Independent palm oil farmers excluded from sustainable market, finds study

A new study has found that independent palm oil farmers in Indonesia are being unintentionally left out of supply chains that lead to sustainably certified mills.

Led by a University of Hawaiʻi at Mānoa researcher, the findings are published in Communications Earth & Environment and spotlight a significant barrier to creating an equitable and sustainable palm oil market.

“Passive exclusion is silent but powerful,” said Andini Ekaputri, lead author who conducted the research as part of her Ph.D. at the College of Tropical Agriculture and Human Resilience Department of Natural Resources and Environmental Management. “Many farmers never have the opportunity to participate at certified mill markets, and they miss out on potential benefits like price transparency.”

$72 billion global market

Palm oil, made from the fruit of the oil palm tree, is the world’s most widely used edible oil. It’s a key ingredient in hundreds of household products like pizza, shampoo and doughnuts, and is also used in animal feed and as a biofuel. The global palm oil market is estimated at $72 billion a year.

While large company-owned plantations produce the majority of palm oil, about 30% comes from smallholder farmers. These farmers fall into two categories: contract smallholders, who have formal agreements with palm oil mills, and independent smallholders, who operate without such contracts.

Indonesia, the world’s largest producer of palm oil, has a vast number of independent smallholder farms. The study found that Indonesian mills certified by the Roundtable on Sustainable Palm Oil (RSPO) were less likely to source from these independent farmers.

Independent farmers left out

The research team analyzed data from mills in Kalimantan and Sumatra and found that certified mills sourced only 7% of their fruits from independent smallholders, even though these farmers produce an estimated 34% of the total palm oil fruits. Conversely, certified mills purchased more than expected from contract smallholders.

The findings will inform the EU’s deforestation–free products regulation, which may risk cutting out some small–scale palm oil producers.

The authors recommend that organizations like the RSPO and major palm oil traders take a more proactive approach. They urge increased engagement with smallholders and collaborative efforts involving governments and the private sector to resolve issues such as land legality.