- By the end of this year, exporters of products derived from palm oil and six other agricultural commodities to Europe will be required to comply with the newly enacted EU Regulation on Deforestation Free Products, or EUDR.
- The law requires exporters to prove the commodities were not produced on recently deforested land, and that their supply chains are free of human rights abuses and environmental violations.
- Experts say compliance will likely be a struggle for small farmers, who sell their crops through chains of intermediaries, and who often lack clear land titles even on long-settled land.
- During reporting in Indonesia’s North Aceh province, oil palm smallholders told Mongabay they weren’t even aware of the EUDR, let alone prepared to comply with it.
LUBOK PUSAKA, Indonesia — Jaharuddin, 50, sits deep in thought in his living room in Lubok Pusaka village, in Indonesia’s Aceh province, smoking a cigarette and staring out the door. On his porch, piles of corn he harvested two before lie scattered, waiting to be sold.
For decades, corn has been Jaharuddin’s main source of income. But lately he’s struggled to find a buyer. After his previous harvest, just a month ago, he failed to sell any corn locally. He finally managed to sell some in Langsa, a city about three and a half hours by car from his village, for just 1,200 rupiah (8 U.S. cents) per ear. “Sometimes, I was so desperate to sell it and told the buyers to give whatever price they want.”
“That’s why I’m putting my hope on oil palm now,” he said. Like many farmers in the province’s North Aceh district, Jaharuddin sees oil palm as the most promising commodity. Compared to other crops, he said, it has the most stable price, is easy to grow, and is constantly in demand. “It’s the safest zone for us,” says Jaharuddin, who from 2013-2019 served as chief of his village.
For decades, he made a living growing corn and cacao on his 8 hectares (20 acres) of land. But since 2018, when his cacao trees failed to bear fruit and his corn could hardly sell, he started to cultivate oil palms. Nearly half of them have started fruiting, earning enough to reliably cover his daily needs even as his corn and cacao business plummets. “Even though it’s a small amount of money, at least it will always come to me.”
Like many oil palm farmers in Indonesia, Jaharuddin says he’s unaware that in less than five months, his farm could be affected by a law ratified on the other side of the world.
What he knows is that middlemen will always come to pick up his oil palm harvests. But how much he will earn will largely depend on something outside his control: the impact of a new European law on the demand for palm oil from smallholders.
Plantations vs. protected areas
In North Aceh, economic needs meet one of nature’s last frontiers. Trucks loaded with oil palm fruit down the dusty roads, while on the horizon oil palm trees extend like a canopy of stars toward the misty hills of the Leuser Ecosystem, the largest remaining tract of primary forest in Sumatra. Since the 1990s, oil palm expansion has eaten away at this forest, famed as the last place on Earth where critically endangered Sumatran tigers, elephants, rhinos and orangutans coexist in the wild. The commodity has, in tandem, become an increasingly crucial source of income for the people who live here, both rich and poor.
In 2022, the European Union lawmakers ratified a law intended to minimize this kind of agriculture-driven deforestation: the EU Regulation on Deforestation Free Products, or EUDR. As of the end of this year, exporters of products derived from rubber, coffee, cacao, cattle, wood, soy and oil palm need to provide geolocation tags proving crops did not come from areas that have been deforested since 2020. They also need to do their due diligence to ensure their supply chains are free from human rights violations and environmental problems.
The law creates a significant financial incentive for producers to curb deforestation and clean up their supply chains. However, experts say its implementation could harm smallholder farmers who may not have the means to generate the required documentation, who sell their crops through middlemen, and who in many cases lack clear title to their land.
Some, like Jaharuddin, also live in areas where deforestation is ongoing, a situation that might increase distrust. For such farmers, the EUDR could reduce the price their crops are able to command, or exclude them completely from the supply chain to Europe.
Jaharuddin says he hasn’t heard about the EUDR before: “If that really happens, I hope the government helps us to get prepared,” he says.
