Rubber Boom Fueling Land Grabs in SE Asia: Report

Jakarta Globe, Agence France-Presse, May 13, 2013

A picture made available on May 10, 2013 shows an Indonesian farmer
 planting rubber seeds on a cleared forest near Teluk Meranti, Riau province,
Indonesia. (EPA Photo/Bagus Indahono)

Vietnamese rubber firms bankrolled by an arm of the World Bank and Germany’s Deutsche Bank are driving a land-grabbing crisis in Southeast Asia, activists said Monday.

Indigenous ethnic minorities are bearing the brunt of the seizures, which have affected tens of thousands of villagers and led to the clearance of swathes of protected forests, according to campaign group Global Witness.

Vietnam, the world’s third-largest rubber producer, is keen to tap surging demand for the commodity in particular from China, which is hungry for car tyres and other rubber goods as its economy booms.

Global Witness accused two firm, Hoang Anh Gia Lai (HAGL) and Vietnam Rubber Group (VRG), of driving forced evictions via subsidiaries linked to government cronies in impoverished — and notoriously corrupt — Cambodia and Laos.

According to the report, Deutsche Bank has multi-million dollar holdings in both companies, while the International Finance Corp. (IFC) — the World Bank’s private lending arm — invests in HAGL through financial intermediaries.

More than 1.2 million hectares (2.96 million acres) of land in Cambodia alone have been leased for rubber plantations, Global Witness said, with some 400,000 people affected by land grabs for rubber and other uses since 2003.

“The governments in Cambodia and Laos are allocating large areas of land and ignoring laws designed to protect human rights and the environment,” according to the report.

“Often the first people know about either company being given their land is when the bulldozers arrive,” it said.

Global Witness urged Cambodia and Laos to suspend all dealings with the two firms and their subsidiaries.

It called on Deutsche Bank and the IFC to withdraw their multi-million dollar funding if the two companies fail to take steps to comply with human rights and environmental standards within the next six months.

In response, Deutsche Bank said an “intensive due diligence process” was conducted before the shares were bought on behalf of its investors.

The IFC declined to comment ahead of the report’s release, saying Global Witness had not shared its full findings in advance.

The two Vietnamese companies denied any illegal activities.

“We contribute to the development of the local economy by paying necessary taxes… creating jobs for tens of thousands of local residents, and contributing to local communities,” HAGL said in a statement.

Agence France-Presse

Related Article:

UN Agency Adopts Global Guidelines Against 'Land Grabbing’

Govt offers 3 million hectares for plantations

The Jakarta Post, Jakarta | Thu, 04/14/2011

The government is offering three millions hectares of land for plantations after revoking 251 licenses from companies deemed to be failing in managing the land.

“Especially for sugar cane, related to our sugar self-sufficiency program,” Forestry Minister Zulkifli Hasan said in Jakarta on Thursday as quoted by tempointeraktif.com.

He added that rubber trees and oil palms were the next priorities.

The ministry's director general for planology, Bambang Supijanto, said the land was part of forested areas ready for conversion into plantations.

“Most of them are situated in Central Kalimantan,” Bambang said, adding that the rest were spread across other in Indonesia except Java Island.

Plantation industry aims big despite economic crisis

The Jakarta Post, Bogor, West Java | Mon, 03/16/2009 11:36 AM

Betting on higher prices for top commodities and the emergence of new markets, the country’s plantation industry is seeking to buck the trend and expects export values this year to increase by 16 percent.

“We believe we can raise our income from exports to US$21.68 billion from last year’s $18.85 billion. This is based on the fact there are new markets available and we believe main commodities prices will improve,” Herdrajat, the Agriculture Ministry’s plantation protection director, said Saturday.

He cited China, the Middle East and India as some of the new export markets.

“Last year’s achievement, which surpassed the original target of $11.55 billion income set in early 2008, was also a big factor in our confidence to increase this year’s exports” he added.

Indonesia is home to plantations of some of the world’s key commodities, including crude palm oil (CPO), rubber and cocoa.

But since the second half of 2008, as the global economic turmoil kicked in, commodities-rich countries like Indonesia have been hit hard by a drop in demand and prices.

However, Herdrajat expected demand would pick up from the new markets, while commodity prices would also recover, providing an eventual boost for the industry.

Still, Herdrajat said it was vital for the government to immediately disburse the stimulus package, in particular the parts designated for the development of agriculture and plantation infrastructure.

“The industry needs the stimulus to improve irrigation and repair broken roads to enhance effectiveness and efficiency,” he said.|

Data from the ministry shows the government also plans to revitalize up to 290,000 hectares of CPO, cacao and rubber plantations in 27 provinces this year.

“[For the project] the government plans to give banking credit subsidies to support farmers in revitalizing the plantations,” Herdrajat said.

“We hope to encourage farmers to revitalize the plantations using the subsidy. We will also fund them for fertilizers in the first year, but we hope they can be self-sufficient in the following years.”

During revitalization, the plantations will not produce commodities for a few months while they are cleaned out.

“For that reason, the government will also give training programs on developing seasonal commodities for farmers to ensure their income during revitalization.”

Plantation revitalization and intensification, which has often caused a rift with other industries, is one of the main challenges the industry still has to face in the future.

“Often the local regent publishes two authorizations on land development for two different stakeholders. For instance, one is for the mining industry and the other for CPO plantations; this situation often causes conflicts,” he said.

“And most of the time, people regard mining as more important than plantations.”

The CPO industry, which absorbs around 3.7 million laborers, contributed around $10.7 billion to the country’s economy in 2008.

“With these training programs, we hope farmers will have more initiative to take action, not just wait for government officials to do the job for them,” Herdrajat said.

