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

The report analyzes the oil palm value chain in Central Kalimantan, finding that while the sector generated over USD 2 billion in 2013, it suffers from underutilized mill capacity (50-65%) and low upstream yields compared to Malaysia and the rest of Indonesia. It highlights a significant loss of value-add because 78% of crude palm oil is refined outside the region. The paper details seven business models, noting that integrated companies manage risks better than smallholders, who face severe financial and legal hurdles. To address these issues, the authors propose a landscape management approach via the PALM Program (2016-2020) and suggest shifting from area-based expansion targets to production-based targets to promote sustainability.

• In 2013, the oil palm value chain in Central Kalimantan generated significant economic value across three phases: approximately USD 1 billion upstream, USD 0.95-1.25 billion midstream, and USD 30-31 million downstream.
• Upstream productivity in Central Kalimantan is lower than national and international benchmarks; in 2013, average 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 underutilized in 2013, with mills operating at only 50-65% of their installed capacity. This gap is partly due to an insufficient supply of FFB, estimated at a deficit of 13 million tonnes in 2013.
• There is a significant loss of value-add in the downstream sector, as 78% of the crude palm oil (CPO) generated in Central Kalimantan was not refined locally in 2013; only 22% was refined within the region.
• The document identifies seven distinct business models in the value chain, ranging from single-point operators (smallholders and independent mills) to fully integrated multi-national groups. Integrated models (Models E and F) generally capture higher value-add and are better equipped to manage financial, production, and market risks.
• Smallholder farmers face the highest financial and production risks due to limited collateral, smaller scale, and lack of access to technology. They also face significant legal risks regarding land titles and overlapping claims.
• The Indonesian Sustainable Palm Oil (ISPO) system mandates certification for most company models (A through F) to maintain licenses, requiring proof of legality and protection of primary forests and peat land. However, ISPO is currently voluntary for smallholder farmers and not required for downstream refiners (Model G).
• The authors recommend a 'landscape management approach' through the Production-Protection Approach to Landscape Management (PALM) Program (2016–2020) to coordinate government, business, and community efforts to improve productivity and ecosystem protection.
• To prioritize sustainability over expansion, the report suggests converting the regional target of 3.5 million hectares of planted oil palm into a production-based target.

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} }