. It took until 1989 to transform the official state forest8 to cleared land. The

Mekar Jaya’s farmers arrived as trans migrant families from Java in 1984. They, or their parents, took part in the government PIRTRANS transmigration programs that resettled rice farmers from the densely populated Java, 23

Difference between RSPO certified (left) and non-certified smallholder (right) on weed management.

lands they still refer to as plasma and around 450 farmers are still reluctant to join the new GAPOKTAN group.

company could start planting their land from 1991 onwards. In the mean time they worked as labourers on nearby farms or plantations.

Farmers joke they can better be referred to as “TRANS-PIR farmers”, as the plantation was only established after they migrated.

However, farmers do not seem to have an ‘oil palm trauma’. Although livelihoods have been uncertain and insecure during the first years after migration, trans migrants and their children have been able to gradually expand their oil palm farms outside their plasma schemes.

Farmers tell they bought land from local Melayu farmers and changed their land from vegetable subsistence farming into oil palm. They first planted low oil yielding dura9 seedlings, but later learned about the better yielding varieties from certified seedlings. At the time Setara Jambi came in to inform them about RSPO and sustainable practices in 2006, the ‘oil palm dream’ had already been around for over twenty years.

Plasma farmers were organised in ‘Koperasi Unit Desa’ (KUD), a government set up cooperation through which the farmers would sell their FFB and repay their debt to the nucleus company. However, the KUD ‘died out’ in 2006.

Lack of transparency, unfair pricing and bad management pushed farmers to sell their FFB via local networks of sub agents and to other oil mills. With the last farmers repaying their debt in 2009, they state they have a koperasi (cooperation) trauma. That is why the current GAPOKTAN has been named as a less formal kelompok (group), and not as the former koperasi. Neither does the group include the

Preparing to visit smallholder farms in Mekar Jaya.

Forest land in Indonesia is officially owned by the goverment and can be claimed for national development purposes.

Dura is a non hybrid oil palm variety with thick shell and low oil containing mesocarp. The dura varieity is often found on smallholder plots, as acces to certified hybried varieties to smallholders is limited. For good oil yield it is better to plant hybrids.

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Palm oil history in Mekar Jaya village in Jambi

1985

1990

1995

Transmigrants arrive

2000

Farmers organised through KUD cooperative, but increasingly sell FFB via external networks

Transmigrants do casual work on plantation or local elite farms while waiting for plasma lands

Company develops plasma farms

2005

2010 NGO Setara Jambi helps establish GAPOKTAN group

2015

GAPOKTAN farmers work towards RSPO certification GAPOKTAN sells RSPO Independant smallholder certificates

Transmigrants and their children expand oil palm land outside plasma areas All plasma farmers pay off debt

Company clears forest land for plasma planting

brought to trans migrant farmers nearby, local villagers gradually switched from forest rubber or vegetables into oil palm. Within five villages along or near to the river 172 farmers and their 458 hectares have recently been RSPO certified.

There is still a potential of 400 farmers with 1.113 hectares that could be certified in the future.

During the first years there was a lot of suspicion towards both Setara and the concept of RSPO. Not related to the government some farmers directly declined. Others showed distrust towards NGOs, felt intimidated when asked for ‘land ownership documents’ or were just reluctant to join a new group. Those that did show a sincere interest are now organised in farmers groups that organises trainings on best management practices, keeps records of FFB production, sells collectively RSPO certificates, maintains plantation infrastructure, sells fertiliser, stores herbicides and takes action to prevent fires. Those outside the cooperation were referred to by the farmers as “working in isolation”.

“Additionally, the sub district head ordered that no herbicides can be used on agricultural land along the river, regardless if the farmer is RSPO certified or not.”

“Two years ago there were almost no fish in the river anymore. We would only catch some small fish, but certainly not as big as these now”. We stand on the bridge across the river and watch fish jump out of the water as some of the locals feed them. The bridge crosses the river in a five hundred meter High Conservation Value (HCV) buffer zone. It protects the two HCV values 5: basic environmental or health needs

Conservation around Sungai Rotan Sungai Rotan is one of three villages located along the Sungai Pengabuan (Pengabuan River). The village households use the river for washing and bathing, as well as for leisure and fun. According to the villagers the river “belongs to the village” and is part of the daily village rhythm. So is oil palm. Seeing the benefit it 26

for communities, and 6: landscapes that are of cultural importance. People are not allowed to fish in this area, and neither are they in two similar zones further down the river. Before they started to get organised and work towards RSPO there were no regulations on fishing or buffer zones. Farmers used herbicides and fertiliser without proper guidelines, draining off pollution from their farms into the river during heavy raining.

