Sustainability is possible!

How smallholders in Thailand

benefit from sustainability
certification
Daniel May, PalmEx, 9.9.2011

16.09.2011

Seite 1

Overview

GIZ

Sustainable Palm oil production in
Thailand

Challenges

The Project

Conclusions

16.09.2011

Seite 2

Deutsche Gesellschaft
fr Internationale Zusammenarbeit GmbH

As an international cooperation enterprise for
sustainable development with worldwide operations,
the federally owned Deutsche Gesellschaft fr
Internationale Zusammenarbeit (GIZ) GmbH supports
the German Government in implementing its
development policy objectives.

Our corporate objective is to improve peoples living

conditions on a sustainable basis.

We work on behalf of the German Federal

Government and other public and private sector, and
national and international clients.
16.09.2011

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Oil palm production in South-East-Asia

Item / country

Indonesia

Malaysia

Thailand

Papua NG

Total land area

(Mln Ha)

181.16

32.85

51.29

45.29

% Forest area

46.78

62.73

28.19

64.39

% Agricultural area

26.77

23.95

38.66

2.30

Oil palm harvested

area (Mln Ha)

5.00

3.90

0.45

0.096

10.31

49.56

2.28

9.23

85

83

7.9

1.4

FFB Productivity
(ton/Ha)

17.00

21.28

17.49

14.58

Area under
smallholder(%)*

33

11

76

50

% Oil Palm to
Agricultural area
FFB Yield (Mln. ton)

Source: FAOSTAT (2010), * World Bank (2010)

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Sustainable Palm Oil Production in Thailand

No rain forest destruction

Production costs higher than
in Indonesia and Malaysia

Smallholders dominate ca.
80% of the production

60 palm oil mills with
overcapacity

Diverse agricultural landscape

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Challenges of the TH Palm Oil Industry

INDEPENDENT & LOOSE COOPERATION
Poor
agri. practices
& management

Harvesting of
unripe fruit
bunch

Lack of
Agricultural
knowledge &
inputs: fertilizer,
credit, etc.

Poor ramp
management: water
spray and sand mixture

Ministry of Agri.
(DoAE, DoA, ACFS)

* Own calculation

Loss of 0.4 billion USD / year*

Low quality
control of FFB
purchasing

Low quality
seedlings

Smallholder

Market Failure

Low OER (ineficient) of

crushing mill

Harvest team
Academic
Institutions

Ramp (middleman)

Provincial Govt.
Office

Agr. Inputs
Supplier

Palm Oil Crushing Mills

Asso. of Palm
Oil mills/refinery

National Palm
Oil Board

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The Project

Funded by German Federal Ministry of
Environment, Nature Conservation and Nuclear
Safety (BMU)

Jointly implemented with the Office of
Agriculture Economics

Project duration: 3,5 years

Volume: 3,5 Mio.

Goal: Certified sustainable palm oil from
smallholders is available on the market

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Win-Win-Situation of commodity partnerships

Farmer seeks for:

Agroindustrie seeks for:

Sustainable
developement
through
market access, knowhow/
education social
Security processing

Planning reliability
through long term
secured
supply/feedstock
chain: Sustainability
CSR, marketing

Partnership Farming
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Partnership Farming

Definition: Partnership Farming is an approach
which promotes sustainable agriculture and
contributes to improved agricultural capacity
necessary to access domestic quality and
international markets

Whats new: The most innovative aspect of
Partnership Farming is that it is not commodity
specific, enabling farmers to be self-sufficient
decision-makers which allows for a more
flexible production system

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Key Characteristics of oil palm smallholders in

Thailand
Age (average)

50,4 years

Formal education level:

Primary education level and under
Secuandary level
Higher level

63,4 %
22,3%
14,3%

Family size

4,0 Persons

Area of Oil palm production

7,2 HA

Oil palm farming experiences

14,9 Years

Household annual income (THB)

200,000 (6,666 USD)
200,000 400,000 (13,333 USD)
400,000 600,000 (20,000 USD)
> 600,000 (20,000 USD)

