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 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

1DevelopingTHAI 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