What makes a ‘smallholder’
In the case of oil palm, smallholders like Jaharuddin are often “blamed as the perpetrators of deforestation,” Mansuetus Darto, secretary-general of the SPKS, a union of smallholder oil palm farmers across Indonesia, wrote in a 2022 letter to the EU to ask the parliament to include input from smallholders in the formulation of the regulation.
In Indonesia, this perception stems in part from the loose definition of “smallholders” introduced by the Ministry of Agriculture. It defines smallholders as farmers who own less than 25 hectares (62 acres) of land; combined, they manage 6.72 million hectares (16.6 million acres) of oil palm plantations in Indonesia, or more than half of the total palm oil area in the country. Consulting firm Daemeter found that the while the typical smallholder household managed just 2 hectares (5 acres) of land, a class of elite “emerging landlords” were able to buy multiple patches of land and register them under multiple names to retain the “smallholder” designation. The SPKS wants the EUDR to clearly define the term “smallholders” as those farmers with a plot no larger than 10 hectares (25 acres), living in rural areas, and directly managing their plantations, Darto says.
Since 2021, primary forest in Langkahan subdistrict, where Jaharuddin’s village lies, and the neighboring subdistrict of Cot Girek, have been cleared for a new oil palm plantations. Farmers in both areas say the plantations are owned by “the ladies and gentlemen,” referring to the local wealthy elite. In 2024, some parts of the once green hills have been transformed into a swaths of brown land with the spotty green dots of baby oil palm trees.
At least 574 hectares (1,418 acres) of land in Langkahan were deforested in 2023, according to Lukmanul Hakim, a specialist in remote sensing at HAkA, an environmental NGO based in Banda Aceh, the provincial capital. It’s not clear yet who is behind the deforestation, but Lilis Indriyanti, the head of North Aceh plantation agency, based in the nearby city of Lhokseumawe, says the clearance in Cot Girek was done for smallholders’ oil palm plantations.
According to Husna, an environmental activist at Sahara, a Lhokseumawe-based NGO that advocates for women’s rights and natural resource protection, the land clearance in Langkahan is linked to plasma plantations — those managed by small farmers contracted to supply oil palm to private companies.
“There is a moratorium for companies’ oil palm expansion in North Aceh, so they opened up the land in the name of smallholders,” Husna says.
A tangle of bureaucracy between the national, provincial and district governments also exacerbates the situation. Syamsul, an environmental monitor at the North Aceh environmental agency, says he can neither answer questions about nor intervene in cases of deforestation in the district because “it is the authority of the provincial government in Banda Aceh,” a six-and-a-half-hour drive away.
“We have reported the deforestation activities in Langkahan but we can only wait for their response,” he says. Syamsul adds he doesn’t know where the rules delegating responsibility come from, but says they likely originated from the Ministry of Environment and Forestry in Jakarta.
But one thing is certain in the case of large-scale deforestation like that happening in North Aceh: “It is not done by smallholder farmers,” says Saifullah, the head of the North Aceh environmental agency.
As for Jaharuddin, he says he does not know anything about the deforestation happening near his village. “I have never been involved in any discussion,” he says. But on satellite imagery, his long-established farm land can’t easily be distinguished from a recently cleared area.
Responsibility for deforestation
The exact contribution of smallholders to Indonesia’s deforestation is subject to debate. A 2013 study by researchers in Switzerland and Indonesia found that smallholder farmers (defined according to the Ministry of Agriculture’s 25-hectare threshold) were responsible for just 10.7% of oil-palm-linked deforestation in Sumatra from 2000-2010. But the misconception of smallholder farmers as the primary actors of deforestation still persists in the oil palm industry. A study conducted by an international team of researchers highlighted “the absence of trust” among companies toward oil palm smallholders, excluding them from the supply chain of zero-deforestation certifications such as the Indonesian Sustainable Palm Oil (ISPO) standard, the Roundtable on Sustainable Palm Oil (RSPO) and, most recently, the EUDR.
