RSPO in Thailand – Challenges

for Prosperity of Smallholders

Prakarn Virakul

Chairman of Thai RSPO National

Interpretation Working Group

September 9, 2011

AGENDA

� Oil Palm Situation in Thailand

� Challenges of Smallholder Production

� Benefits of Smallholder Production

� RSPO in Thailand

� Opportunities of Smallholder Certification

� Challenges of Smallholder Certification

� Tools for Promoting Sustainable Palm Oil

� Conclusions

� Thailand is the third biggest producer in the world

– Production of 1.3 million t CPO in 2010

� Importance of smallholders

– >70% of the area planted with palm oil is managed by

Oil Palm Situation in Thailand

– >70% of the area planted with palm oil is managed by

smallholders

– 98% of all growers and more than 120.000 smallholdings

� Domestic market

– Only 10% of yearly production exported (avg. last 10

years)

Oil Palm Situation in Thailand

� Rising importance of biodiesel

– 20% to 30% of CPO used for biodiesel (avg. last 5 years)

� Market for FFB is sellers market

– overcapacity in oil palm crushing mills– overcapacity in oil palm crushing mills

� Productivity Challenges

– FFB yield per hectare 16 – 17 t (avg. last 10 years)

– OER of 16% - 17% (avg. last 10 years)

Productivity Challenge

2009 Mid-term

potential

FFB yield (t/ha) 16 18.5

OER (%) 17 20

CPO Production (t) 1,387,604 1,887,788

Revenue (USD)* 963,333,565 1,310,582,587

Potential to increase CPO production by 36%---->

* Based on Ø CPO price 2009 of USD 694.-

Lost annual revenue of USD 347,250,000.----->

Challenges of Smallholder Production

� Limited knowledge

– Nutrient requirements, fertilizer application, soil fertility

� Limited professional farm management

– Record keeping, clear procedures, training and – Record keeping, clear procedures, training and improvement, managing labor and transportation

� Limited financing

– Insufficient fertilization, low quality seedlings

� Lack of incentives for quality

– Sellers market, no quality pricing and little incentive to harvest ripe FFB

Benefits of Smallholder Production

� Economic development and prosperity

– Net profit 3,121 THB/rai/year *

� Diverse agricultural landscape

– Farmers grow a variety of crops – rubber, palm, fruits ..– Farmers grow a variety of crops – rubber, palm, fruits ..

� No clearing of large areas of natural vegetation

– Remaining forest and natural vegetation legally protected

– Conversion from agricultural area or unused land

� Part of local community

– Community driven oil palm development

* Office of Agricultural Economics, June 2009

RSPO in Thailand

� Little Export of Palm oil…

� BUT: Export of Food and Chemical Products containing palm oil

� Multi-National companies operating in Thailand� Multi-National companies operating in Thailand

� Biodiesel Production of Multi-National Corporations

Increasing Demand for Certified Palm Oil in Thailand ---->

RSPO in Thailand

In harmony Social Economic viable

RSPO Framework

In harmony with nature

Social responsible

Economic viable

RSPO in Thailand

In harmony Social Increase Quality

Elements of Thai RSPO

In harmony with nature

Social responsible

Increase productivity

Quality assurance

1

DevelopingTHAI RSPO

Field test

Thai NIWGVoluntary Team

Public consultation onDraft Thai RSPO 3

Nation Prosperity

Prosperity of palm oil

industry and stakeholders

Increase volume of export Field test

Draft Thai RSPO

Submission to RSPO

Final Thai RSPO

Increasing productivity and produce quality

2

PracticingTHAI RSPO

of export

Conserving environmentSocial responsible to people, community and

farm workers

Market access of certified RSPO palm oil

Opportunities of Smallholder Certification

� Access to the market in the long term

– Markets are changing and farmers need to adapt

� Improved knowledge and farming practices

– Capacity building measures are part of the standard– Capacity building measures are part of the standard

� Better organization and management

– Smallholders need to form groups to join RSPO

– Sophisticated group management requirements

� Improved environmental and ecological conditions

� Avoid conflict and maintain harmony in the communities

Certification of Plantations With Mills

RSPO P&C

RSPO Certification SystemRSPO Supply Chain Certification

UTZ CERTIFIED

Certification by Including Scheme Smallholders

RSPO P&C

RSPO Certification SystemRSPO Supply Chain Certification

P&C for Scheme SHUTZ CERTIFIED

Certification of Independent Smallholders

P&C for Independent SH

Group Certification Standard

RSPO Certification System

RSPO Supply Chain Certifacation

RSPO P&C

UTZ CERTIFIED

Stand-alone mills

Thai Oil Palm Production Chain (Upstream)

Independent smallholders

Smallholder groups

Mini estates

Mills with

plantationsMiddle-men /

collection centers

Challenges of Smallholder Certification

� Spot market for FFB

– weak relationship between farmers and mills

� Fragmented production area� Fragmented production area

� High number of middlemen / collection centers

� Smallholders act independently – few formal groups

� Challenge for setting up group certification

– Group formation takes a long time

– RSPO Group Certification Requirements are very

demanding

Challenges for Smallholder Certification

� Lack of price incentives for certification

– Insufficient premium price

– No market access for certified FFB exists until now

� High cost for audit and compliance

– Management requirements

– Group formation

– Annual auditing cost and member fees

� No command from mills on farmers

� Lack of support for smallholders

Tools for promoting sustainable palm oil

� National Good Agricultural Practices (GAP) for Oil

Palm (MoAC/ACFS)

� FFB Quality Grading Standard (MoAC/ACFS)� FFB Quality Grading Standard (MoAC/ACFS)

� Good Manufacturing Practices (GMP) for Collection

Center (MoAC/ACFS)

� Thai RSPO for Mills and Plantations (To be

approved)

� Thai RSPO for Smallholders under Group

Certification (To be approved)

Tools for promoting sustainable palm oil

� RSPO Palm Oil Supply Chain Manual (MASCI)

� Operational Procedures for Thai RSPO (MASCI)

� Oil Palm Farm Management (OAE-GIZ)� Oil Palm Farm Management (OAE-GIZ)

� Fertilizer Management (OAE-GIZ)

� Occupational Health & Safety (OAE-GIZ)

� RSPO Practical Guidelines for Smallholders (OAE-

GIZ)

� More to come…

Conclusions

� Oil palm in Thailand support the local economy and well

being of the communities and the Thai economy as a

whole

� Huge potential to increase productivity and thereby the � Huge potential to increase productivity and thereby the

prosperity of smallholders

� Certification poses a big challenge to smallholders and

SMEs in the Thai palm oil industry

� RSPO needs further adjustments to incorporate

independent smallholders

Further support is needed – Need to pass the torch! ---->

Thank you for your attention!

Prakarn Virakul

Chairman of Thai RSPO National

Interpretation Working Group

E-mail address: virakulp@hotmail.com

Telephone: (66)85 115 8188