Palm oil in Thailand (update 1): Royal Forest Department says it will not renew some 32,000 ha of plantation concessions, but allocate land to local farmers instead

3 Jan 2015: Thailand's Royal Forest Department says it will not renew some 32,000 ha of plantation concessions, but allocate land to local farmers instead

Note: Bangkok Post report says that "If a plot is found suitable for rehabilitation, the land will be reforested. If not, those plots will be allocated to the poor under a land redistribution scheme. " 20,000 rai is about 3,200 ha and 200,000 rai is 32,000 hectares.

Thailand...The Royal Forest Department announced it would not renew plantation concessions. Deputy director-general Somchai Masathian said the land plots should be allocated to local farmers rather than wealthy investors... For 30 years, palm concession holders have paid just 30 baht per rai to the state, Mr Somchai said. More than 200,000 rai of land has been granted to companies, including big players in the palm oil. Several of these companies have managed to secure upwards of 20,000 rai to plant their crop... © Post Publishing PCL. All rights reserved.

Earlier news report

Palm oil farmers in Krabi block access to airport during protest - Scuffles broke out when residents whose businesses rely on tourism confronted the protesters. By Panu Wongcha-um, Channel NewsAsia 13 Nov 2015, ... The farmers have been protesting since Thursday, demanding redistribution of land concessions based on a 2003 Cabinet resolution on land distribution for the poor. They want to be able to farm their own land....

At the sidelines of POC 2014: (2) on certification and smallholders

Khor Reports was at POC 2014 to find out about some hot issues discussed on the side-lines. Here are some topics that we think might be of broader industry interest in the near and medium-term:

(2) On sustainability certification and smallholders

Sustainability was a frequently mentioned topic in and out of the hall. We heard that many groups attended briefings by Wilmar. On 5 December 2013, Wilmar announced its new “No Deforestation, No Peat, No Exploitation Policy” for suppliers (with a 31 December 2015 implementation date) via a press release on its company website. No surprise that there will be heaps of implementation queries on this big change to palm oil procurement (Khor Reports' interviewed Wilmar last week, and we are awaiting clearance on some quotes for our report on this). In the expanding market pressure (someone pointed out that one might want to differentiate "market pressure" from "market demand") for sustainability, short and simple supply-chains are the order of the day.

In this regard, the expansion of sustainability requirements point to two major new tiers of sustainability procurement programs over and above that of RSPO (and this excludes the various one-on-one B2B deals that won't be of a public nature). However, we don't think that RSPO will sit still either. The situation in palm sustainability will take time to reach a new steady-state, as announced and non-announced major programs have jolted the prior RSPO-led situation (in which ISCC was also steadily impinging).

Moreover, the big market share that the large "B2NGO2B" deals are representing are raising the antennae of the authorities. This is largely because this looks most likely now to impinge on and thus require NGO-led compliance certification by smallholders and small estates. Thus, we were not surprised to hear some buzz that smallholder associations are trying to figure out what this means for them and how they might want to step up to pressure for certification. In Malaysia, the smallholder centric organizations include Felda, Felcra, NASH and state-level bodies.

On this same topic, Khor Reports' spoke to sources in Indonesia last week. We were told that the authorities there are well prepared to discuss with international NGOs (currently clamouring and strongly  competing among themselves over smallholder certification) what they propose. We understand that they will need to pay attention to new Indonesia enactments made in 2013. Thus, the Indonesia authorities stand ready to intervene if necessary on supply-chain impacts from NGO and B2B programs, if they fail to sufficiently regard the required principles in their dealings with smallholders and farmers: "impartiality," economic benefit and others. Indonesia has two major smallholder associations, one for plasma and one for independent smallholders.

Khor Reports is intrigued to hear that some new large NGOs on smallholder certification reckon that smallholders need to take out a loan to participate in their programs. In general, the recent promotional material from NGO-led sustainability programs for smallholders lay key emphasis on the good agricultural practices that they offer (yield gains); and in at least one presentation they mention that cost of certification includes periodic payments of USD10,000 per group of smallholders (source: presentation at PIPOC on Thai smallholder sustainability certification).

The direct or indirect participation of government authorities, especially via farmer and smallholder regulations (at least for Indonesia) will add a new dimension within the B2NGO2B situation. This is in addition to direct efforts on national certification via ISPO (mandatory) for Indonesia and MSPO (voluntary) for Malaysia. We also heard that those representing Malaysia smallholders are also thinking of options and economic cost-benefits. Don't be surprised if the authorities contest the right of sustainability programs to claim credit for gains from good agricultural practices (programs for these have existed prior to the sustainability era and often available to smallholders and farmers at zero or near zero cost), and also step up their own programs. The availability of premium relative to cost will also likely be a question, especially for the less advantaged smallholders. What is an appropriate cost ratio to target? In the NGO world, one of the benchmarks is admin cost percentage per dollar donated; for example, Oxfam UK reports 9% spent on support costs per GBP1 received /donated;

Bottom-line: As the B2NGO2B sustainability programs expand in depth (more policies) and breadth (dominant market shares), the space to watch is emerging requirements and the economic cost-benefit of different programs for smallholders, farmers, small & mid-sized estates, and independent mills etc. In the assessment of different options, an impartial and hard-nosed analysis would be important. It is not uncommon in the sphere of agri-product eco-certification that some key early promises made on marketability / market take-up have disappointed those who gone to the effort and cost of certification. For the "other half" of the market, consideration of real market take-up, cost-effectiveness and some stability in policy evolution are of increased importance as many do not have the deep pockets of the "big boys."