Indonesia’s vast landscape is dedicated to a single crop that drives the prosperity of the country’s economy – palm oil. Palm oil plantations, spanning 16.38 million hectares (ha) including 6.94 million ha managed by smallholders, fuel the nation's economy. Each year, palm oil exports alone contribute USD27.91 billion to Indonesia’s coffers, representing a staggering 10.2% of total exports. This valuable commodity outshines even oil and gas exports, solidifying its position as one of the nation's most valuable exports. The driver of these impressive statistics is a story of small independent farmers who form the backbone of the industry. Their dedication and resilience are vital to Indonesia's economic success, and their future holds the key to the sustainability of the palm oil sector.
Indonesia's palm oil sector has created direct employment for 5.5 million people. This number rises to 17 million when including direct and indirect labour. Across the country, more than 2.6 million independent smallholders manage 41 per cent of Indonesia’s palm oil plantations.
With the industry relying on a significant number of independent smallholders, Sinar Mas Agribusiness and Food believes that empowering smallholders goes a long way to fulfil the goals of the Sustainable Development Goals (SDGs) and the transformation of the global supply chain.
Among the key programs in empowering smallholders initiated by Sinar Mas Agribusiness and Food are the Smallholder Palm Oil Rejuvenation (PSR) program and Sawit Terampil program. Both programs are designed to improve livelihoods, enhance access to finance and resources and build capacity through training for the smallholders.
Currently, there are 2.8 million hectares (ha) of palm oil plantations in Indonesia that require rejuvenation as the average age of the plants has surpassed 25 years old.
The government targets 180,000 hectares of oil palm plantations to be revitalized each year through PSR program. The program is run through two channels, namely the government service channel and the partnership channel with plantation companies. The PSR program, which takes place in various regions in Indonesia, aims to increase the volume and quality of farmers' oil palm fresh fruit bunch (FFB) production. It is a joint effort crucial to maintain the sustainability of national palm oil production.
Sinar Mas Agribusiness and Food remains committed to supporting Indonesia’s PSR program for smallholders. Since 2014, the PSR program has aimed to improve the livelihoods of smallholders and ensure the sustainability of oil palm as a strategic national commodity by replacing old, unproductive trees with new planting materials based on good agricultural practices. By 2022, Sinar Mas Agribusiness and Food has partnered with 16,300 smallholders in replanting a total area of 32,700 hectares. By 2023, the Company's PSR programme covers a total area of 5,854 hectares.
While the company is dedicated to this initiative, the process of convincing smallholders to replant is complex and challenging. Constant improvement of the approach to address the concerns of smallholders and recognizing their participation is vital to the success of the program.
For large agribusinesses, replanting is done routinely. However, for smallholders, it can be challenging for a variety of reasons, including loss of income, lack of workforce, and uncertainty about the process.
To drive the program, Sinar Mas Agribusiness and Food set up a dedicated PSR division, offering farmers support ranging from land mapping (their land is often scattered and planted with commodities other than oil palm) to timeline planning. The company organises the program in a strategic partnership manner to open up opportunities for farmers to develop further, involving farmers cooperatives and BPDPKS and banks.
Sinar Mas Agribusiness and Food helps local farmers with every step of the replanting process, from gathering the necessary paperwork, applying for the program, and receiving the financial support. On top of that, farmers receive healthy young plants and valuable tips for growing crops.
One of the essential step in the program is Sinar Mas Agribusiness and Food’s role in facilitating smallholders’ access to funds from banks. The company also conduct comprehensive sustainability assessments before engaging the smallholders to prioritise replanting for plantations that meet the sustainability requirement standards, such as Indonesia Sustainable Palm Oil (ISPO) and Roundtable on Sustainable Palm Oil (RSPO).
As an independent farmer, I faced numerous challenges, including the proper application of fertilizer. Due to my limited experience, I am keen on joining the PSR programme, which offers guidance from Sinar Mas Agribusiness and Food. I have observed that they excel in fertilization, maintain high-quality standards, and utilize certified seeds, all under the guidance of expert
I have seen a lot of progress in income from oil palm plantations. Before joining the program, the results were very different from what I see now. In the past, the output was only 700-800kg [per month], but now my production has reached more than 2 tonnes per month
Smallholders are often grateful of the support a larger palm business can provide to help them navigate the complexities of replanting and get the best result, one of them Alfa Lubis from Siak, Riau, “As an independent farmer, I faced numerous challenges, including the proper application of fertilizer. Due to my limited experience, I am keen on joining the PSR programme, which offers guidance from Sinar Mas Agribusiness and Food. I have observed that they excel in fertilization, maintain high-quality standards, and utilize certified seeds, all under the guidance of expert,” he explained.
Although there is still some way from Sinar Mas Agribusiness and Food's eventual target of 200,000 hectares by 2029, a lot of work has gone into getting the program off the ground. This work is challenging, but the company remains committed because it is the right thing to do for the business, for the farmers and for the growth of the economy.
While PSR program contributes to increasing FFB yield and purchases according to the price set by the government, transitioning to new practices can be challenging. Smallholders or communities may be understandably hesitant to change their longstanding management approaches. Sinar Mas Agribusiness and Food field officers have therefore needed to carry out several rounds of dialogue with farmers, public figures, religious and indigenous leaders, local governments and NGOs to address concerns and get approval, before proceeding with the replanting.
One example of a Sinar Mas Agribusiness and Food partner that has benefited from the PSR program comes from the Berkat Ridho Bersama Cooperative in Riau. The cooperative's FFB yield, which was previously around 10 tons per hectare per year before the replanting program has doubled to 23.43 tons per hectare at an average plant age of 6 years. As the plants continue to mature, the production potential can reach 30 tons per hectare per year between 10-20 years. By increasing efficiency and reducing production costs, this achievement has the potential to put more money in the pockets of farmers. While the specific impact for individual farmers will vary, depend on individual circumstances and market factors, it could potentially lead to an additional income.