no herbicides can be used on agricultural land along the river, regardless if the farmer is RSPO certified or not. As the river enters the sub district direct for the Bukit Tiga Puluh national Mother and child near the river in HCV area around Sungai Rotan village

Now, RSPO farmers no longer apply herbicides on their land along the river and fertiliser is only applied by injecting them in the soil. As the river runs through three of the five villages in the sub district, cooperation is crucial. With the help of Setara Jambi, the five farming kelompok (group) set up a “RSPO forum” that allowed farmers form all villages to go for RSPO certification.

Additionally, the sub district head ordered that

“Does it always work? No, with over a thousand farmers spread among five different villages there are still challenges.”

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park, the rivers ecosystem stays clean and protected throughout its thirty km run down the sub district. Does it always work? No, with over a thousand farmers spread among five different villages there are still challenges.

As I went down to the river, yellow coloured grasses clearly showed the use of chemical spraying. It wasn’t RSPO certified, but still went against the sub districts commitment. Why?

Applying herbicides is easier, quick and cheaper compared to manual weeding. You don’t have to hire a team of labourers, do not have to pay them or wait for them to be available. However, using herbicides is easily noticed and the complaint was already fed back to the village head. After all it is in everyone’s interest to keep the river clean.

Trees, but “not a forest” “That forest over there, whose land is that?” I ask the two farmers that show me around on their land. “That’s not a forest” one of them answers. “It is just shrub - belukar - not a forest”.

I try to take another look. I can see green bushes and trees up to eight meters, some bigger trees sticking out reaching thirty meters of what I can guess from a distance the area must be around ten hectares in total. We even hear a group of monkeys chasing each other as we walk closer.

As we walk towards the ‘forest’ I realize how complex a simple question can be: what actually is a forest and what is not? Legally, the farmer is right, the land is classified as ‘other land use’ which means it can be developed for agricultural purposes.

HCV conservation around Sungai Rotan village, Jambi.

Sungairotan Village

Pengabuan river

Bufferzone.

No pesticides or chemicals allowed.

Protected area.

No fishing allowed.

Bufferzone.

No pesticides or chemicals allowed.

Rantaubenar Village

Second, the farmer has ownership of the land.

It is his land, it has been his - customary or private – entitlement and he will, at some point and in some way, want to make use of it. Our discussion is not even on clearing land for oil palm, but for vegetables. The farmer joins a nine person group that plants vegetables (cucumber, chili, cabbage, etc.) throughout the village. Sometimes they do intercropping with young palms on other farmers land. He tells me he “does not want to switch to more oil palm.

There is already enough, I prefer vegetables”.

Unfortunately for the monkeys, he has plans to develop his three hectares piece of shrub land into agriculture. But for him, he is creating an asset that will give him an additional income.

Protected area.

No fishing allowed.

Intercropping of cucumbers between young oil palms. The farmers “borrow” the land from neighbouring oil palm farmers for a period of two years.

Bufferzone.

No pesticides or chemicals allowed.

Protected area.

No fishing allowed.

“Shrub or forest?” Discussing with farmers on conservation and agriculture in the area. Grassland in the front has already been cleared using fire two years ago. Farmer knows he is no longer allowed to use it, but it remains a challenge to finance mechanical clearing.

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Pulaupau Village

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Discussing smallholders Listening and discussing with smallholders in the field can be very surprising, yet also confusing.

Assumptions based on a European perspective often bias to missed or misinterpreted key elements. It is stunning to reflect with your assumptions while walking in the field. Linking European assumptions with reality takes time and patience. However, it does raise new questions and perspectives. In this chapter, four of these perspectives are discussed.

Information and knowledge do not guarantee sustainable practices To understand or intervene in practices at farm level, one has to understand how decisions are made. When discussing smallholder development, it is often assumed that agricultural information and knowledge are

lacking. However, providing knowledge and information alone is not the key. KKPA farms are able to manage certified farms, but their individual plots lack almost everything they implemented on their KKPA schemes. This is not because they do not care or know. Fertiliser is important, but in many cases too expensive.