“We will also give them technical training on plantation development, sanitation and fertilizing techniques.” (hdt)

Plantation exports (in US$ billion)

Year Target Realization

2007 11.25 14.64

2008 11.55 18.85

2009 21.68 --

Source: Agriculture Ministry

Indonesia, Malaysia agree to cut supply of commodities

The Jakarta Post | Thu, 02/26/2009 4:03 PM

Indonesia and Malaysia have agreed to work together in strengthening the prices of global commodities, particularly crude palm oil and rubber, through production cut backs.

Malaysia and Indonesia jointly account for 85 percent of global palm oil production and 40 percent of natural rubber production.

State news agency Antara reported Thursday that the two countries had issued a joint statement saying that they were preparing measures to “ensure stable pirces in particular for palm oil”.

"These measures include managing palm oil stocks and reducing supply through replanting programs," the statement said.

Plantation Industries and Commodities Minister Peter Chin Fah Kui and Minister of Agriculture of the Republic of Indonesia Dr. Ir. Anton Apriyanto met in Kuala Lumpur on Wednesday to discuss bilateral cooperation on the matter.

The Indonesian Minister is in the city to attend the Developing-Eight (D-8) Ministers Meeting.

For palm oil, the ministers have agreed to accelerate replanting of oil palm trees which are above 25-years old, implementation of biofuel program, increasing domestic demand for crude palm oil and jointly engage major importing countries of palm based methyl ester in addressing non-tariff barriers for the exports of biofuel.

Malaysia has implemented the blending of five percent palm based methyl ester with fossil diesel.

Indonesia implemented a minimum of one percent blending program in the public transportation sector and a minimum of 2.5 percent blending in the industry and commercial sector. These minimum percentages will be increased to 2.5 percent in the public transportation sector and five percent in the industrial and commercial sectors.

Both ministers also want to exchange production and stock level data on a regular basis to facilitate stock management and promote palm oil through engaging the related legislators of importing countries.

As for rubber, both countries will accelerate replanting of rubber trees aimed at managing the supply of natural rubber.

"Malaysia has revised upwards the original target of replanting rubber areas to 50,000 hectares in 2009 from 32,000 hectares. Indonesia is replanting 55,000 hectares with rubber in 2009," the statement was quoted by Bernama as saying.

Meanwhile, both countries also agreed to control the expansion of new planted area for rubber, encouraging the reduction of tapping frequency.

The ministers hope that these measures will reduce price volatility and contribute towards stability of both palm oil and natural rubber prices in the longer term.

State Set To Recover Idle Land

The Jakarta Globe, Arti Ekawati, February 25, 2009

The Agriculture Ministry plans to survey the management of lands leased by the state to large-scale plantation companies across the country to identify those that are not being worked on or have been abandoned, Achmad Mangga Barani, the Agriculture Ministry’s director general of plantations, said on Tuesday in Jakarta.

Owners of abandoned plantations, he said, would be warned and their licenses revoked after 18 months if they failed to cultivate the leased lands.

He said the survey would categorize plantations into five categories: excellent, good, adequate, poor and abandoned.

In determining a plantation’s category, the ministry would take various factors into account, such as soil management, financial management, economic performance and the management of social relations in the vicinity of the plantation.

Achmad said that the survey was aimed at encouraging big plantation firms to manage their lands better and to minimize abandonment.

The survey, he said, would start in the middle of the year and would focus on three major types of plantation: cacao, oil palm and rubber.

The owners of abandoned plantations would then be issued with warnings. “We will give them 18 months to improve their management after the warnings,” Achmad said. “If there is no improvement, we will withdraw their plantation licenses and confiscate the land.”

The survey is also being done to determine how much of plantation land has been abandoned.

“We must recalculate and reclassify the land to identify the exact area,” he said.

He said that instead of lying abandoned, the land could be used for other purposes, such as the growing of food crops.

Winarno Tohir, chairman of the Progressive Farmers’ and Fishermen’s Association, or KTNA, welcomed the government’s plan to seize abandoned plantations.

“It’s a good idea,” he said. “The lands could be used for the growing of food crops and for increasing both farmers’ incomes and national food production.”

According to Winarno, there are currently some 56 million hectares of abandoned plantations across the country, with about 32 million hectares consisting of abandoned rubber and oil palm plantations.

“It would be very disturbing if we weren’t able to use this abandoned plantation land for something useful, considering the limited area of land for growing food crops,” he said.

At present, Indonesia only has about 7 million hectares of irrigated paddy fields.

“This area could be expanded by taking over the abandoned plantations. So, we would end up being able to produce more rice,” Winarno said.

Sutarto Alimoeso, the Agriculture Ministry’s director general of food crops, said that the National Land Agency, or BPN, had identified 9.1 million hectares of idle land that could be given over to the growing of food.

“The land could be parcelled out to small farmers over the next three to five years,” he said.

However, he warned that not all the land would be suitable for rice cultivation.

Rubber Employee

Antara, 26 December 2008 

Some worker is carrying rubber sap in Pasang Panti plantation in Jember, East Java, Friday (Dec.26). They are gets salary of 3,750 rupiah for collect a kilogram rubber sap from trees in this plantation. (ANTARA photo/Seno S)

Rubber producers remain upbeat despite global crisis

Mustaqim Adamrah, The Jakarta Post, Jakarta | Wed, 12/03/2008 11:04 AM  

Rubber exports may hit US$6 billion by the end of this year, an association says, underlining a positive outlook for the industry despite a one-month fall in exports in October reflecting the global economic downturn. 

Executive director of the Indonesian Rubber Association (Gapkindo) Suharto Honggokusumo said Tuesday this year's average rubber price, which was still higher than that in the previous year, would help keep the volume of rubber exports above the record 2007 figures. 

