PALMOILMAGAZINE, JAKARTA – While smallholder farmers produce the raw materials that sustain Indonesia’s agricultural and palm oil industries, they continue to receive only a small share of the economic value generated along the supply chain. Industry experts argue that expanding farmers’ role beyond raw commodity production is essential to improving rural incomes and building a more resilient agricultural economy.
Speaking during a recent webinar attended by Palmoilmagazine.com, Katryn Pasaribu, Research Director at Kaleka, said farmers typically occupy the lowest-value segment of the agricultural supply chain, which extends from villages to processing facilities, wholesalers, manufacturers, and ultimately consumers.
“Farmers often remain at the very beginning of the value chain,” she said.
Although value increases significantly through processing, packaging, and marketing, much of the additional profit is captured by downstream businesses rather than the producers themselves.
Moving Beyond Raw Commodity Sales
According to Katryn, the challenge extends beyond volatile commodity prices. It stems from the way agricultural production and processing systems have been structured for decades.
She believes farmers could substantially increase their income by participating in primary processing activities such as drying, distillation, grading, and post-harvest handling before selling their products.
Across many agricultural commodities, the price difference between raw materials and semi-processed products can be considerable. Coffee provides a clear example. Green coffee beans command relatively low prices, but their value rises significantly after drying, sorting, and initial processing before entering the manufacturing sector.
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The same opportunity exists for numerous agroforestry commodities.
To address this gap, communities are increasingly exploring the establishment of village-scale processing facilities, ranging from drying units to simple post-harvest processing centers.
The objective is to enable farmers to market semi-processed products with higher commercial value instead of selling raw materials alone, allowing them to retain a larger share of the value that would otherwise flow to intermediaries and aggregators.
“The idea is to develop early-stage manufacturing,” Katryn explained. “The products are not yet finished goods, but they have already advanced much further along the value chain.”
Such an approach creates a shorter, fairer supply chain that delivers greater economic returns to producers.
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Regenerative Agroforestry as a Long-Term Strategy
The concept is closely linked to regenerative agriculture and agroforestry.
Agroforestry integrates multiple crops and trees within the same landscape, combining food crops with high-value perennial species. This diversified production system enhances biodiversity, improves soil fertility, and strengthens ecosystem resilience.
When combined with regenerative farming principles, agroforestry can restore soil health while maintaining productivity over the long term.
Katryn said regenerative agroforestry demonstrates that agricultural production and environmental conservation can advance together.
“Regenerative agroforestry can generate high-value products while protecting the environment,” she noted.
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Supporting Indonesia’s Development Priorities
The approach also aligns with Indonesia’s national development agenda.
Under the 2025–2029 National Medium-Term Development Plan (RPJMN), strengthening food, water, and energy security has become a strategic priority. Katryn believes regenerative agriculture and agroforestry directly support these objectives by improving soil quality, conserving water resources, enhancing food security, and creating new economic opportunities for rural communities.
However, achieving these goals will require stronger collaboration among government agencies, farming communities, research institutions, and organizations promoting sustainable agriculture.
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According to Katryn, meaningful agricultural transformation depends on close coordination between policy and practice. Government programs need successful field-level examples, while farming communities require supportive regulations, incentives, and investment.
“There must be a mutually reinforcing relationship,” she said.
If policymakers provide stronger institutional support for regenerative agroforestry, farmer-led initiatives could expand more rapidly. At the same time, successful community projects would help accelerate the government’s sustainable development objectives.
Also Read: Regenerative Farming Gains Ground in Indonesia as Villages Rebuild Soil and Farmer Livelihoods
Returning Economic Value to Farmers
Ultimately, the broader goal behind community processing facilities, agroforestry, and regenerative agriculture is to return greater economic control to farmers.
By processing part of their harvest locally, farmers can move beyond being simple suppliers of raw commodities and become active participants in higher-value segments of the agricultural economy.
While investments such as village drying facilities, distillation units, or basic processing centers may appear modest, they have the potential to deliver higher prices, more stable incomes, and stronger rural economies.
For Katryn, the future of agriculture will not be measured solely by how much is produced, but by how much of the value created remains in the hands of the farmers who cultivate the land. (P2)
