In 2018, around 4 million ha of oil palm smallholdings need to be replanted. Indonesia could utilize this moment to improve smallholdings’ productivity by ensuring the usage of good quality seeds. For the industry, Dura is considered as bad seeds as its thick shells can damage the machine and the oil content is low. Therefore, most mills do not want to buy it, hence the selling price is low. In fact, most smallholdings’ use uncertified seedlings that include many contaminated Dura. Unfortunately, smallholders can only detect this 3 years after the planting and spending a considerable amount of production costs. Actually, to avoid the unnecessary loss a Dura marking technique can be applied to the oil palm seeds. However, most smallholders are unlikely consider Dura usage as an important issue due to the higher weight and higher sales revenue. This study is conducted to analyse smallholders’ willingness to pay (WTP) for seed marking service. Data is collected from 60 independent smallholders in Labuhan Batu Utara, which mostly use the uncertified seedlings. The willingness to pay is measured with Conjectural Variations Approach, revealing 71% of the respondents are willing to pay the Dura seed marking service, although still with a minimum level of WTP. Pearson Chi Square Correlation Test shows that the WTP for Dura Marking Service is only significantly correlated with the smallholders’ knowledge and perception, but not with their land size and experience. Based on the results, a number of policy implication are included.

Oil palm plantation is well known as a profitable business. In general, oil palm smallholders have a higher income than farmers of other commodities. However, most smallholdings have land sizes that do not reach the economic scale. Together with the lack of managerial skills, smallholdings are likely to be more vulnerable to production and price fluctuations, which in turn affects their business sustainability. This study was conducted to analyze the possibility and impact of production and price changes to the oil palm smallholdings' sustainability. Data were collected from 240 schemed and independent smallholders in Asahan, Labuhan Batu, Labuhan Batu Utara and Labuhan Batu Selatan, which were selected with purposive cluster sampling. The production and market risk possibility and impact were measured with Value at Risk Method. The estimations showed that smallholders had a low risk possibility and impact, which partly stemmed from the enormously low threshold of both production and market risks. In fact, on average, smallholders' productivity is less than 20% of the potentials, and many schemed smallholders receive low prices due to their aged trees. This may be harmful to smallholding sustainability. Since VaR only considers risks from variations of production and price, a low threshold is not considered as a risk for sustainability. Therefore, further studies using different thresholds or approaches are required. From the policy implication point of view, to address such a situation, the Indonesian government needs to improve smallholdings' productivity and their composition of trees.

In Indonesia, oil palm plantations have long affected income levels positively. Furthermore, Indonesia has developed oil palm smallholdings in 1980 to improve rural incomes. The success of this program has attracted other farmers and migrants to further developed oil palm plantations. Those who collaborated with companies were known as scheme smallholdings, while the others are known as independent smallholdings. In general, the lack of professional assistance has caused independent smallholdings to perform lower than the scheme ones. In addition, on average, the migrants also performed better as they were familiar with the collective actions of group activity management. Using as many as 210 and 219 scheme and independent smallholders from the Provinces of North Sumatra, South Sumatra, Jambi and Riau, such assumption were tested using the ANOVA compare means test of the four groups, namely schemed local and migrant, and independent local and migrant. Comparisons between the smallholders’ incomes and the Regional Minimum Wages of each province were analysed. The results showed that oil palm plantations have significantly improved the smallholders’ incomes in all provinces, although the impacts were observed to be higher for the scheme-migrant smallholders, not only concerning income, but also for productivity and selling price. However, this was likely due to the difference between scheme and independent rather than locals and migrants. This was partly explained due to the collective actions of all migrant-schemed smallholders in both the input purchases and the output sales and around 50% of the local-schemed, while almost all independents did it individually.

Sustainable palm oil certification is expected to lead to sustainable development and livelihood. This expectation is tested through 240 and 176 smallholders in Indonesia and Malaysia, respectively. The results show that certified smallholders have better perception and implementation of environment, economic and social aspects, enjoy higher productivity and selling price, maintain natural resources quality, more resistant in coping production and price fluctuations, and more prepared for replanting.

Oil palm smallholders have rapidly grown but their performance is relatively low compared to other producer groups. One of the programs that are expected to address this is certification. However, only a small percentage of smallholders received the certification in practice. This study was conducted to analyze the effectiveness of certification to improve smallholder oil palm plantations’ performance. The study was conducted in North Sumatra, South Sumatra, and Riau. Data were collected from 707 sample smallholders. Performance is measured from economic aspects, namely productivity, selling prices, fertilizer usage and harvest criteria, and environmental aspects, namely waste treatment and paraquat pesticide usage. The data were then analyzed using the One-Way ANOVA test and the One-Sample t-test. The results show significant differences in productivity and selling prices between the plasma and other smallholder groups, but not between the certified and non-certified ones. The results also show significant differences in the waste treatment between the certified and non-certified groups, but not in paraquat pesticides. Therefore, it can be concluded that certification cannot improve smallholder oil palm plantations’ performance if not followed by intensive and sustainable partnership assistance.