Sustainable palm oil production – challenge of Thai small-scale farmers

8May 2017

As of 2015, Thailand ranked third in world’s palm oil output, responsible for 3% of production worldwide, behind Indonesia and Malaysia whose combined output accounts for more than 85% of the world’s production. Oil palm and palm oil industry plays significant role in Thai economy for consumption and as biodiesel for domestic use and as export, while also creates jobs and income for all involved. In 2015, 4.7 million rais of land was dedicated to grow oil palms all around the country. There were over 200,000 farmers/operators, 90% of whom were small farmers each of whom owns an average of 20-30 rais.

However, despite about 50 years of industry development, many issues are still predominant. These issues include headwaters, water processing, downstream markets as well as governmental policies. Small-scale farmers often face such major problems as 1) unpredictability and decline of pricing 2) low production per rai (average of 2.6 tons in 2015) 3) higher cost, for example. These problems must be overcome in order to ensure long-term sustainability by way of securing the economic stability and farmers’ finance.

Picture 2 Samples of tire labeling: (a) EU; (b) USA; (c) Japan

One of the more successful attempts to solve aforementioned issues is “Sustainable Palm oil Production for Bio-Energy in Thailand” project implemented by German International Cooperation (GIZ) in cooperation with Office of Agricultural Economics (OAE). The objective is to provide necessary support structures to promote sustainable palm oil production in Thailand. For over 2 years, the program has enlisted 500 farmers, 4 private crushing mills, 1 cooperative from Krabi, Surat Thani, Traad, and Sra Kaew.

The project provides training to farmers to increase yield per rai, improves quality of products, and guides farmers’ practices in accordance with Roundtable on Sustainable Palm Oil (RSPO). The project has developed several RSPO-based palm oil production manuals related to fertilizer application, farm management, farm diary, Occupational Health and Safety (OHS), Internal Control System (ICS), RSPO guide for small-scale farmers, integrated pest management, agronomic advice including soil/water/resource conservation, and conservation of high-value resource, for example.

The project specifically addresses smallholder farmers and encourages partnerships with the participating crushing mills through shareholding practice and setting agreeable premium price for quality products. The project also provides mentorship for farmers who receive advice and support fundamental farming practices. The project has provided continuous documentation of participating farmers and database management.

The evident of success achieved by the project is listed below:

  1. The pilot farmers from all 4 mills are RSPO-certified and are the first 4 groups in the world to receive the certification.
  2. The project is selected as outstanding smallholder farmers in Bioenergy Value Chains and Certification by Food and Agriculture Organization of the United Nations (FAO)
  3. Increased incentives for participating smallholder farmers to acquire more knowledge and provide comprehensive training materials (picture 1)

Picture 1 sample of training materials

  1. Improved farm management such as farm activities recording (picture 2), fertilizer management, leafing arrangement management (picture 3), chemicals management, occupational health and safety, soil/water/environmental conservation. Farmers learned to fertilize according to analytical value of soil and leaf, switch from compound fertilizer to single-nutrient fertilizer, increase use of organic fertilizer.  
  2. The change in farm management significantly increases yields. Farmers gain more income from the growth of 412 kilos/rai/year on average (15,900 rais of farm participating in the project therefore yields increased 6,550 tons/year). Farmers have sold fresh palms at an increased rate of 50 Baths/ton on average. In conclusion, farmers have earned more by 94,536 Baths/farmer/year on average.
  3. Farmers saved on discount of fertilizers directly from factory by 10,810 baths/farmer/year (from farm that produce 39 rais on average) or reduced price of fertilizer by 10-15%.

Picture 2 sample record of farm management

Picture 3 proper leafing arrangement

  1. Besides increased production, farmers enjoy benefits from analysis of soil and leafs, empty palm bunch, and a fast way to sell during overproduction. Moreover, small-scale farmers and workers enjoy better living condition, reduced health risk and accident by following RSPO standard.
  2. Major positive impact has been groups of farmers and community enjoy exchange of knowledge internally and with other groups/community. This dynamic creates palm oil experts in various areas. Best Management Practices (BMPs) within each group serves as mentors or models to the other members, creating and expanding network of smallholder farmers with knowledge and bargaining power in the market.
  3. Participating mills also enjoy the following – increased palm production with better quality which translate to higher percentage of oil, better relationships with farmers, trained personnel in sustainable palm oil production, the experience and ability to train and organize farmers in other areas.
  4. Non-participating smallholder farmers still benefit from the project by learning from the participating farmers so to improve their own production as well.

 

In conclusion, shareholding model in an industry like this stimulates sustainable development of palm oil production. Therefore, responsible governmental units such as Department of Academic Affairs and Department of Agricultural Extension should replicate this project’s model and lessons in other areas to improve a complete structure of palm oil while also promote sustainability in other agricultural products.

Assoc. Prof. Dr. Sutonya Thongrak and Asst. Prof. Dr. Sirirat Kiatpathomchai
DDepartment of Agricultural Economics, Faculty of Economics,
Prince of Songkla University
E-mail: sutonya.t@psu.ac.th
Source : http://rdo.psu.ac.th/


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