Businessman Explains Why Palm Oil Farmers Have Weak Bargaining Power

The President Director of Agro Investama Group, Petrus Tjandra, has laid out a number of issues facing the national palm oil industry. “Smallholder farmers manage 6.8 million hectares of plantations but do not own any mills. This imbalance is unfair. It is time for farmers to have their own clean and environmentally friendly mills,” he said during a discussion at the Indonesian Palm Oil Research Week in Jakarta on Tuesday, 21 July 2026.

Beyond the lack of processing facilities for smallholders, Petrus assessed that the domestic industry faces a challenge of technological stagnation in mills. He noted that processing facilities have remained largely unchanged since the Dutch colonial era, 104 years ago.

Petrus also highlighted obstacles experienced by farmers. He said farmers tend to be reluctant to harvest ripe fresh fruit bunches because their value often drops. This is linked to mills generally requiring palm oil with lower free fatty acid content, whereas very ripe fresh fruit bunches are known to have a higher oil extraction rate.

To address this issue, Petrus proposed that fresh fruit bunches from smallholders be dedicated specifically to biodiesel production.

Citing data from Agro Investama, the total area of oil palm plantations in Indonesia currently reaches approximately 16.38 million hectares. Of this total, 53 percent, or 8.68 million hectares, is managed by private companies; 41 percent, or 6.72 million hectares, is managed by smallholder farmers; and the remainder, 0.98 million hectares, is managed by state-owned enterprises. Furthermore, the palm oil industry is recorded as absorbing 4.2 million direct workers and 12 million indirect workers. The export performance of palm oil products reached Rp 321.5 trillion in 2020, an increase compared to the 2019 export value of Rp 319.6 trillion.