"The rubber price is $2.66 per kilogram on average as of Nov. 27 this year, still above the 2007 average price of $2.15 a kilogram," he said. 

"Therefore, we believe our exports will still be able to reach $6 billion this year although the price has fallen from its peak on June 27 and demand has significantly dropped due to the global financial crisis," he added. 

With the $2.15 per kilogram average price in 2007 rubber exports still reached $4.8 billion. 

Following the trend in global crude oil prices, rubber peaked at $3.3 per kilogram on June 27 before slumping to its lowest point at $1.53 per kilogram on Sept. 16, and further declining to $1.2 per kilogram on Tuesday. 

On Monday, the Central Statistics Agency (BPS) showed that exports of rubber and rubber-made products stood at $597.3 million in October, down 22.4 percent from September's $769.8 million due to the global slowdown. 

Rubber is mostly used in the tire industry. 

The Indonesian tire industry, estimated to consume 169,000 tons of natural rubber and 126,000 tons of synthetic rubber by the end of this year, is forecasting to post $1.1 billion in exports by the end of this year, according to Indonesian Tire Producers Association (APBI) chairman Azis Pane. 

In a bid to help bolster the rubber price, Indonesia, Malaysia and Thailand -- which together produce 70 percent of global natural rubber production -- jointly agreed last month to cut rubber output by 210,000 tons next year by replanting trees. 

Indonesia is the world's second biggest rubber producer after Thailand, with rubber production amounting to 2.7 million tons last year. 

Suharto also said he was convinced that by volume, rubber exports would still grow this year by 3 percent on the 2.4 million tons shipped last year.

Special Report: Slowdown jolts RI's commodity-heavy economy

The Jakarta Post, Fri, 11/14/2008 11:04 AM

The Indonesian economy has been generating lucrative profits from the soaring prices of agricultural commodities during the last two years. Following increasing dependency on this business, the recent slump in commodity prices has severely impacted on the economy. The Jakarta Post business section features a special report on commodity sector problems. Here are the stories:

For seasonal farmer Alex Sinaga of Tanjungjabung Barat regency, Jambi, the world is tumbling down around his ears after knowing that his October revenue has dropped by a factor of 10 times following the plummeting global prices for palm oil.

Having previously enjoyed a monthly income of Rp 5 million (US$434 million), six times higher than a university-graduate civil servant in his province, Alex now has to end his shopping spree earlier than expected.

In Jambi, fresh oil palm fruit bunches are now sold at Rp 200 per kilogram, having dropped like a stone from Rp 1,500 per kilogram a few months ago.

Alex is just one example of how Indonesians living in rural areas have already taken a severe knock from the global economic crisis earlier than the government has estimated, since the government initially concluded that the full negative impact would not be felt until the first quarter of next year.

As one of the world's top producers of palm oil, rubber, cocoa and coffee, the Indonesian economy, Southeast Asia's biggest, was making good profits from high agricultural commodity prices earlier this year.

In the first nine months of the year, exports of crude palm oil (CPO), for example, reached $12.12 billion, or 14.5 percent of the country's non-oil and gas exports, according to the Central Statistics Agency.

"Commodity prices soared since 2007 up until early 2008. Clearly, Indonesia benefited significantly from commodity trade, as proven by exports and industry expansion," said World Bank chief economist and senior vice president Justin Yifu Lin recently.

The magnitude of agricultural commodity business is even more significant when remembering that it is estimated to have employed 99.9 million workers, both seasonal and permanent, according to Siswono Yudhohusodo, chairman of the Indonesian Farmers Union (HKTI) advisory board.

Producing an estimated 18.5 million tons of palm oil this year from more than six million hectares of plantation, Indonesia is the world's largest producer of the commodity.

However, with slumping demand from the world's largest importers of palm oil -- China, India and Europe -- local palm oil farmers are now likely to seek more loans from the pawnshop to help ends meet.

The slowing demand has sent the Malaysian CPO benchmark price down to 1,505 ringgit ($419.89) per ton on Wednesday from its peak of 4,486 per ton on March 4, as reported by Bloomberg.

Indonesian Association of Oil Palm Producers (Gapki) chairman Akmaluddin Hasibuan said the plummeting prices had been exacerbated recently by moves from several countries to intentionally default on purchase contracts due to slow demand.

Among the importers carrying out this practice are 30 Indian companies.

"The Indian companies are being unethical by defaulting on their import contracts that have consequently affected our exporters as well as our farmers," Akmaluddin told The Jakarta Post recently.

"We have filed complaints with the Indian government and Indian oil palm-related trade associations but we haven't received any response yet," he said.

There are also contract defaulters in the European Union countries and China.

Indonesia and Malaysia together produce around 85 percent of the world's CPO and account for 88 percent of global CPO exports.

Last year, Indonesia and Malaysia produced about 17 million tons and 15.7 million tons of CPO respectively.

Indonesia recorded exports of $5.5 billion in 2007, with more than 75 percent of its palm oil output being exported as CPO, while by contrast Malaysia posted a higher export revenue of $10.4 billion, with 80 percent of its output exported as value-added products.

In a bid to help bolster the CPO price, Indonesia and Malaysia agreed last week to cut palm oil output by 75,000 tons and around 500,000 to 600,000 tons respectively next year, according to the Agriculture Ministry's director general for plantations, Achmad Manggabarani.

Indonesia also plans to replant 50,000 hectares of oil palm trees while Malaysia plans to replant 250,000 hectares next year.

Achmad hoped the prices of palm oil could then reach its commercially viable level of around $700 to $800 per metric ton.

