Independent Smallholders: Partnership Farming

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1 Creating Opportunities for Independent Smallholders: Partnership Farming Dr. Yotsawin Kukeawkasem Project on Sustainable Palm Oil Production in Thailand, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH November, 2011 The 9 th Annual Roundtable Meeting on Sustainable Palm Oil 2 1

2 The extent of oil palm cultivation in 43 oil palm producing countries Palm Oil (2011/F)* Million ton Production under smallholder (%)** SHs average ton oil per Ha** (average) Palm oil from SHs Million ton (3.74) No. of SHs: Million (calculated) A: 1.0 ha / farmer B: 1.5 ha / farmer C: 2.0 ha / farmer Source: FAO (2007). Cited by World bank (2010) * Oil World (vol.54, 2011); ** World Bank (2010); *** Sawit Watch(2011) How many smallholders are RSPO certified? 25,000 farmers*** (0.77%) 2 2

3 Is smallholder a bottle neck in ensuring sustainable palm oil? Government? Civil Society? Private Business? Smallholders??? 23

4 Challenges of the TH Palm Oil Industry INDEPENDENT SMALLHOLDERS & STAKEHOLDERS Poor agri. practices & management Lack of Agricultural knowledge & inputs: fertilizer, credit, etc. Low quality seedlings Harvesting of unripe fruit bunch Poor ramp management: water spray and sand mixture Low quality control of FFB purchasing Market Failure Loss of 0.4 billion USD / year* Low OER (ineficient) of crushing mill Smallholder Harvest team Ramp (middleman) Palm Oil Crushing Mills Ministry of Agri. (DoAE, DoA, ACFS) Academic Institutions Provincial Govt. Office Agr. Inputs Supplier/company Asso. of Palm Oil mills/refinery National Palm Oil Board * Own calculation 6 4

5 Stakeholder Pros Cons Government Pros and Cons of stakeholders linking with smallholders - Legal authority - Manpower covering all areas - Officials - Centralized policy - Multipurpose duty - Limited resource - Outdated information and knowledge Civil society -Specific purpose - closed-up & In dept work - Follow up - Limited (spatial & time & thematic areas) - Lack of manpower and resource Business - Market access - Advanced knowledge & Technology -- long term business - Focus mainly on economic aspect - Specific supply base 2 5

6 Creating win-win Opportunities for Smallholder Economic Aspect CHALLENGES Opportunity & approach Partner 1. High cost of agri. inputs Seedling: direct purchase Fertilizer (group purchase) 2. Yield gap Farm management and practices Certified seedlings partner mills farmer groups oil palm experts (uni., state, mill) mills 3. Poor FFB improve % OER (pricing mill quality mechanism based on quality) farmer group FFB standard Government IMPACT ECONOMIC VALUE ADDED 10 15% fertilizer cost reduction Yield increased 3 ton/ha 0.1 THB/kg FFB Average farm size of 7 ha : ~ 3,000 usd / year to smallholder; : 1-2 % OER increased for mill 6

7 Creating win-win Opportunities for Smallholder (cont.) Social & Environmental Aspect CHALLENGES Opportunity & approach Partner 4. Working condition 5. Transparent payment & price occupational health and safety Health coverage program minimum wage free market (labor & FFB) Syngenta Mahidol University Public Health Min. government private, farmers 6. Ethnics & local wisdom and values local administrative cultural values (bottom up planning) offices & community 7. Land conflict land distribution & titling community agreement 8. Monoculture diversified agricultural activities (2.3% palm area) 9. High Conservation Values IMPACT Clear & good management of protected areas Freedom of local beliefs & practices Land department community government farmers Human security Clear land use & conservation areas Thai authority Thai s constitution & ways of life 7

8 Stakeholders role in coping with key challenges Challenges Approaches Governm ent Civil Society Private Yield gap Production cost Quality (FB) Training & monitoring: oil palm experts Certified seedlings Farm best practice management Group purchase of agricultural inputs Credit and agri. inputs access Quality- based price premium? - FFB standard?? Pricing Mechanism Competitive market - Labour Free labour market - Ethnics & culture Decentralized and local wisdom? -???? - Land Land distribution & titling to smallholder? - Monoculture Diversified crops/activities?? Environ. & cultural values trespassing Control & monitor local wisdom & Note: is Necessary;? is Important; - is less relevant? - 8

9 Creating Opportunities for Smallholder with Innovative partnership Farming Is the RSPO certification attractive enough to independent smallholders? 9

10 Thank you very much E- mail: 2 10