Indonesian Palm Oil News (IPO News), Jakarta — The Indonesian Oil Palm Smallholders Association (SPKS) is encouraging independent oil palm smallholders to enter the downstream sector by developing mini crude palm oil (CPO) mills through cooperatives. The initiative is expected to increase value added while strengthening smallholders’ position in the national palm oil supply chain.
SPKS Chairman Sabarudin said smallholders have an opportunity to develop their own TBS processing businesses. However, investment requirements remain one of the main challenges.
A mini mill with a processing capacity of around 10 tonnes of fresh fruit bunches (FFB) per hour is estimated to require an investment of approximately Rp30–40 billion. Therefore, access to financing will be an important factor in enabling farmer cooperatives to develop these facilities.
Cooperatives as the Main Driver
Under the proposed model, the mills would be established and managed by smallholder cooperatives. This would allow farmers not only to act as FFB suppliers but also to participate more directly in the processing stage.
Minister of Cooperatives Ferry Juliantono said the government is ready to provide assistance and incubation programs for cooperatives that are prepared to develop CPO processing businesses. The government is also preparing financing schemes for cooperatives that meet the required criteria.
According to Ferry, cooperative owned mills could be developed from around 10 tonnes to 45 tonnes of FFB per hour. One example is KUD Sejahtera in Musi Banyuasin, South Sumatra, which already operates a CPO mill with a capacity of 45 tonnes of FFB per hour.
Increasing Value Added
The development of cooperative-based mini mills could provide independent smallholders with an opportunity to capture greater value from their palm oil production. Currently, many smallholders remain primarily positioned as FFB suppliers to processing mills.
According to data from Indonesian Palm Oil News (IPO NEWS), strengthening cooperatives is an important factor in improving smallholders’ bargaining position, particularly in addressing productivity, marketing, financing and access to processing facilities.
However, the success of mini CPO mills will depend on adequate FFB supply, professional management, appropriate processing technology and reliable markets for the CPO produced.
A New Opportunity for Smallholder Palm Oil
The SPKS initiative highlights an opportunity for smallholders to play a greater role in the processing industry. With strong cooperative institutions and appropriate financing, mini CPO mills could become one model for developing smallholder businesses in Indonesia’s major palm oil-producing regions.
Government support through assistance, incubation programs and financing preparation will be important in turning the concept into viable processing businesses owned and managed by smallholders.
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