It is a matter of common knowledge that weather represents the major source of uncertainty in crop production. It is to be expected that weather fluctuations will increase in the future due to climate change. Traditionally, farmers tried to protect themselves against weather-related yield variations by buying insurances. More recently, there has been a discussion regarding the use of weather derivatives to safeguard against volumetric risks. Although weather derivatives display advantages over traditional insurances, there is only a relatively small market for these products in agriculture. This is partly attributed to the fact that it is unclear whether and to what extent weather derivatives are a useful instrument of risk management in agriculture. This study applies real yield and weather data from Northeast Germany in order to quantify the risk-reducing effect that can be achieved in wheat production by using precipitation options. To do so stochastic simulation is used. The hedging effectiveness is controlled by the contract design (index, strike level, tick size). However, the local basis risk and the geographical basis risk remain with the farmer. We separate both causes of basis risk and reveal the extent of each. This enables conclusions regarding the design of weather derivatives; thus the question dealt with here is relevant both for farmers and for potential sellers of weather derivatives.

Three decades after their establishment, many smallholder oil palm plantations are overmatured and will require replanting soon. Replanting offers a unique opportunity to redesign plantations, close yield gaps, boost farm productivity, and secure livelihoods. However, replanting requires knowledge, inputs, and financing. If postponed or done sluggishly, replanting could further exacerbate existing socioeconomic and environmental challenges in smallholder oil palm cultivation. We collected literature relevant to the replanting of oil palm and created a narrative literature review to highlight the challenges that smallholders face during replanting. We identified access to inputs, finances, and knowledge as paramount challenges that might influence smallholders’ decisions about when, how, and what to replant. Barriers to successful smallholder replanting in Indonesia are a lack of knowledge on replanting and proper training, uneven access to high-quality seedlings, as well as uneven eligibility for public replanting funds. We finish the review with recommendations for policymakers and researchers on how to overcome the challenges replanting holds and emphasize the opportunities replanting offers.

The expansion of the oil palm industry in Indonesia has improved livelihoods in rural communities, but comes at the cost of biodiversity and ecosystem degradation. Here, we investigated ways to balance ecological and economic outcomes of oil palm cultivation. We compared a wide range of production systems, including smallholder plantations, industrialized company estates, estates with improved agronomic management, and estates with native tree enrichment. Across all management types, we assessed multiple indicators of biodiversity, ecosystem functions, management, and landscape structure to identify factors that facilitate economic–ecological win–wins, using palm yields as measure of economic performance. Although, we found that yields in industrialized estates were, on average, twice as high as those in smallholder plantations, ecological indicators displayed substantial variability across systems, regardless of yield variations, highlighting potential for economic–ecological win–wins. Reducing management intensity (e.g., mechanical weeding instead of herbicide application) did not lower yields but improved ecological outcomes at moderate costs, making it a potential measure for balancing economic and ecological demands. Additionally, maintaining forest cover in the landscape generally enhanced local biodiversity and ecosystem functioning within plantations. Enriching plantations with native trees is also a promising strategy to increase ecological value without reducing productivity. Overall, we recommend closing yield gaps in smallholder cultivation through careful intensification, whereas conventional plantations could reduce management intensity without sacrificing yield. Our study highlights various pathways to reconcile the economics and ecology of palm oil production and identifies management practices for a more sustainable future of oil palm cultivation.

Smallholder-managed oil palm plantations are a major driver of economic welfare and rural development. However, compared to industrial producers, smallholders are associated with lower farm productivity and disproportionately higher rates of illegal land clearing. Therefore, a balance must be struck between mitigating adverse externalities and strengthening favorable outcomes to ensure smallholders' sustainable integration into the palm oil industry. Certification schemes are proven instruments for achieving this goal by introducing best agronomic practices and standards. Yet, despite the availability of certification, adoption rates among smallholders remain low. Using Indonesia as a case study, we extend existing research by investigating how altering identified barriers to smallholder certification affects their acceptance. Through a discrete choice experiment conducted with 251 Indonesian oil palm smallholders, the results of our mixed logit models indicate smallholders' positive attitude towards certification schemes and their general willingness to adopt one. While 62% of respondents acknowledge the direct environmental impact of oil palm cultivation, 84% recognize the potential of certification schemes to contribute to environmental protection. Our results further show that smallholders are more likely to adopt a certificate with increasing amounts of farm management trainings and cash premiums. Moreover, we highlight the pivotal influence of farmers' risk attitudes and locus of control in shaping adoption decisions. Our novel findings are relevant to researchers and industry stakeholders as they provide valuable insights into pathways for the design of certification schemes, which catalyzes smallholders' economic integration as well as environmental wellbeing.