24.4 %
41.2 %
20.5 %
13.9 %

Household income depending on Oil palm

Up to 25 %
25 50 %
51 75 %
More than 75 %

12.7 %
32.0 %
24.5 %
30.8 %

Source: (n = 503 of total 118,354)* , *Project baseline study in Thailand (95% confidence level)
**Exchange rate: 1 USD = 30 THB (15th, October, 2010)

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Projects intervention: Strategy

National Level (policy, framework) Local level (field, production)
Develop sustainable Palm Oil
certification system in Thailand

Support the implementation of a

certified Palm Oil production in
pilot areas

Support Thailand National

Initiative Working Groups

Select mills and small

farmer/groups in pilot areas

Facilitate the TH NI process

Value chain coordination,

technical supports, and better
farm practices: productivity,
quality, reduce costs

Thai NI on RSPO P&C:

- Large plantation: Approved on July, 2010
- NI for Smallholder Task Force is formed

Improve livelihood of
smallholders (Socio-economic
& environment)

Aims:
-Support 1,000
SHs
certified RSPO
-Develop concepts
for
group certification
Opportunity
-Transfer &
upscale
the concepts
within
Thailand and other
countries

Sustainable Palm Oil Production

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Project intervention:

Processes

SUSTAINABILITY
FRESH FRUIT
BUNCH QUALITY

FARM
PRODUCTIVITY

Price premium based on

quality

Grading system

Harvesting and fruit
handling guidelines/training

Training & technical support: Fertilizer Management,

Leaf & soil analysis, Plantation management

Farm inputs coordination

Best Management
Practices (Th GAP, IPM, OSH, etc)

Farmer group &
institutional development

Database management
system

Internal Control System

Mutual interest, benefit &
information sharing

Long-term relationship &
interdependence
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Project intervention: Steering structure

Support office in Bangkok/Eschborn: Certification
Project
Director

Project
Manager

system, GHG calculation, Monitoring, Policy &

advocacy

Private Mills

Field Manager
Assistant

Farm Advisor 1

Mill Coordinator
1

Technical
Management
Officer

Farm Advisor 2

Mill Coordinator
2

Farmer
Coordinator
(1, 2)

Farm Advisor 3

Mill Coordinator
3

Oil Palm Expert

Farm Advisor
4, 5

Mill Coordinator
4

Admin. Officer

Farm AdvisorK

Coordinator

In brown color: Personnel financed by the project

Ao Luek Cooperative
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Project intervention: Cooperation

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Project intervention: Learning & Innovation

Partnership Agreement:
Interdependent agreement
Mills support
Fertilizer at the mills price & quality
Seedlings provision (price & priority)
Free empty fruit bunches (EFB)
Premium price based on QUALITY
Express delivery channel
Technical & training supports
Farmers commitment
Regular delivery
Plantation Best Management
Commitment to the groups agreement &
rule towards sustainability on socio-,
economic and environmental aspects
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Direct Impact on Smallholders/Mills

Productivity

Quality

Sustainability

Better farm practices

Farm records
Cost reduction on fertilizer: appropriate
application & group purchase via the
mills
Quality-based pricing mechanism
Interactive platform between
smallholder & processor
Farmer Group formation
Learning & exchanges among groups
Strong linkages between mills &
Smallholders
Mills provide a range of sustainable
products

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Challenges & Solutions

Challenges

Solutions

Poor agriculture
practices &
management
Communication
lack between
smallholders
and mills

SUSTAINABILITY
FRESH
FRUIT
BUNCH
QUALITY

Lack of
incentives for
quality
Limited
financing effort
by Smallholders

FARM
PRODUCTIVITY

Capacity building
and traing for
smallholders:
Guidelines for GAP,
Improve
cooperation in
value chain. Result:
lower production
costs & higher
quality
Partnership
Agreement
Financial support
for smallholders
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Conclusions

Thai palm oil industry has great potential to achieve
sustainability standards

Smallholders are key and they can comply with the
standards, if provided capacity

Capacity building and training are required

Fertilizer Management, Farm Management, Harvesting and
Quality Management etc. -> all training material is available
in Thailand!

Institutional support and funding needed!

 Palm oil production in Thailand is on the right right,
but still a lot need to be done
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Thank you for your attention!

Contact: Daniel May Project Director

Daniel.May@giz.de
www.giz.de/sustainablepalmoil
16.09.2011

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