A system dynamic perspective in efforts to improve the income of independent palm oil farmers in Regency X through changing roles in the palm oil supply chain

Abstract

At present, independent palm oil (PO) farmers are expected to change their roles in the palm oil supply chain, not only being producers and sellers of Fresh Fruit Bunches (FFB) but also able to generate added value by processing FFB into CPO for renewable energy resources. This research aims to improve the income of farmers based on changing roles through strategies using system dynamic modeling. The impacts observed are the number of labors based on a proxy of government revenue and GDP, labor income, and benefits obtained. Scenarios to improve the income of farmers projected over the next 10 years are selling FFB to Farmer’s Cooperatives that own palm oil mill(s) and other palm oil mill(s). Each scenario has 3 sub-scenarios: Business as Usual, Optimist and Environment. With the addition of new plantations of 5.7-7% per year, CPO yields of 20%, and using the palm oil mill of 30 tons/hour owned by Farmers Cooperative, the income of farmers can be improved. Recommendations to attract more farmers to become members of Farmer’s Cooperatives include funding for implementing Good Agricultural Practices, buying FFB from Cooperative members at transparent prices based on mutual agreements, and providing assistant workers for farmers.