Traceability is a vital part of the upcoming EUDR. In order for a commodity to be compliant with the regulation, sellers of an EUDR-covered commodity must be able to trace said commodities back to their source.
EUDR compliance in palm oil is, according to the Roundtable on Sustainable Palm Oil (RSPO), significantly advanced, as it told FoodNavigator in a recent interview.
However, in Thailand, unique attributes of its supply chain make traceability, and therefore EUDR compliance, more difficult than in other markets.
A smallholder-dominated market
In Thailand, 85% of palm oil is grown by smallholders, according to the RSPO. The land in the country is allocated to those people who live in the area, rather than large companies.
Because of the Thai government’s free-trade policy, according to Trin Phongpetra, Executive Committee of Thaksin Palm Group, Business Support Division and President of Federation of Thai Industries in Surat Thani province, processing mills can be opened easily and thus competition between the mills is acute. In this model, smallholders are free to sell to any mills they want.
After implementation, this model eventually led to a system where smallholders would contract professional harvesters to harvest the palm, as well as fruit collectors to collect it. In this system, many of the palm cultivators actually do not work the land.
Because of the longer supply chain, the palm is less fresh, and the extraction rate is lower. In Indonesia and Malaysia, according to Phongpetra, the extraction rate is roughly 21-23%, whereas in Thailand it is only 18-19%.
How intercropping can protect smallholders
Palm oil is, like all commodities, often at the mercy of fluctuating global prices, due to shifting demand from consumers. For smallholders, this can provide an obstacle to maintaining their income. Unpredictable weather patterns due to climate change can exacerbate this problem. Intercropping can provide a fallback option, a failsafe in case things go wrong.
In Thailand’s Surat Thani province, FoodNavigator spoke to oil palm smallholders who utilised intercropping. Throughout the farm we saw, smallholders grow pandan leaf, a tropical plant often used in South East Asia for desserts. The crop is not eaten by insects and in fact repels them, making it a secure alternative source of income for farmers, and can also grow in the shade, meaning it can be grown underneath palm trees.
Pandan leaf is popular in Thailand, and is not exported but mainly sold domestically. Thus, it is not at the mercy of globally fluctuating prices.
How does this affect EUDR compliance?
Very little of Thailand’s palm goes to the EU, and the palm oil that does is usually within food products. However, Thai palm that is exported there is less likely to comply to the EUDR due to the more complex supply chain in Thailand.
This is because it is far more difficult to keep traceability data. As the harvesters and fruit collectors are not tied to a specific plot of land, the palm that they sell to the crushing mill cannot be traced back to a piece of land declared free of deforestation.
They must, Phongpetra suggested, be given tools which will allow them to assess the land of the cultivators which they’re harvesting on, and ascertain whether the palm that they’re harvesting is deforestation-free.