Manual weeding takes both more time and effort, or is expensive. Improved harvest timing is a relatively easy best practice that can create direct incentive.

“KKPA farms are able to manage certified farms, but their individual plots lack almost everything they implemented on their KKPA schemes.”

Collected lose fruits at smallholder farm. The wide brown kernel shell indicates lower seedling quality.

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“Farmers “just know” where their land ends and their neighbours land begins or can tell the difference between ‘shrub’ and ‘forest’ instantly.”

However, FFB collectors only pass by once every fifteen days. With theft as a real threat in some regions as well, it is better to harvest all fruits out in one go. Even if it leads to a lower price for some under ripe bunches. As there is no regulated FFB quality standard at the mill, farmers know there will always be a market. Farmers don’t just base their activities on agricultural information, what is happening around them is equally important to consider when working on smallholder development.

computer skills, planning and keeping record of your activities is not a given. Farmers look at nature to plan their activities. If the weeds are high they weed, if fruits are ripe they harvest.

Farmers “just know” where their land ends and their neighbours land begins or can tell the difference between ‘shrub’ and ‘forest’ instantly.

Their approach is pragmatic, not necessarily entrepreneurial. When asking farmers what is the most difficult about RSPO, they answer it is “the administration”. Not only because they are not used to it, but also because they might have another farm, have another business and

Certification is not just about sustainability When discussing certification for sustainable palm oil, the debate tends to focus on practices.

Less herbicides, efficient use of fertilisers, no use of fire, etc. However, certification is as much about organisation and administration as it is about practices. Most farmers have a basic form of education, but financial literacy,

Buffer zone along the river at RSPO certified independent smallholder farms.

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a family to take care of as well. At the moment, most smallholders need external support to get certification. That raises the question if current certification available is the correct tool for smallholders in the first place.

access and labour as well. The trans migrants in Merkat Jaya sell either through an agent, via the group or both at the same time. Most farmers have both land in and land outside the group as well as certified and non-certified lands. It can therefore not be assumed that ‘a group’ is the same as an enclosed, uniform, centrally coordinated group. Reality is different, but often quite logic once you get to understand the underlying story why they make the decisions they are making.

Having ‘an organisation’ is not equal to ‘being organised’ – and vice versa Smallholders organised in groups can perform better in terms of yield and environmental practices. Other advantages can also be the sharing of labourers, fertiliser distribution and harvest materials. However, organised farmers are not always able to create positive outcomes.

Trans migrant groups referred to during my field visits were uncertain about their debt and got no transparent information on FFB pricing.

Historically, Indonesian cooperatives are not necessarily regarded as favourable and are often viewed with suspicion. It is interesting that KKPA farmers are able to formally organise their KKPA lands, but not their independent farms.

At the moment, it seems that the commitment and support from a company or NGO behind an organisation is crucial.

“This does not mean then that there is no organisation in palm oil smallholders at all.”

The future of smallholders One of the basic questions on palm oil smallholders is often overlooked. Why did they switch to palm oil in the first place? Changing into palm oil seems quite opportunistic: “it is easy and makes more money” would summarize it best. When I asked farmers to their incentives to switch into palm oil they refer to materials such as motorbikes, cars, television and mobile phone and education for their children.

Smallholders is not just about one person, it is about an entire family. Most of the farmers I spoke to have children at school or at university in the larger towns. There is no single answer on how farmers see the future. Some indicated that their children had to make their own decisions whether they would want to inherit the farm. Others referred to as contract that KKPA ended, there would be new negotiations with

This does not mean then that there is no organisation in palm oil smallholders at all.

Palm oil has produced complex networks that are based on geographical boundaries, family relations, financial obligations or social hierarchy.

There is already a network of farmers, drivers, fertiliser and herbicide suppliers, collection point managers and agents out there. These networks are not just about smallholder farmers. It is about logistics, credit, fertiliser access, market 32

new opportunities. Some like their children to come back to the village. One farmer told me he already had his land divided for his children.

Others farmers said they do not want their children to make a living from agriculture.

will inherit what proportion of the land and how will this be managed? Will big farmers buy out smaller ones? Will new cooperatives emerge or will plantation companies take over eventually?

Because of its physical properties – harvest every 10 days and has a 25 years cycle – palm oil is an ideal crop to be managed ‘from a distance’. If that is the case, who will still be living in the countryside? And how will this then relate to smallholder farmers? These questions will be relevant to consider during the next twenty years.

