Smallholders’ willingness to pay for dura marking oil palm seeds

Abstract

In 2018, around 4 million ha of oil palm smallholdings need to be replanted. Indonesia could utilize this moment to improve smallholdings’ productivity by ensuring the usage of good quality seeds. For the industry, Dura is considered as bad seeds as its thick shells can damage the machine and the oil content is low. Therefore, most mills do not want to buy it, hence the selling price is low. In fact, most smallholdings’ use uncertified seedlings that include many contaminated Dura. Unfortunately, smallholders can only detect this 3 years after the planting and spending a considerable amount of production costs. Actually, to avoid the unnecessary loss a Dura marking technique can be applied to the oil palm seeds. However, most smallholders are unlikely consider Dura usage as an important issue due to the higher weight and higher sales revenue. This study is conducted to analyse smallholders’ willingness to pay (WTP) for seed marking service. Data is collected from 60 independent smallholders in Labuhan Batu Utara, which mostly use the uncertified seedlings. The willingness to pay is measured with Conjectural Variations Approach, revealing 71% of the respondents are willing to pay the Dura seed marking service, although still with a minimum level of WTP. Pearson Chi Square Correlation Test shows that the WTP for Dura Marking Service is only significantly correlated with the smallholders’ knowledge and perception, but not with their land size and experience. Based on the results, a number of policy implication are included.