Meanwhile, Indonesian Vegetable Oil Producers Association (Gimni) executive director Sahat Sinaga said the export drop had actually been developing since 2006 when European countries began to use soybean and sunflower oil as alternatives to CPO for feedstock for biofuel.

Furthermore, he said, the financial crisis and economic downturn had led some foreign buyers to stop ordering CPO due to the drying up of liquidity in their banks, which had previously helped to finance CPO purchases.

"Capacity utilization of CPO production is expected to decline to 48 percent by the end of this year, from 52 percent forecast earlier," said Sahat.

Rubber, coffee and cacao are all experiencing similar problems to those experienced by the CPO sector.

Indonesian Rubber Association (Gapkindo) executive director Suharto Honggokusumo said the price of natural rubber reached its peak at $3.3 per kilogram on June 27 before slumping to its lowest point at $1.53 per kilogram on Sept. 16.

The price has since failed to recover.

With rubber production amounting to 2.7 million tons last year, Indonesia is the world's second biggest rubber producer after Thailand.

Last week, Indonesia, Malaysia and Thailand , which produce between them 70 percent of global natural rubber production, jointly agreed to cut rubber production by 210,000 tons next year by replanting trees.

Robusta coffee also fell to its lowest point at $1.5 per kilogram after peaking at $2.5 per kilogram around three months ago, according to the Indonesian Coffee Exporter Association (AEKI) chairman Hassan Wijaya.

Indonesia is the fourth largest producer of coffee after Vietnam , Colombia and Brazil, producing around 450,000 tons per year of which 250,000 tons are exported.

Cacao also dipped to around $1,930 per ton from a record high of $3,200 per ton around August, according to Indonesian Cacao Association (Askindo) secretary general Zulhefi Sikumbang.

Zulhefi, however, said cacao farmers were relatively safe from price volatility.

"Our farmers are still able to earn profits by selling cacao for around Rp 15,000 to Rp 16,000 per kilogram. They would suffer losses if the price dipped below Rp 11,000 to Rp 12,000 per kilogram," he said.

Indonesia is the world's third largest cacao producer with an estimated production of 500,000 tons. Ivory Coast and Ghana are the first and second largest. JP/Mustaqim Adamrah

Bakrie Sumatera Plantations Q1 profit jumps 794 percent

Novia D. Rulistia, The Jakarta Post, Jakarta | Fri, 05/02/2008 1:33 PM

The country's fifth-largest plantation owner by value, PT Bakrie Sumatera Plantations, booked a 794 percent increase in its first quarter net profit helped by stronger prices of palm oil.

President director Ambono Janurianto said Wednesday the firm's net profit had reached Rp 165 billion (around US$18 million) by the end of March this year, jumping from Rp 18.5 billion in the same period last year.

PALM OIL CONTROVERSY - Palm oil trees at Pangkalan Kerinci in Riau, Central Sumatra, Indonesia, on Thursday. A WWF study found that deforestation, in many cases to plant biofuel friendly palm oil plants, in central Sumatra's Riau Province over the past 25 years has generated 3.7 gigatons of carbon dioxide. (AP/Achmad Ibrahim)

He said sales in the first three months climbed to Rp 678 billion from Rp 264 billion and that its operational income reached Rp 222 billion from Rp 70 billion a year earlier."This indicates that we're going to be very strong in growth this year, both in land ownership and net profit," he said.

Ambono said the company expected to acquire 200,000 hectares of land by the end of 2011. Currently, the company has a total 106,000 hectares of planted land, up from 52,000 hectares at the end of 2007.

For this year's strategies, the company has set aside US$100 million in cash, $40 million of which will be used to buy a further 26 percent of PT Agri Resources BV (ARBV).

"We plan to increase our share in ARBV from the current 25 percent to 51 percent," Ambono said.

He said 25 million of the fund would be used for the company's capital expenditure worth $25 million, with the remaining cash to finance its joint venture company with Bakrie Sentosa Persada, called PT Indo Green International, in its efforts to turn 50,000 hectares of empty land into CPO plantations.

He said the strategies would help the company increase CPO production to 340,000 tons this year, an 88.8 percent increase from 180,000 tons in 2007, and that Bakrie's rubber production would reach 40,000 tons this year, up from 29,500 tons last year.

The company's total 2008 revenue is targeted to reach Rp 3.5 trillion.

RI rubber business set to reach new heights

Rendi Akhmad Witular, The Jakarta Post, Jakarta

If booming investment in the rubber processing sector amid tight raw material supply is any indication, the country's natural rubber business is set to reach new heights in the coming year.

The Indonesian Rubber Association (Gapkindo), said 10 new rubber processing plants came into operation by local and foreign firms last year, with the largest being a unit in Jambi owned by Japan's giant trading company Itochu Corporation.

"Last year was marked by ... big corporations with integrated supply chains setting up new processing plants here. The trend is expected to continue this year," Gapkindo chairman Daud Husni Bastari told The Jakarta Post recently.

Last year's newcomers, some of them also owned by big rubber players from Thailand and Malaysia, have a combined installed capacity of 360,000 tons annually, with Itochu's unit alone contributing around 100,000 tons.

In total, the industry now has the capacity to process 3.3 million tons of rubber a year.

Raw natural rubber needs to be processed before it can be exported or transferred into another products. Processing companies are thus the middle chain in rubber trading industry, between producers and manufacturers.

Indonesia is the world's second largest rubber exporter after Thailand. In 2006, the country exported 2.28 million tons of rubber valued at $4.32 billion. In the first 10 months of last year, export reached 1.87 million tons, a 4.9 percent increase from the same period in 2006.

Gapkindo forecasted this year export was likely to increase by at least 6 to 7 percent.

