Posted on July 1, 2020 by Sustainable Food News

Pandemic puts squeeze on sustainable palm oil producers

RSPO reports low fresh fruit bunch prices harms 'farmers who have more than two children'

While the spread of Covid-19 has threatened the income of independent oil palm smallholder farmers in Indonesia due to low fresh fruit bunch (FFB) prices, farmers certified to the Roundtable on Sustainable Palm Oil’s (RSPO) standard have found that the sale of RSPO credits has provided the additional funds and support needed to see them through this difficult time.

In a recent online forum, titled, “Covid-19’s impact on RSPO certified farmers,” Rukaiyah Rafik, senior advisor of the Sustainable Palm Oil Farmers Forum Indonesia (Fortasbi), noted that in addition to low FFB prices, farmers felt the pinch as both palm oil mill and manufacturing activities remain sluggish due to large scale social restrictions, yet fertilizer prices remain high.

“As many independent smallholder farmers do not have the means to transport their FFBs to a mill, they rely on a ‘middle man’ or intermediary business to provide this service, but the restriction in activities and movement due to Covid-19 has impacted their primary source of livelihood as they’re unable to sell or transport their FFBs to a buyer,” Rafik said. “The pandemic also affects fertilizer stock and input for the farmers’ plantation as well as food prices.”

He added that RSPO certified farmers have a strong institution and network to support them, as well as accountability built into the standard. He said RSPO farmers also have a diverse range of businesses or crops during the pandemic, which further supported their livelihoods.

Secretary General of Palm Oil Farmers Union (SPKS), Mansuetus Darto, said that at one point during the pandemic, the FFB price dropped below 1,000 Rupiah (Rp) per kilogram (US$0.07 per kilogram) at the independent smallholder farmers’ level.

Meanwhile, the FFB price for plasma farmers (farmers who partner with palm oil-producing companies) was recorded at between Rp1,200 per kg and Rp1,300 ($0.08-$0.09) per kg.

“The price below Rp1,100 is difficult for farmers who have more than two children, with their child pursuing higher education, or those who have another family member who is dependent on them, such as their parents,” Darto said. “Because of their low productivity, between 1 to 1.2 tonnes per hectare per month, they sold [their produce] to middlemen. They also have a debt burden to the middlemen because the farmers have loans, which have to be repaid during harvest.”

Darto added that many oil palm farmers have no other sources of income and solely rely on palm oil. A 2018 SPKS study revealed that only 30 percent of farmers have alternative means of livelihood from cultivation, rubber planting, and becoming small traders. Land that was set aside during the New Order era for PIR farmers during the transmigration period, which spans 0.75 hectares, has been converted to oil palm plantation.

Darto also said that farmers were being dragged down due to the increase in fertilizer prices, which are sometimes scarce. “There are no health protocols for farmers/harvesters. Farmers need cash while the transaction process for FFBs for farmers who sell to the corporations is usually processed between one or two weeks after the produce was delivered to the factory or mill,” he said.

“During the pandemic, certification helped support around 6.000 members that make up 30 farmer groups, through the sale of RSPO certified palm oil via RSPO Credits,” said RSPO Indonesia’s Smallholder Program Manager, Guntur Cahyo Prabowo. “A total of $1.5 million was disbursed to 30 groups of RSPO certified independent smallholder farmers from the transaction of certified palm oil sales between May 2019 and May 2020.”

Guntur added that at the time of this unforeseen pandemic, certification proved to be a great asset for farmers when dealing with the uncertainties of the situation. This included requirements for certification such as a strong farmer’s organization and financial planning, helping to improve their bargaining power during the pandemic.

A farmer representative from the Independent Palm Oil Farmers Association, Zainanto Hari Widodo said that there are no cash transfers (BLT) from the government that are focused on palm oil farmers.

“As RSPO certified farmers, we get staple food aid and fertilizers for our members. Assistance for non-members includes health equipment, support for community health centers [Puskesmas] within the association’s area, help to establish a COVID-19 command center and aid for the economically-vulnerable people,” he said.

However, other types of businesses, such as the Small-Medium Enterprise (SME) have also found it hard to market products such as vegetables, fish and other foodstuffs, during the pandemic.

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