The Vulnerability of Indonesian Smallholder Oil Palm Farmers in the Times of Global Crisis

Abstract

Since 2010, Indonesia has overtaken Malaysia as the biggest palm oil producer in the world. From around 12,7 million hectares of oil palm plantation spread across the country (2017), more than one third belonged to smallholder farmers. Almost all of those smallholder farmers do not possess any processing skill, thus they are dependent on oil palm mills to sell the fruit bunch. The export-oriented nature of palm oil resulted in the price fluctuation that follows global dynamics. With case studies in four villages in Labuhan Batu Utara Regency, this paper seeks to explore the awareness of how such conditions could impact the economic resilience of oil palm smallholder farmers during the global crisis and explore the near-future strategy to overcome it. The study used a qualitative approach using the in-depth interview to interview smallholder oil palm farmers, village officials, oil palm fruit middlemen, and related local government agency officials. The results show that smallholder oil palm farmers are most vulnerable in multiple aspects. The understanding of the relation of the price fluctuation to the global political and economical dynamics is gained through literature study. The lack of processing skills of farmers do not allow any possibility for an added value to the oil palm fruit, hence selling the fresh fruit immediately after harvest is the only option. Since selling is the only option, while on the other hand they do not hold any power to determine the price, little can be done when price slumps due to global dynamics. The farmers as well as the local leaders and government agency officials do not aware of the threat this may pose. Therefore, no agenda is currently set yet to strengthen the farmers’ resilience or in the near future.