Indonesia, Thailand and Malaysia supply around 70 percent of the world's natural rubber.

Since 2001, Indonesia has seen the highest annual export growth, 8.94 percent, as compared to Thailand's 3.02 percent.

"The growth surely will be promising this year. I cannot cite any vital factors likely to undermine the price and output," said Azrul Latif, investment relations officer for the publicly listed plantation company PT Bakrie Sumatera Plantation.

Azrul cited higher oil prices and demand for automotive products as key factors in maintaining the rubber boom.

Gapkindo believed this growth was likely to trigger another wave of investments in the processing sector this year, as signaled by a plan from at least nine newcomers to set up plants with a combined capacity of 230,000 tons per year.

Investment for setting up a processing plant with a capacity of 48,000 tons a year is estimated at a minimum of Rp 60 billion (US$6.38 million).

For the country's rubber farmers, who are mostly operating in fairly remote villages scattered in Sumatra and part of Kalimantan, these new investments will be among the catalysts for a higher rubber price.

"Amid limited supply of natural rubber, processing companies will be racing to buy rubber ... which will increase the commodity's price. This is good for farmers," said Daud, who manages rubber processing firm PT Badja Baru.

Proceeds from planting rubber have far-reaching effects on people living in remote areas due to the fact that 85 percent of the country's 3.3-million-hectare rubber plantations are managed by farmers, with only 15 percent by corporations.

This is not the case for other booming commodities, such as oil palm, where 65 percent of the plantations are controlled by big companies, leaving only 35 percent for local farmers.

However, not all looks rosy for the rubber industry. Processing companies can only use a maximum of 70 percent of their installed production capacity due to the lack of rubber.

"I am concerned that there will be leeway for big companies, especially those from overseas, to plunder local small and medium-sized processing firms in a price war to buy rubber from farmers," said Daud.

The limited supply is primarily triggered by the inability of rubber farmers to gain capital access in revitalizing their plantations. Most of the farmers have no land certificates, which is a key requirement for applying for bank loans.

Another factor is the lack of access to high quality seeds at affordable prices.

Due to these problems, Gapkindo said productivity in the country's rubber plantations remained low compared to those of Thailand and even Vietnam, a newcomer to the rubber business.

With 3.3 million hectares, Indonesian farmers can only produce 967 kilograms per hectare per year, while Thailand, with only 2.3 million hectares, can produce 1,775 kilograms per hectare per year.

Farmers and companies in Indonesia are also reluctant to expand rubber plantations due to the fact that the oil palm business is considered more lucrative, and also because of an existing deal between major rubber producing countries not to aggressively open up new plantations in order to prevent oversupply.

Farmers told to watch the weather closely

Adianto P. Simamora, The Jakarta Post, Jakarta

The government has warned farmers of extreme weather events in regards to climate change. This is the second article in a series of six and focuses on the government's action plan for climate change mitigation and adaptation in the agricultural sector.

The government has told farmers to be more "creative" to grasp weather patterns that are predicted to become more extreme.

"The toughest work for our farmers now is how to adapt to unpredictable weather changes," Gatot Irianto, director of water resources at the ministry of agriculture, told The Jakarta Post.

"Long-standing traditional crop cycle systems may no longer be practicable."

However, said Gatot, without putting their income at risk, farmers can still do much to help reduce greenhouse gas emissions and thus help avert disastrous climate change.

A study by London-based economist Nicholas Stern indicated agriculture was responsible for 14 percent of greenhouse gas emissions.

Through various incentives, the government plan calls for farmers to find ways to store more carbon dioxide (C02) and methane (CH4), thus releasing less of these harmful gases into the atmosphere.

According to the mitigation plan, the government is to provide financial incentives to farmers who avoid clearing land by burning, for example.

"We want zero burning as a method for clearing land."

The plan also calls for animal manure and methane to be trapped and converted to electricity for nearby farming communities. Methane gas is even more problematic than C02 when released.

To reduce methane, eco-friendly irrigation systems that use less water are called for by the plan because CH4-producing bacteria are linked to irrigation flow rates.

Meanwhile, as another alternative strategy for reducing emissions, the plans call for various forms of carbon to be "stored" both in living matter -- such as trees -- and underground, in non-productive mines.

According to the blueprint action plan, by 2025 the country's palm oil, rubber and cacao plantations would be able to store 217 million tons of C02.

Meanwhile, residue from crop harvests is to be used to produce compost and the government will work to drive up the use of organic fertilizer and eco-friendly pesticides.

The government plan categorizes adaptation goals as to whether they are short, medium or long-term efforts.

In the short term -- over the next year, until 2009 -- the adaptation effort is focused on gathering data on areas vulnerable to droughts or floods, including information on dry and wet seasons.

The information is to be distributed to farmers as a guideline to help in re-mapping weather patterns, agricultural seasons and crop cycles.

"We have finished the map for the island of Java," Gatot said.

In the medium-term -- through 2012 -- the plan will see the government create and evaluating an early warning system for drought. In the long term, the government is set to analyze weather anomalies and be able to better predict planting seasons and adjust crop cycles.

Just exactly what farmers should expect -- of course -- the government can't say. However changes in rainfall and drought, they are told, will seriously impact agriculture.

Experts have said that for every one Celsius degree increase in the average temperature, rice yields decrease by about 10 percent.

In the 1990s, the ministry of agriculture reported an average harvest failure of 100,000 tons per regency across the country due to drought.

The failure rate has been around 300,000 tons per regency since 2000.

With an estimated 60 million farmers in the country, approximately one in four Indonesians can expected to be directly impacted by statistics like these.

Gatot said his office had repeatedly urged farmers to plant crops other than rice -- such as corn and soybeans -- especially in the dry season, due to the water-intensive nature of rice farming.