Darto at the SPKS says this vilification needs to end. Independent smallholder farmers “are able to protect their forests and carry out conservation with their method and knowledge,” he says. He adds that small farmers don’t have the capacity to carry out large-scale deforestation, and that many of their plantations grow among wild shrubs and trees, providing better ecosystem services than companies’ monocultured plantations. This transition is visible along the route from Cot Girek to Lubok Pusaka village, as uniform rows of oil palms give way to forest-like oil palm plantations owned by farmers. Similar patterns can be observed in rural areas across Indonesia.
“Unfortunately, the private sector rarely cooperates with independent farmers,” Darto says. This distrust creates a power imbalance in the palm oil industry, where smallholder farmers’ crops are undervalued even if they don’t come from deforested area. “They have no other choice but to sell it to middlemen at low prices.”
Unlike large plantation owners, small farmers who rely on intermediaries to transport their crops have virtually no bargaining power. As of August 2024, the official mill-door price set by the Aceh provincial plantation agency was 2,400 rupiah per kilogram (15 cents/kg, or 7 cents/pound). But producers often get just a fraction of this. According to local informants, farmers in Lubok Pusaka sell their oil palm fruit for the equivalent of 13 cents/kg (6 cents/lb). In the neighboring village of Sarah Raja, separated by the 100-meter-wide (330-foot) Jambo Aye River, farmers can only sell their crops for the equivalent of 9 cents/kg (4 cents/lb). In more remote villages, like Batang Sarangan in Langkat district, farmers reportedly sell their crops to middlemen for the equivalent of 7.7 cents /kg (3.5 cents/lb).
If the EUDR is implemented without any support for smallholder farmers, “many of us would be disadvantaged,” Jaharuddin says.
“There must be a solution from the government before its implementation,” Jaharuddin says of the EUDR. He emphasizes the need for the government to provide an alternative crop to support farmers who rely mostly on oil palm. “Look at my corn: no one would buy it. My cacao trees? They can’t bear any fruit because of the pest.”
Government support, he adds, must be tailored to farmers’ needs. He says he hasn’t received any serious help from the government during his life as a farmer. Whatever aid he’s gotten in the past wasn’t well thought out, he says, recalling donations of low-quality seeds or poorly timed deliveries of fertilizer.
Smallholder farmers don’t need “ceremonial aid,” Jaharuddin says; they need educational support and evidence-based policy to protect the environment and sustain livelihoods. For example, building a bridge from his village, Lubok Pusaka, to neighboring Sarah Raja would allow Sarah Raja farmers to get better prices for their oil palm and bring other benefits for residents of both villages. Another example is training for farmers on how to conserve riverbanks, which are now threatened by oil palm expansion, Jaharuddin says.
“Farmers are smart and critical,” says Husna from Sahara, as she joins Jaharuddin for a snack of steamed corn at his home. She says farmers have deep knowledge about the areas they live in but are rarely involved in devising the policies that affect them. “We need to invite them for a dialogue, hearing their views and opinion,” she says. But so far, the approach has always been top-down, leaving famers to accept their fate.
Jaharuddin shucks his ear of corn, still hot and steaming. “I really hope the government could hear us,” he says. “They must help us get prepared soon. We still have time.”
EU deforestation-free rule ‘highly challenging’ for SE Asia smallholders, experts say
Citations:
Lee, J. S., Abood, S., Ghazoul, J., Barus, B., Obidzinski, K., & Koh, L. P. (2013). Environmental impacts of large‐scale oil palm enterprises exceed that of smallholdings in Indonesia. Conservation Letters, 7(1), 25-33. doi:10.1111/conl.12039
Eggen, M., Heilmayr, R., Anderson, P., Armson, R., Austin, K., Azmi, R., … Carlson, K. M. (2024). Smallholder participation in zero-deforestation supply chain initiatives in the Indonesian palm oil sector: Challenges, opportunities, and limitations. Elementa: Science of the Anthropocene, 12(1), 00099. doi:10.1525/elementa.2023.00099
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