Palm oil Fruits Collector Turns Out Into Cooperative Manager

Further deep from the district’s capital of Musi Banyuasin of South Sumatra province,  Sekayu town, I have noticed some of the villages spread out along the connecting road from South Sumatra to Jambi province. There are some of oil mills in between vast land occupied with mix patches of palm oil , shrubs, rubber or simply houses and small stores. One of the villages that I have identified earlier is Simpang Tungkal, in Tungkal Jaya Sub Disrict, Musi Banyuasin, where, I will engage with their oil edible crops production practices for couple years ahead.

As typical current Indonesia – except Java Island --   rimland, palm oil production becomes one of the main sources of income for the communities. How can it be? It simply the country locates along the equator line where abundant of sun light and rain dripping water is the nature given.  This exactly the Elais guinensis Jacq  (palm oil ) required to live, breed and produce.

There were 608 palm oil mills with its production capacities around 34,280 tons palm oil fruit per hour, according to Director General perennial crops, ministry of agriculture in 2014. Some 58 mills of them were located in South Sumatra. Thus, there is a market can be penetrated for sure for palm oil farmers in the rural areas, this more than enough for many of people to seek for fortune in surviving their life.

Simpang Tungkal’s folks is one of the fortune seekers from palm oil business, although there were not any parties helping them to cultivate the crops. It had not stopped them to speculate and risking their limited investment just to grow palm oil trees. Since, palm oil is considered as a sophisticated crops that requires a rigorous agronomic treatment.

Limited access to information that lead them in following the populist trend whatever makes money. There also a very limited opportunities available in rural areas except to utilize the natural resources available. It is a survival mode on, moreover, some of fruit collector so called “approaching buyer” regularly visits and buys their palm oil  fruits just right from their plots.

Easy market connection stimulates the blooming of palm oil  cultivation, although, this does not mean that the farmers will earn fair price. The collector act as middle man in between farmer producers palm oil fruits and mill procuring the palm oil. Some transaction layers were being created before the fruit reach out the oil mills. It has made, the farmers will not be able to receive the oil mills true price - where the mill mostly will pay base on fruit quality – the collector should take up some the transaction margin from mill’s price and the farmers are sitting on the bottom of the pyramid of the chains. They only receiving crumb after the middle man take up theirs deserve right of margin.

This typical palm oil farmers commonly finds in Simpang Tungkal Village. I define them as the beginner palm oil farmer, independent (there were not any support to cultivate crops received), individual (there is not overshadow farmer organization). With lack of access to information and direct access to the upstream market has made this farmer category fall into vulnerable condition. They slumped down to undue market channel and will rely on collector services to transport their products.

Moreover, the palm oil fruits have to reach and processed in the mill within 24 hours after harvesting, otherwise its fatty acid will be increased and reducing the oil content quality. Such critical short period will put transportation as the main consideration, also economically with long distance to the mill, the fruits cargo vehicle should meet the balance of cost benefit. Thus, there is not another way, for the independent beginner farmers; the collector is the only market channel to make them survive in practicing palm oil business.

I have recognized this issue, and was talking to one of prominent collector,”Ruben” he acts as the patron of his fruits suppliers. “There are about 40 farmers supplies the fruits to me” says Ruben, he provides loans whenever his suppliers need it. It can be as the down payment of the future fruits. Also, he has been distributing some agro-input needed that mostly fertilizers to his suppliers.

His suppliers consider him as their patron, which requires loyalty from them. His services to provide accesses to loans, agro-input and marketing channel successfully knitting both emotional and economic binding. Thus, Ruben’s farmers supplier has an emotion and feel responsible to maintain the relationship by keep their loyalty in the form of selling their fruit trough his market channel. The patron-client relationship has been well created to benefit both sides.

Only access to information and technology, that Ruben could not provide. As one of the beginner smallholder characteristics, this lack of access also hampers the quality and quantity production increasement. It was leads to wide yield gaps, which determined by limiting (soil, climate, topography) and reducing (seeds, spacing, maintenance) factors.

There was not sufficient information on best management practices on palm oil to independent farmers In Simpang Tungkal village.  It has impacted to huge imposes to the reducing factors and lead to low and poor fruits production. Farmers suffered of great deal of losses, and they could not lift up from subsistence level.

This has became the basis for Our organization to start the intervention to correct the yield gap. We had 5 training modules on best management practices palm oil; grading harvesting transportation, plantation maintenance, planting preparation, fertilization and pest and diseases. The training delivery was utilizing training of trainer approach. We suppose to create trainers and having them deployed to deliver some training in their respective villages.   

We were elaborating the approach to build farmers capacities in adopting the best management practices. There are 3 steps of intervention; awareness – where training is the tool –, diffusion (coaching and mentoring approaches) and finally adoption. Those process had been carefully carried out, although there some factors were influencing in the diffusion stage.

The farmer should revive some accesses to agro-input, credit or loans, market as the result of diffusion process. Although a collector such as Ruben will take some benefit from the margin taken from each transaction, but he preferred put his suppliers interest sake as the priority. He was thinking on setting up a cooperative where his suppliers status will be lifted up as the cooperative owner rather then become Ruben’s client.

Cooperative will accommodate the development of some businesses unit to provide services to the members. It will help the farmers to deal with their impasse on having accesses to support their palm oil business. The farmers will also enjoy the net margin from all transaction made every year, it will be proportionally distributed to them during the annual member meeting.

Ruben requested the cooperative training, then we followed this up to embrace his interest with delivering series of training and mentoring. It is the only way to improve the independent farmers economic and future. Cooperative as local financial institution and improving best management practice of palm oil production. (Dani Rahadian P. Hidayat)