Currently, most farmers plant rice in both dry and wet seasons.

Exports of Indonesian agricultural products up

Medan (ANTARA News) - Exports of Indonesian agricultural products such as coffee, cocoa, and rubber increased in volume as well as in value this year, a trade ministry official said here on Tuesday.

The head of the sub-directorate of plantations of the ministry`s directorate of plantation and agriculural product exports, Lamsudin Sitindaon, said the rise of the country`s exports of agricultural products was encouraging in spite of many barriers.

He said the barriers that could threaten North Sumatra`s exports of plantation products include negative campaigns by various parties abroad on the country`s plantation products.

"Thank God Indonesian businessmen could stil maintain their exports and have even been able to boost them," he said.

He said the government should continue helping the country`s exporters through cooperation with other countries that also produced similar products to counter the campaign.

Until April this year the Indonesia`s foreign exchange earning from exports of agricultural products had reached US$1.034 billion, up 6.68 percent from the same period last year.

Last year the country`s exports of agricultural products reached US$3.406 billion.

North Sumatra`s coffee exporter, Suryo Pranoto, said the price of agricultural products was higher than last year`s.

The price of Arabica coffee, for example, this year reached US$3,200 per metric ton. "The price is good because demand is high," the president director of PT Sarimakmur Tunggalmandiri said.

Low yields remains big problem for RI rubber

Rita A.Widiadana and Wasti Atmodjo, The Jakarta Post, Nusa Dua, Bali

Despite the fact that Indonesia's rubber plantations covers the largest area in the world with around 3.3 million hectares, the country comes second to Thailand in terms of production due its low yield levels, says a senior government official.

Achmad Suryana, director general for agricultural research and development at the Agriculture Ministry, said Thursday that besides having lower yields, Indonesia's rubber was also of lower quality compared to Thailand's

Speaking during a two-day rubber conference, he said that production problems were due to the fact that most rubber plantations were owned or managed by tappers who lacked not only capital, but also the technology needed to boost production and improve quality.

Vice President Jusuf Kalla is scheduled Thursday to address the annual gathering, which brings together experts, policy makers and rubber-industry stakeholders from 16 member countries, including India, Thailand, China and Malaysia.

Indonesian's foreign exchange earnings from rubber exports increased by 60 percent to US$4 billion in 2006 from $2.58 billion in 2005.

This year, rubber output may rise 4.9 percent to 2.77 million tons as the area under rubber has increased to 3.3 million hectares from 3.29 million previously, Mukti Sardjono, director for perennial crops, told the conference.

Indonesia expects production to rise 8 percent by 2008 as plantations are expanded and yields improve, an official from the Agriculture Ministry said.

About 85 percent of the 3.30 million hectares under rubber are operated by smallholder tappers, and have very low productivity. Private-sector firms and state-owned enterprises operate the remaining plantations, mainly located in Kalimantan and Sumatra.

The productivity of smallholder plantations varies between 600 kilograms and 800 kg per hectare per year, as compared to 1,300 kg from rubber estates. Thailand and India produce between 1,800 kg and 1,900 kg per hectare a year.

According to Suryana, the low productivity of smallholder plantations in Indonesia was caused by a number of factors. Firstly, the trees in smallholder plantations were grown from low-yielding seeds. Secondly, a large proportion of the smallholder plantations consisted of old and unproductive trees.

Indonesia has the potential to profit greatly from the rubber sector. Currently, the price of standard Indonesian rubber stands at $2 per kg, while processed rubber timber, such as that used for parquet flooring, is worth more than $500 per cubic meter.

Agus Pakpahan, deputy state minister for state-owned companies, said that Indonesia was unable to compete with Thailand and Malaysia because of the low quality of its rubber production.

Most Indonesian rubber was produced by tappers using traditional technology, Pakpahan explained.

He said that Indonesia had failed to develop a mutually beneficial partnership with the growers. "We developed the wrong partnership scheme in the nucleus-smallholder system. This scheme treats farmers only as suppliers. Our links with the farmers are weak and the position of the farmers is even weaker under this scheme," Pakpahan said.

Indonesian province asks church to maintain rubber plantations

PONTIANAK, Indonesia (UCAN): A provincial government in Kalimantan, the Indonesian part of Borneo Island, has offered the Catholic Church rubber trees for parochial financial self-sufficiency.

"Ideally, each parish in the Archdiocese of Pontianak should receive a prime grafted rubber plantation of at least five hectares," West Kalimantan Vice Governor Laurentius Herman Kadir told 17 Pontianak archdiocese parish priests.

For the 2007 fiscal year, however, the government is providing a two-hectare parent estate each for Pontianak archdiocese and Ketapang diocese, Kadir said.

The priests gathered in the West Kalimantan province capital for a May 18 presentation on rubber-plantation programs by the vice governor, a Catholic. He was accompanied by Idwar Hanis, a Muslim, who heads the provincial plantation office, and Capuchin Father Jeremias Melis, head of Pontianak archdiocese's Komisi Pengembangan Sosial Ekonomi (commission for socioeconomic development).

"We ask the Church to graft prime rubber saplings and offer them to the parishioners who have land to cultivate rubber plants," Kadir said during his presentation. He added that each government-provided, one-hectare parent estate has 8,000 grafted plants, which can produce at least 2 million rubber trees each year.

Under standard cultivation, a rubber plantation can have 20 productive years, he added. During these years, a plantation can be a cornerstone to help people improve their economic situation.

Furthermore, "the government has prepared funds as working capital, available through easy bank loans, to revitalize rubber plantations," he said. To qualify for financing, farmers need only to set up a cooperative farmer group, prepare land and register with the district or municipal government.