Whilst replanting is one part of supporting improvements in smallholder incomes and practices, there are established plantations that are still young or in their prime where support is also needed. Companies must meet the needs of smallholders in these areas as well.
Palm oil companies are responsible to ensure their independent smallholders apply the same standard of sustainable agricultural practices. However, many farmers lack access to formal agronomy training, administrative knowledge and support that can help improve their farming practices and meet requirements for certification.
Not only promoting but proving sustainable agricultural practices is crucial for inclusion in global supply chains, in the face of growing demand for accountability and traceability coming from palm oil customers, regulators and consumers. To unlock greater economic opportunities, smallholders need to comply with specific quality and safety standards. Meeting these standards, such as those related to food safety, or organic certification, will open doors to new markets and enhance their bargaining power, ultimately leading to increased income and improved livelihoods.
Sawit Terampil was launched in June 2020 by Sinar Mas Agribusiness and Food with support from its partners. The program aims to provide support to independent smallholders through group coaching and individual guidance to implement good agricultural practices. Currently, Sawit Terampil is implemented in Langkat, North Sumatera and several regions in Aceh, which include Nagan Raya, Aceh Barat Daya, Subulussalam, Aceh Singkil, Aceh Utara and Bireun.
Imagine a vast palm oil landscape, not just thriving, but transformed. Smallholder farmers, armed with knowledge and cutting-edge technology, become stewards of a sustainable future. This is the vision of Sawit Terampil that is being brought alive by Sinar Mas Agribusiness and Food together with industry giants like MARS, Fuji Oil, and Neste Oil and funding partners like the Sustainable Trade Initiative (IDH). Digitizing supply chains and sharing best practices are core components of the programme. The implementing partner, Koltiva, is stepping in to provide valuable mentorship on best agricultural practices, helping farmers increase yields and improve their livelihoods.
The program emphasises working together with different groups of people to change how smallholders think and act. It is also designed to help protect smallholders against threats of economic insecurity and climate change. By empowering them with skills and knowledge, Sinar Mas Agribusiness and Food aims to build resilience among smallholders and equip them with the ability to maintain stability in the face of change.
There are three ways farmers can earn more from farming – improve the yield of their main crop through better seed stock and farming practices, minimise the costs of production by minimising fertiliser and expensive agri-chemical use, and diversifying farming income through alternative or additional crops or other work. The Sawit Terampil program focuses on the first two.
The training includes good agricultural practices (GAP), institutional development, and other valuable skills for farmers. Registered farmers could also receive assistance in the form of one-on-one coaching. In addition, farmers or groups of farmers are also identified for their potential towards certification and the appropriate support is provided to help them become certification-ready.
The direct impact for smallholders is that they have better understanding on how to care for their plantations and in the long run increase their production. The increase in productivity will improve income and livelihood of the smallholders and local communities over time.
Farmers are expected to achieve ISPO certification gradually until 2025, and 270 farmers from Perkumpulan Sejahtera Pelita Nusantara (PSPN) holding 568.88 hectares of palm oil plantations in North Aceh received RSPO certification in 2023. Another three associations with more than 500 farmers are on the pathway to become certification-ready by 2024. This marked a significant milestone for Sawit Terampil program since its implementation.
By the end of Q1 2023, the project had reached approximately 4,800 farmers with training and coaching opportunities, exceeding the target of 4,500 participants set for the end of 2023. More than 6,600 coaching sessions have been conducted, amounting to over 11,600 coaching hours since the initiative was launched.
The company remains steadfast in helping as many farmers as possible to be ready on ISPO and RSPO certification. The goal is to train 10,000 smallholders at Langkat North Sumatera, Subulussalam Singkil Aceh, West Kalimantan and Riau by 2025.
The coaching sessions have delivered material results that can help to support smallholders’ livelihoods by increasing their yields, reducing input costs and enhancing farming efficiency. Sawit Terampil data shows that farmers who have undertaken training increased their plantation productivity by 14 percent on average, from 18,5 ton/ha/year to 21,02 ton/ha/year, with the number of trees per hectare remaining constant. Langkat Regency saw the highest productivity increase of 19 percent. The national average for plantation productivity among smallholders is 9,6 ton/ha/year.
Participants have also reported positive outcomes from the project. Some examples are Ardiyanto and Sutiyem from Langkat Regency, North Sumatera. “Since I joined the Sawit Terampil programme, I learned where I can and can’t plant because of land legality or high carbon areas”, said Ardiyanto. While Sutiyem, commented “I have seen a lot of progress in income from oil palm plantations. Before joining the program, the results were very different from what I see now. In the past, the output was only 700-800kg [per month], but now my production has reached more than 2 tonnes per month”.
Driving rural economic development is at the heart of Sinar Mas Agribusiness and Food’s work and helping smallholders to upskill and become certification-ready is a key part of this effort. Sinar Mas Agribusiness and Food hopes to work with more partners in the future both in Palm Oil Rejuvenation and Sawit Terampil programs to further benefit and empower smallholders in accelerating sustainable growth.
From Indonesian farms to international tables, empowering smallholders ripples outward. Not only do individual farmers thrive with higher incomes and improved livelihoods, but Indonesia, as a country, experiences a surge in rural development and economic growth. This translates to a more stable and prosperous nation, ready to share its bounty with the world. Consumers everywhere can enjoy the fruits of sustainable agriculture with a clear conscience, knowing that their choices support both farmers and the planet.
