Analysis of the Factors Influencing the Technical Efficiency among Oil Palm Smallholder Farmers in Indonesia

Abstract

Agricultural sector in Indonesia plays an important role in raising rural livelihood,as it is becoming the main source of national income. Oil palm plantation was emphasized in Master Plan for Acceleration and Expansion of Indonesia Economic Development (MP3EI) as one of the potential sectors in agriculture. Since the implementation of the plan, it had provided smallholder farmers with an opportunity to expand their resources for oil palm plantation. On the contrary, smallholders’ oil palm cultivation were also facing productivity gap among farmers because of the background of farming practices. The present study aimed to investigate oil palm productivity of smallholder farmers with stochastic frontier approach to provide evidence on agricultural practices that were beneficial to enhance the productivity of oil palm. The results observed several socio-economicfactors that can lead to the increasing of farmers’ efficiency, such as farmers group, extension program, education level, and farm diversification.Empirical results were expected to provide better input to the government, in order to improve the policy regarding with the land expansion in oil palm sector.