The government has an interest in rubber plantations, according to Kadir, because rubber has long been important in Kalimantan's economy.

The governors of all four Kalimantan provinces, he added, have committed to improving rubber plantations in the 5 million hectares (50,000 square kilometers) set aside for agricultural plantation in Kalimantan. This amounts to 9 percent of the total area of 547,891 square kilometers.

In the past, Kadir said, the West Kalimantan government had the impression that it did not get full cooperation from the local Catholic Church in helping people improve their livelihood. Besides Pontianak archdiocese and Ketapang diocese, West Kalimantan is also home to Sanggau and Sintang dioceses.

According to the vice governor, that impression did not take into account the efforts of Capuchin missioners, who came to the area of Sejiram town in Sintang diocese in 1890. "They gave instructions on how to plant rubber trees," he said, adding that the rubber plantation they started there is still active.

To improve people's welfare, he suggested, the Church must encourage people to diligently work on productive economics, especially through rubber plantations.

After the vice governor's presentation, Father Melis thanked the government for the prime rubber parent estates. He promised that the parishes would gradually develop their own rubber plantations.

"With a prime rubber plantation under standard cultivation, each parish can attain a set income. It will be a good example of relying on productive economics instead of the generosity of nature," the Netherlands-born priest said.

With a coordinated, integrated effort, Indonesia can be a major producer of natural rubber by 2015, Suharto Honggokusumo, executive director of the central board of the Rubber Association of Indonesia, told UCA News on May 19.

Annual global demand is 11 million tons of natural rubber, he said. But in 2006 only 9.2 million tons were produced. Of that, 49.7 percent came from Thailand, 21.8 percent came from Indonesia, 18.1 percent came from Malaysia and the rest came from other countries.

He believes that by 2020, Indonesia will be able to supply 3.5 million tons, which will boost the country's foreign exchange and farmers' incomes.

BSP plans to expand oil-palm plantations

The Jakarta Post, Jakarta

Publicly listed PT Bakrie Sumatera Plantations (BSP) plans to expand its oil-palm and rubber plantations to about 83,000 hectares this year by acquiring more land for new plantations, and purchasing existing plantations.

President director Ambono Januarianto said Monday that the expansion plan would include 20,000 hectares of oil palm and rubber plantations that BSP would acquire from other companies, and 10,000 hectares of its own land that would be planted with oil palms and rubber trees at a total cost of Rp 154 billion (US$17 million).

"We have acquired 7,000 hectares from PT Sumbertama Nusa Pertiwi and we need to acquire another 13,000 hectares," he told reporters after the company's annual shareholders meeting.

He said that BSP had recently acquired all of Sumbertama Nusa Pertiwi plantations in Jambi for Rp 260 billion. Sumertama operates 7,000 hectares of plantations, of which 4,300 hectares are under oil palms.

Currently, BSP has about 53,000 hectares of plantations in Sumatra and Kalimantan, of which 62 percent are planted with oil palms and 38 percent with rubber trees. It also operates three CPO refineries and three rubber processing plants in Sumatra.

Ambono said that the expansion was part of a long-term plan to triple its plantation area to 150,000 hectares by 2012.

"Assuming that we will plant new trees in the additional areas, we will need to spend about US$270 million," he said.

Last year, BSP commenced the construction of a biodiesel plant with a capacity of 100,000 tons per year in Batam in collaboration with a local firm. The plant is expected to come onstream next year.

Ambono said that BSP would boost its CPO production to 180,000 tons this year from 158,000 tons last year, and its rubber production to 38,000 tons from 27,000 tons previously.

During the meeting, the company announced that it would pay out a dividend of Rp 34 billion, or about 20 percent of its Rp 172.8 billion net profit for 2006.

"We've decided to disburse only 20 percent of our profit as we need to retain most of it to support our expansion plan," he said, adding that the decision was in line with the company's dividend policy.

He said that BSP was targeting an increase of 20 percent in its net profit to Rp 207.5 billion this year from Rp 172.9 billion last year, and a rise of 35 percent in its revenue to Rp 1.5 trillion from Rp 1.1 trillion previously.

Malaysian investor wants to invest in CPO production in S Sumatra

Palembang, S Sumatra (ANTARA News) - HDZ Biodiesel Corporation Sdn Bhd of Malaysia wished to invest US$50 million to US$60 million in oil palm plantations in South Sumatra, a Malaysian official said.

The wish was conveyed in a meeting between Malaysian Ambassador to Indonesia Dato Zainal Abidin Zain and HDZ Biodiesel Corporation Sdn Bhd chairman Datuk Seri Azumi Muhammad, and South Sumatra administration officials including administration secretary Musyrif Suardi and administration assistant for economic, financial and development affairs Budi Rahardjo here Friday.

Datuk Seri Azumi said his company believed that its investment in crude palm oil production in the province would be successful as the political life in Indonesia in general and in South Sumatra in particular is stable.

The location for a CPO factory had not been determined although the Malaysian ambassador and the investor company had already visited Bengkulu and Palembang.

Meanwhile, Musyrif said South Sumatra had allocated 3.2 million ha land for plantations and other horticultural crops, 2.2 million ha of which had already been planted with rubber, oil palm, coffee, and horticultural crops since 2004.

RI rubber production may rise 10 percent this year

The Jakarta Post, Jakarta

Indonesia's rubber production is likely to increase by 10 percent this year to 2.6 million tons from 2.37 million tons last year, an executive of the Indonesian Rubber Research Institute says.

Institute director Chairil Anwar said Tuesday that over the last three years, the country's rubber production had increased by 7 percent per year on average.

