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Key messages

• Despite its promotion of contract farming (widely considered to be a relatively pro-poor approach to agribusiness expansion), Brazil’s Sustainable Palm Oil Production Program (SPOPP) cannot be considered to be an inclusive development program in its current format. Findings suggest that land- and labor-constrained households are more likely to be excluded from contract farming under this program than other households.
• Viable options to strengthen inclusivity within the program include permitting smallholders to develop smaller plantations, promoting intercropping and reducing barriers that currently prevent smallholders under the scheme from engaging external laborers.
• Despite civil society concerns that contract farming could result in smallholders abandoning staple food crop production to focus only on oil palm, there is no evidence to date that contract farming under the SPOPP scheme has exacerbated smallholder food insecurity.
• Results suggest that while smallholder performance ranges widely, from highly productive farms to near abandonment of oil palm plots, the majority of smallholders involved in the scheme have been unable to meet the performance expectations of oil palm companies.
• To increase the likelihood of success amongst the 12% of smallholders at highest risk of credit default, additional support should be provided, for example in the form of targeted capacity-building initiatives or enabling management outsourcing arrangements where successful smallholders take over plantation management through production sharing arrangements.