Abstract
Oil palm production has led to large losses of valuable habitats for tropical biodiversity. Sparing of land for nature could in theory be attained if oil palm yields increased. The efficiency of oil palm smallholders is below its potential capacity, but the factors determining efficiency are poorly understood. We employed a two-stage data envelopment analysis approach to assess the influence of agronomic, supply chain and management factors on oil palm production efficiency in 190 smallholders in six villages in Indonesia. The results show that, on average, yield increases of 65% were possible and that fertilizer and herbicide use was excessive and inefficient. Adopting industry-supported scheme management practices, use of high-quality seeds and higher pruning and weeding rates were found to improve efficiency. Smallholder oil palm production intensification in Indonesia has the capacity to increase production by 26%, an equivalent of 1.75 million hectares of land.
Highlights
Indonesia is the leading producer and exporter of palm oil worldwide, with over 19 million tonnes produced annually [1,2]
Assuming variable returns to scale (VRS), the results showed that 10% of the smallholders were operating at the frontier, whereas 56% presented an efficiency score below 0.3
The mean of the efficiency scores under VRS (0.35) was higher than the mean of the efficiency scores under decreasing returns to scale DRS (0.3), increasing returns to scale IRS (0.22) and constant returns to scale CRS (0.17; figure 1 and table 3). This is because VRS allows for the largest possible technology set compared with DRS, IRS and CRS
Summary
Indonesia is the leading producer and exporter of palm oil worldwide, with over 19 million tonnes produced annually [1,2]. In 2008, over 41% of oil palm plantations were owned by smallholders, producing 6.6 million tonnes of palm oil [3]. Most of the increase in Indonesian palm oil production is due to the rapid expansion of plantation area, often at the expense of forests, rather than yield improvements. The expansion of area planted has been estimated in the last two decades to be three million hectares [1]. While absolute area expansion of private estates remains higher, the rate of area expansion among smallholders is increasing faster than among government and private estates [4]. Smallholder yield is estimated to be 50% lower than the potential attainable yield, whereas the yield of government and private estates is estimated to be between 85% and 90% of the potential attainable yield [5]
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