Central Kalimantan’s Oil Palm Value Chain: Opportunities for Productivity, Profitability and Sustainability Gains

The document analyzes the economic value and operational gaps in Central Kalimantan's oil palm sector, highlighting significant under-utilization of midstream mill capacity and limited downstream refining. It identifies a wide range of business models, from smallholder farmers to fully integrated multinationals, and argues that integrated models are better equipped to manage financial, production, and market risks. The authors recommend a 'landscape management approach' via the PALM Program to transition the sector toward sustainable, high-productivity practices without further deforestation.

• In 2013, the oil palm value chain in Central Kalimantan generated substantial economic value, with approximately USD 1 billion added upstream, USD 0.95-1.25 billion midstream, and USD 30-31 million downstream.
• Upstream productivity in Central Kalimantan is lower than national and regional averages; 2013 yields were 14.7 tonnes of fresh fruit bunches (FFB) per hectare, which is 13% lower than the Indonesia-wide average and 23% lower than Malaysia's average.
• Midstream processing capacity was significantly under-utilized in 2013, with mills operating at only 50-65% of their installed capacity due largely to an insufficient supply of FFB.
• There is a significant gap in downstream value retention, as only 22% of the crude palm oil (CPO) generated in Central Kalimantan was refined locally in 2013.
• Business models vary significantly in risk exposure; single-point operators (smallholders and independent plantations/mills) face the highest financial, off-take, and supply risks due to limited collateral and lack of integration.
• Integrated business models (Models C, D, E, and F) are better positioned to manage sustainability and market-access risks, as they can more effectively trace supply and implement mitigation measures.
• Smallholder farmers manage approximately 15% of the oil palm area in Central Kalimantan, and while ISPO certification is currently voluntary for them, their support is critical for overall sector sustainability.
• The authors propose a 'landscape management approach' through the Production-Protection Approach to Landscape Management (PALM) Program (2016–2020) to coordinate government, business, and community efforts for sustainable development.

APA

Glenday, S., Jagau, Y., Suharno, & Safford, A. (2015). Central Kalimantan’s Oil Palm Value Chain: Opportunities for Productivity, Profitability and Sustainability Gains. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/11/Central-Kalimantan-Oil-Palm-Value-Chain-Full-Working-Paper.pdf

Chicago

Glenday, Skye, Yusurum Jagau, Suharno, and Agnes Safford. Central Kalimantan’s Oil Palm Value Chain: Opportunities for Productivity, Profitability and Sustainability Gains. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/11/Central-Kalimantan-Oil-Palm-Value-Chain-Full-Working-Paper.pdf.

Wikipedia

{{cite report |last1=Glenday |first1=Skye |last2=Jagau |first2=Yusurum |last3=Suharno |last4=Safford |first4=Agnes |title=Central Kalimantan’s Oil Palm Value Chain: Opportunities for Productivity, Profitability and Sustainability Gains |publisher=Climate Policy Initiative |date=November 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/11/Central-Kalimantan-Oil-Palm-Value-Chain-Full-Working-Paper.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{glenday2015central, author = {Glenday, Skye and Jagau, Yusurum and Suharno and Safford, Agnes}, title = {{Central Kalimantan’s Oil Palm Value Chain: Opportunities for Productivity, Profitability and Sustainability Gains}}, institution = {Climate Policy Initiative}, year = {2015}, month = nov, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/11/Central-Kalimantan-Oil-Palm-Value-Chain-Full-Working-Paper.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }