Cargill

LOCATION: CARGILL, INCORPORATED, USA with business operations in Indonesia

RSPO MEMBER TYPE: Processor & Trader

Cargill, through Cargill Tropical Palm (CTP) Holdings, owns and operates two oil palm plantations in Indonesia – one on the island of Sumatra (PT Hindoli) and another on the island of Borneo in West Kalimantan (PT Harapan Sawit Lestari).
Cargill’s PT Hindoli operations comprise of 10,000 hectares of oil palm plantation producing fresh fruit bunches which are processed at two company–owned mills into high quality crude palm oil and palm kernel. Partnering PT Hindoli are 8,800 smallholders across 17 village cooperatives; each supported by a team of Farmer Development (FD) assistants. The FD assistants, employed by Cargill, provide guidance in training, plantation development, as well as environmental and financial management.
Cargill is committed to working towards sustainable palm oil production and fully supports the Roundtable on Sustainable Palm Oil (RSPO) principles and its criteria. In August 2010, PT Hindoli’s 8,800 smallholders became the first to be certified under the RSPO’s Smallholder Principles & Criteria.

ISSUES

Palm oil and the sustainability challenge

The global demand for palm oil has been rising over the past decade. It is a low-cost food and biofuel oil with high yields relative to other vegetable fats. Palm oil has become a viable sustainable development tool for Indonesia, resulting in high levels of investment in the palm oil sector.

However, palm oil producers are frequently accused of illegally cutting down natural rainforests, developing on peatlands and contributing to their loss, as well as threatening many endangered animals. Plantations and farmers in the past have also been found practicing open-burning, which contributes to a haze that impacts many parts of Southeast Asia.

Challenges unique to PT Hindoli

The smallholders of Cargill’s PT Hindoli oil palm plantation are trans-migrants who moved from the populated region of Java to South Sumatra in the 1980’s. They survived on subsistence farming and had great trouble making ends meet whilst living in deep poverty.
The farmers were also cynical about palm companies that did not fulfil promises of development, agronomic support, transparent pricing nor prompt payment for the fruit.
Cargill needed to develop a partnership with the smallholders that would gain their trust then work together to maximize productivity and their resultant income.

SOLUTIONS

A win-win partnership

Helping the smallholders understand the importance and benefits of sustainable palm production was a long-term effort.
Right from the onset, Cargill’s approach towards the partnership with smallholders was one of honestly, transparency and a genuine commitment to help maximize smallholder income. In addition to delivering agricultural extension services and technical know-how on the maximization of oil palm yields, Cargill also trained the PT Hindoli smallholders on other important skills – such as home economics as well as business operations and communications related subjects in order to help them establish effective cooperatives.
Through the partnership with Cargill, the smallholders eventually recognized their part in supporting sustainable palm production. In addition, the establishment and maintenance of multiple lines of regular communication with the smallholders aided the establishment of transparency and trust. On their part, the smallholders were receptive and willing to collaborate. They were diligent in implementing their learning; and over time, increased yields to over 24 tons per hectare. This resulted in them quickly repaying their development loans from banks to being able to enjoy a good standard of living today.

A better life for smallholders
Poverty has been significantly alleviated amongst the smallholders. In addition to meeting their core needs, such as food, housing and healthcare for their families, the PT Hindoli smallholders are today earning and living well above the national and community average. Most are able to send their children on to higher education as well as purchase their own cars and trucks.
"Our partnership with Cargill has enabled us to successfully produce sustainable palm oil that helps improve our standard of life," said Bambang Gianto, a PT Hindoli smallholder. "More importantly, we have also learnt how to care for our land and maintain its productivity for the long term so that our children will continue to be provided for. We hope that more consumers and companies will support smallholder initiatives."

Setting their sights on the world
PT Hindoli marked a major milestone in its own sustainability journey – receiving RSPO certification for sustainable palm oil production practices on February 25, 2009.
As Cargill’s own PT Hindoli plantation became RSPO certified, the smallholders expressed a deep-set desire to also achieve international standards of excellence as measured by RSPO principles, criteria and indicators. They sought PT Hindoli’s help to understand the requirements, identify gaps, close the gaps and then work towards becoming RSPO certified.
It was a matter of the PT Hindoli smallholders’ confidence in their own capabilities, taking great pride in doing things right and realizing the need to prepare for the future

CONCLUSION

The PT Hindoli smallholders’ transition to RSPO was built on the agricultural success they had already achieved.
On August 4, 2010, PT Hindoli’s smallholders received RSPO certification, making them amongst the world’s first smallholder schemes to become certified under RSPO’s smallholder Principles and Criteria. And on June 27, 2011, smallholders at PT Hindoli received their first premiums for the certified palm oil they produced. The smallholders – in 17 cooperatives representing 17,594 hectares of planted palm oil – collectively received more than IDR 870 million (approximately US$100,000) in combined premiums.

"The premium received by our smallholders shows that sustainable farming practices can contribute to the livelihoods of rural farmers," said Anthony Yeow, president director of PT Hindoli. "In addition to an increase to their incomes, the farmers also reap other significant benefits such as increased crop productivity and enhanced operational efficiency. We deeply appreciate our partnership with the smallholders and will continue to advance sustainable practices with them."