Abstract
This research aims to evaluate the performance production and technical efficiency of oil palm production in Indonesia based on the management pattern (independent farmers and supported farmers). The secondary data were used from the Estate Cultivation Household Survey (ST2013 SKB) conducted by BPS-Statistics Indonesia. The empirical analysis involved using a meta-frontier approach, allowing one to decompose efficiency into group-level technical efficiency and technology gaps. The results indicate that the output of each management pattern behind their potential with the mean technical efficiency of 0,6789 and 0,7127 for independent farmers and supported farmers, respectively. The technology gap ratio statistics showed that the farmers had adopted the best available smallholder production technology in their farming. However, independent farmers were slightly more optimal than supported farmers. The efficiency measure generated from the meta-frontier revealed that supported farmers were more efficient, where the primary source of inefficiency came from managerial inefficiency. Thus, the policies to increase the production of oil palm smallholders must focus on the improvement of technical skills and managerial capabilities of farmers on the efficient use of resources and advanced technology by considering each characteristic of each management pattern. Keywords: technical efficiency, independent farmers, supported farmers, oil palm, meta-frontier
Highlights
Indonesia is the largest oil palm-producing country in the world
This study showed that the fertilizer input on oil palm production in the supported farmers' group was more responsive than independent farmers
Oil palm production is relatively heterogeneous within the management pattern of smallholders
Summary
Indonesia is the largest oil palm-producing country in the world. Its production (in the form of crude palm oil) was recorded to represent more than 56% of total world production, reaching 71.45 million tons in 2018 (FAO, 2020). Oil palm is a leading commodity from the estate sector in Indonesia, becoming a source of foreign exchange earnings and economic drivers in rural areas. The development of oil palm plantations has impacted natural habitats, biodiversity, and global climate (Rist et al 2010). It has long been associated with deforestation and environmental destruction (Euler et al 2016a; Gatto et al 2017). Regardless of the pros and cons of adverse effects, oil palm remains an attractive opportunity for improving farmers' welfare in most regions in Indonesia
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