Palm oil fruit bunches at a dealer collection centre near Johor, Malaysia March 22, 2018. Thomson Reuters Foundation / Michael Taylor
Small growers have been left behind in the push for sustainable palm oil, industry experts say
JOHOR BAHRU, Malaysia, March 29 (Thomson Reuters Foundation) – When palm oil farmer Isnin Kasno eventually retires, his three children will turn their backs on the family’s small plantation in Malaysia’s southern state of Johor.
Like many ageing oil palm growers in Southeast Asia, the 58-year-old struggles to make ends meet from his 2 hectares (5 acres), and his adult children have little appetite for the physically demanding work and dwindling financial rewards.
“It makes me very sad,” said Kasno, who planted his land in 1983 after working in Singapore’s construction industry. “Soon, when I no longer have the energy to help with the harvesting, my only option will be to lease my farm.”
There are more than 2 million smallholders tending 5.6 million hectares of land in Malaysia and Indonesia – the two countries that dominate the world’s supply of the vegetable oil used widely in food, household products and biodiesel.
This army of farmers produces about 40 percent of palm oil from those two countries.
Over the last decade, growing pressure from green groups and consumers has pushed big companies that produce, trade or buy palm oil to tackle labour abuses on plantations and commit to ending deforestation that is contributing to climate change.
But smallholders like Kasno have been left behind, say industry officials.
Only 78,000 smallholders are certified by the Roundtable on Sustainable Palm Oil (RSPO), a body of consumer organisations, environmental groups and plantation firms that aims to make the industry greener and more ethical.
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Some 35 years ago, Kasno and three workers spent 12 months clearing a plot of lush forest land near the city of Johor Bahru using chainsaws and burning.
The farmer planted oil palm on the carbon-rich peatland and then registered the land in his name for a nominal fee.
Kasno, who also does a part-time job to support his family, pays two Indonesians a monthly wage of 150 ringgit ($39) each to help harvest his plantation.
The father of three has heard of, but knows little about RSPO certification, a sustainability scheme that promotes best practice and is backed by major European buyers of palm oil.
The challenge for international companies now – faced with a scarcity of land to expand and the need to secure future supplies – is to work with small growers like Kasno, even though many farmers find it hard to follow sustainability rules.
Smallholders across the region often live in poverty and have only a basic education level, industry officials said.
Averaging from 2 to 7 hectares of land each, they struggle to make large profits because they do not use the latest farming methods, cannot buy the best fertilisers and pesticides cheaply, and their yields are usually lower than the industry average.
Unlike major palm growers, independent farmers also face logistical problems getting their fresh palm fruit to mills for processing, and are inefficient because they cannot afford modern farming equipment.
During low output months when seasonal monsoon rains are at their heaviest, their income can plummet, forcing them to cut down on labour costs or spending on fertilisers. This harms harvests and quality further.
Fluctuating global palm prices also hurt farmers – many of whom cannot access credit or insurance that would help them when extreme weather damages their crops.
Growing oil palm promised big profits 25 years ago but has turned out to be a “false dream” for many smallholders, said Marianne Martinet of The Forest Trust, a non-profit that works with large plantations, consumers and smallholders.
“The common challenge now is low productivity and yields … also the financial ability to manage a business.”
Smallholders outside Johor Bahru said they need lower or subsidised fertiliser prices, training in the best farming practices, more help to increase yields and financial support from governments – especially when palm oil prices drop.
The children of smallholders in Malaysia, who complain about a lack of entertainment and the difficulty of finding a partner in rural areas, often seek better-paid work in urban areas. Halting that trend is crucial, farmers and dealers said.
“The priorities of smallholders, in most cases, (are) to put food on the table,” said Carl Bek-Nielsen, chief executive director of United Plantations, which has palm plantations in Malaysia and Indonesia.
“More resources need to be channeled to help smallholders, simply because they make up such a huge part of the (palm) cake. It’s a huge, huge task, but you have to start somewhere.”
Established back in 2004, the RSPO’s focus has been mostly on making large and medium-sized palm oil companies more sustainable, trying to achieve the maximum with limited funds.
But in 2012, it certified a first batch of smallholders, and three years later, set up a working group to look at how best to help them. In July last year, a roadmap was completed to open up the RSPO to more small growers, aimed at improving their livelihoods, sustainability and yields.
Eventually, with more funding and training, the goal is to make it easier for smallholders to get RSPO certification and access international markets. RSPO-certified palm oil is preferred by many European buyers, and is sold at a premium.
The RSPO launched a two-year pilot project late last year, partly funded by UN Environment, which will train smallholders in Sabah, Malaysia and Central Kalimantan in Indonesia.
“This is not only about economics but access to education, better healthcare,” said Julia Majail, RSPO associate director.
The RSPO project is similar to schemes backed by big palm buyers like Nestle, Unilever and Procter & Gamble (P&G), which partner with sustainability advisors like The Forest Trust, Wild Asia and Proforest.
Such schemes train pockets of smallholders to adopt modern farming techniques and ensure workplace safety, as well as to avoid planting on peatland or burning during land clearance.
Smoke from slash-and-burn agriculture is blamed for the polluting haze that brings health risks across Southeast Asia most years.
Besides helping farmers achieve RSPO certification, the hope is that other smallholders will notice the gains made by participating growers, and change their methods too.
“If we want to drive more production with the same land – improve productivity (and) minimise deforestation – the way to go about it is to work with the smallholders,” said Girish Deshpande, a global business planner at P&G.
But some say achieving RSPO certification is too costly and complicated for most smallholders, citing the remoteness of plantations, the number of middlemen in the supply chain and the scale of monitoring required.
“I’m now beginning to question whether certification is the route for smallholders,” said Simon Lord, chief sustainability officer at Sime Darby Plantation and former chair of the RSPO smallholders’ working group.
“It’s just sheer logistics. The number of audit hours to do that just blows it out of the water, in terms of expense.”
Lord, who has more than 30 years of industry experience, said smallholders should form collectives, while government-run schemes offer them an easier “entry level” into sustainability.
The RSPO is reviewing how to simplify its certification process and standards for smallholders, said Majail, a process likely to be finalised by November.
Back in rural Johor, Malaysian navy veteran Farid Harith, 48, spotted a trend of smallholders leaving their land back in 2004, and now manages 70 plantations for owners who have moved to the cities or are too elderly to manage their crops.
“A lot of young people go to study at university and then pursue corporate careers,” said Harith, who employs some 17 Indonesian workers to help him.
“It is a great loss, because I see the opportunities there are to make money in the palm plantations,” he added. “We need to change the mindset.”