The Palm Scribe

APKASINDO Seeks Way to Protect Smallholders from Pressure of Low Prices

The Indonesian Association of Oil Palm Smallholders (APKASINDO) is currently seeking ways to protect smallholders from the pressure of low world prices, one of its executives said on Wednesday (25/7).


APKASINDO on Wednesday opened a two-day Focus Group Discussion in Pekanbaru, Riau province, involving various stakeholders in the palm oil industry, including farmers, companies, local governments, and academics, to seek ways how to protect the small palm oil farmers from the vagaries of low global prices.

“We want to highlight the reality in the commerce of fresh fruit bunch (FFB) of smallholders,” APKASINDO Deputy Secretary-General Rino Afrino told The Palm Scribe in a short text message.

He said that with the prices of Crude Palm Oil (CPO ) hovering around $540, farmers should be able to pocket RP 1,300-Rp 1,500 per kilogram of fresh fruit bunch. “But what is happening on the field is that prices could reach Rp 600 per kilogram,” he added.

He said that the government actually already had Regulation of the Agriculture Minister number 1 of 2018 that is aimed at protecting all farmers by assuring a fair price for the fresh fruit bunch and prevent unhealthy competition between palm oil companies.

The ministerial regulation stipulates that the purchase price for the fresh fruit bunch by mills or companies is set by the governor with the assistance of a Pricing Team he must establish that composed of representatives of companies and farmers’ associations.

However, Afrino said that the reality on the ground was that smallholders continued to receive only a paltry sum for their FFBs from the mill operators or companies.

“Therefore, the theme of this FGD is: assuring the welfare of smallholders through a just FFB price. It wants to find a solution to this problem. For those farmers who already meet the criteria and quality.. they, of course, are worthy of receiving the prices set by the pricing team.. they should not be put in the same basket as the others,” Afrino said.

The FGD’s results, Afrino said, would then be recommended as a base for the formulation of a Gubernatorial Regulation by the Governor of Riau that will bind both companies and mills as well as the smallholders in the Sumatran province that is one of the main palm oil producing areas on the island.

“With this, the unilateral price manipulation by the mills and brokers is hoped to no longer take place,” he said, adding that the calculation of the price will depend heavily on global CPO prices,

“I see that the government’s main duty is to implement the regulations on the FFBs well, and come out with policies that can be positively responded by the markets, such as on the use of biodiesel in the country, the massive replanting of oil palm etc,” he added.

The government is trying to boost domestic consumption of CPO by setting an obligatory mix percentage of biofuels in diesel oil. Currently set at 20 percent, the policy is also now being extended to covered transportation in general and not only in the mining and plantation sector as it previously was.

It is also targeting the replanting of some 185,000 hectares of smallholders’ oil palm plantation this year as part of efforts to boost productivity as smallholders now accounting for more than 40 percent of the country’s oil palm plantation.

Another smallholder association, the Union of Oil Palm Farmers (SPKS) had on Tuesday called on the government to set a minimum FFB purchase price for mills and company to protect the smallholders from the low prices. The group, however, set the minimum price arbitrarily at Rp 1,500 per kilogram, saying at it was the minimum level that would allow farmers to cover their operational costs while still leaving cash for some of their daily needs.

3 thoughts on “APKASINDO Seeks Way to Protect Smallholders from Pressure of Low Prices

  1. Repeats every year when low crop ffb prices go sky high, opposite happens when peak crop comes and mills are all running full capacity, prices plunge. I don’t think a floor price would work , if I was a mill operator I could just choose not to buy.

  2. You cannot dictate prices for any commodities. It all depends on supply & demand. Our mills are having problem as the oil storage tanks are almost full and kernels are not collected. That is present state.

    1. The issue here is not one of price fixing/dictating but rather setting a minimum price for farmers when prices rockbottom…

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