“If that is the case, who will still be living in the countryside?”

While others noted that it will probably depend on the type of job his son or daughter can find in the city and if it pays well. Who will take over the farm is also related to other questions: Who

Two heaps of fresh fruit bunches. One is sold via the group and the other via a local agent.

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Recommendations

Acknowledgements.

Some farmers were well informed on European discussions on palm oil. They asked me what I thought of orang utangs, why people in Europe think negative about palm oil and what it is that we (in Europe) actually want with palm oil. This often came down to: “so, how will you help us”.

That is not because they are begging for our support, but because we, those at the global palm oil stage, have committed, have pledged and say that we want to support them. After three months in the field, this is my view on what global stakeholders can do to support palm oil smallholders:

• Choose suppliers that engage with independent smallholders. Palm oil producing companies are naturally linked to smallholders through their supply chain and therefore able to start supply chain transformation. Leading sustainable companies are already showing good action on the ground. If you are serious about sustainable palm oil and smallholders, let them know.

• Support landscape initiatives.

Sustainable landscapes do not emerge from the drawing table, it is something you have to build up in the field. The example of creating buffer zones in the third case study is a landscape approach that can be strengthened by bringing in more farmers, linked with supply chain by involving local oil mills and scaled by creating political support in other sub districts. All palm oil stakeholders can contribute to that.

• Buy independent smallholder credits to reward those farmers that have achieved certification for sustainable palm oil.

• Supporting smallholders is about understanding and engagement.

Take into account that smallholders have different perspectives, capacity and priorities when discussing and demanding sustainable palm oil.

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This report and learning project would not have been possible without the support of two persons in particular. I thank Mr. Frans Claassen, my director at MVO – the Netherlands Oils and Fats Industry, for giving me the time and encouragement to develop this project in Indonesia and Dr. Petra Meekers, director sustainable development and CSR at Musim Mas, for welcoming and hosting me in her team.

This project has been a unique experience that allowed me to not only improve my palm oil knowledge, but also better link our work in Europe with what is happening in the field.

I look forward to continue this work for more sustainable palm oil in the future.

Furthermore, I would like to thank all my colleagues at MVO, all Musim Mas staff in Medan and Singapore, the plantation and mill facilities, IFC staff in Rantau Prapat, Setara Jambi staff in Jambi and all smallholder famers and villagers on the project sites for their time, support and interest in this project.

Finally, I thank Paula and Bente for joining me on this shared adventure and for their ongoing support and happiness along the way.

Walking to the river to take a bath in Sunga Rotan.

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about

References

Thijs Pasmans works at MVO – The Netherlands Oils and Fats Industry as policy advisor sustainable sourcing. This report is the result of a learning project with Musim Mas in Indonesia from June to August 2017. For more information or contact – thijs.pasmans@gmail.com

• Bandun Pusat Statistik (BPS), 2015. Statistik Kelapa Sawit Indonesia.

• Forest Peoples Programme and Sawit Watch, 2006. Ghosts on our Own Land: Indonesian Oil Palm Smallholders and the Roundtable on Sustainable Palm Oil. • Friends of the Earth, LifeMosaic and Sawit Watch, 2008. Losing Ground. The Human Rights Impacts of Oil Palm Plantation Expansion in Indonesia.

• International Finance Corporation (IFC), 2013. Diagnostic Study on Indonesian Oil Palm Smallholders: Developing a Better Understanding of their Performances and Potential.

• McCarthy, 2010. Processes of Inclusion and Adverse Incorporation: Oil Palm and Agrarian Change in Sumatra, Indonesia.

• Feintrenie, Chong and Levang, 2010. Why Do Farmers Prefer Oil Palm? Lessons Learnt from Bungo District, Indonesia. Small-scale Forestry, 9:379–396.

• Molenaar, Orth, Lord, Meekers, Taylor, Mansuetus, Elson and Ginting, 2010. Analysis of the Agronomic and Institutional Constraints to Smallholder Yield Improvement in Indonesia.

• Bungaran Saragih. Indonesia Oil Palm Industry: Recent Development and Socio-economic and Environmental Issues.

• Rival and Levang, 2014. Palms of Controversies. CIFOR. • Roundtable on Sustainable Palm Oil (RSPO), 2017. Accessed on 01-11-2017.

Talking with smallholders on FFB harvesting and logistics.

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Thijs Pasmans November 2017

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