Indonesian smallholders hit hard by palm oil prices at 5-year low

Jakarta

A PROLONGED fall in the price of palm oil is hitting Indonesia's legions of smallholder farmers, forcing cutbacks that will reduce output in coming years and raising the prospect of a bout of sell-outs to major producers.

Smallholder farmers account for about 40 per cent of output from Indonesia's vast plantations that cover an area the size of South Korea. A drop in smallholder output could shave total production by around 5 per cent from next year, said analysts.

Up to one million smallholders in the world's top palm oil producer have enjoyed a near uninterrupted decade of boom years, fuelling a rural consumer binge on new motorbikes and mobile phones.

But with prices near five-year lows, some cash-strapped farmers are being forced to cut back on fertilisers, pesticides and replanting. They are calling on the government to give a sector vilified by green groups for forest destruction the type of price floor s…