"As one of the world's main suppliers of rubber, Indonesia is expected to boost its rubber production year by year to meet the increasing demand worldwide," he said.

Indonesia is currently the world's second largest producer of natural rubber after Thailand, where production reached 3 million tons last year.

Indonesia exports the bulk of its rubber to a number of countries, with China being its main market, importing between 200,000 and 300,000 tons per year. It also exports to the United States, Japan and several European countries.

Rubber exports were valued at US$4 billion last year, and are expected to be worth between $4 billion and $4.5 billion this year.

According to data from the International Rubber Study Group, total global rubber production amounted to 9.26 million tons last year, while total demand stood at 8.97 million tons.

Indonesia is expected to become the world's number one producer by 2020, overtaking Thailand, with a total production of more than 4 million tons.

"Indonesia has a major chance of becoming the main producer as Malaysia has begun to shift its focus to palm oil, while Thailand has to cope with land shortages," Anwar explained.

Indonesia, Thailand and Malaysia, the world's three largest rubber producers, established a tripartite consortium in 2001. They currently supply 80 percent of the world's total demand for rubber.

Indonesia will host an international rubber conference and exhibition in Bali from June 13 through 15. The event will showcase the latest technological breakthroughs by rubber research institutes around the world.

Indonesian rubber output may rise 6%, industry body says

Claire Leow, Bloomberg - The Jakarta Post - 2007-04-12 10:39

Rubber output in Indonesia, the world's largest grower after Thailand, may rise at least 6 percent this year as long as prolonged rains do not disrupt tapping, the head of a producers' group said.

"April to September should be dry, that is normal, but now south of the equator, it is still wet so it means it is disrupting rubber tapping," said Suharto Honggokusumo, executive director at the Indonesia Rubber Association.

The Southeast Asian nation is a major grower of coffee, palm oil, rubber and other agricultural commodities, with output dependent in part on favorable weather.

The country experienced drought last year, triggered by an El Nino, followed by wetter-than-usual conditions in the first quarter of this year.

Indonesia's rubber output grew about 8 percent a year between 2000 and 2006, bringing total production to 2.6 million tons last year, Honggokusumo said in a telephone interview from Jakarta.

"Unless weather disrupts our production, a minimum 6 percent increase from last year will be normal," he said.

Rubber futures traded on the Tokyo Commodity Exchange, the region's benchmark contract, have more than doubled since 2002 amid rising demand.

Over the past six months, the price gained 34 percent to ¥289,7 (US$2.43) a kilogram on concern last year's dry weather affected the trees' productivity.

This year, Jakarta, the capital, was affected by the worst flooding in five years after heavy monsoon rains. The downpours destroyed 27 percent of the rice crop area, Agriculture Minister Anton Apriantono said on Feb. 7.

The archipelago, which straddles the equator, has 3.3 million hectares of rubber plantations, of which 70 percent are on Sumatra island, Honggokusumo said.

Trees in north Sumatra are less affected by recent rains than those in the south, he said.

The rest of the plantations are in Kalimantan and Java and some of those areas are affected by the rains, Honggokusumo added.

Rubber is used in the automobile and electronics industries.

Mandiri sets aside Rp 11t for plantations

Urip Hudiono, The Jakarta Post, Jakarta

Bank Mandiri will provide up to Rp 11 trillion (US$1.2 billion) in new loans to the small holder plantation sector over the next three years, says a senior Madiri executive.

The loans are intended to finance the development of up to 321,268 hectares of plantations by some 80,000 growers, and will be disbursed in stages between 2007 and 2010, Mandiri's micro and retail banking director, Budi Gunadi Sadikin, said at an agricultural expo Friday.

"The plantations concerned consist of those producing such commodities as palm oil, cocoa and rubber," he said.

The loans to small-scale plantation growers would be channeled through large-scale plantation companies, which would guarantee the loans, and provide advice and guidance to the growers.

Budi said that the new loans would increase the value of Mandiri's total outstanding loans to the plantation sector to Rp 14.39 trillion, consisting of Rp 11.3 trillion to industrial plantation firms and Rp 3.09 trillion to small-scale plantation cooperatives and growers. The bank has also provided Rp 7.14 trillion in loans to associated processing enterprises, he added

Mandiri's outstanding loans to the plantation sector account for 36 percent of the Rp 39.5 trillion in total borrowing by the sector, according to central bank figures.

Mandiri president Agus D. Martowardojo said the additional lending would support the government's program to revitalize the country's agricultural sector, develop the biofuel sector, and grow small and medium enterprises (SMEs).

A consortium of five state and local government banks recently banded together to provide Rp 25.56 trillion in loans for the development of the plantation sector, including plantations producing biofuel feedstock.

Besides Mandiri, which will provide Rp 11.08 trillion of the Rp 25.56 trillion, Bank Rakyat Indonesia (BRI) will stump up Rp 12 trillion, Bank Bukopin Rp 1 trillion, the West Sumatra provincial bank Rp 980 billion, and the North Sumatra provincial bank Rp 500 billion.

Indonesia is the world's largest palm oil producer. Palm oil, along with jatropha oil, can be processed into biodiesel, and is also used in the production of cooking oil, soap and detergent.

The country also has vast tracts of rubber plantations, most of which are owned and managed by small farmers or cooperatives operating as SMEs.

Palm oil and rubber, whose production and prices grew strongly last year, provided the backbone for Indonesia's strong 2006 export performance, bringing in more than $100 billion in foreign exchange earnings.

Agus said he expected the increased lending to the plantation sector to help Mandiri achieve its 20 percent lending growth target for this year.

Mandiri, Indonesia's largest lender by assets, saw lending grow by 10 percent to Rp 117.7 trillion last year.