Spatial heterogeneity in smallholder oil palm production

Abstract

Oil palm production is an important income source for millions of smallholder farmers in the tropics. Oftentimes, yields in smallholder systems are low, entailing larger area requirements and higher than necessary rates of deforestation. Smallholder performance differs spatially, even within countries and provinces. A better understanding of this spatial variation can help to design more effective support programs to preserve forestland and foster sustainable economic development. Here, we use survey data from smallholder oil palm producers in Sumatra, Indonesia, to identify spatial variation in yields, input use, and output prices by employing structured additive regression models with nonlinear spatial effects, so-called geosplines. Our results confirm large spatial differences. Some of these differences can be explained. For instance, possession of land titles and proximity to urban centers are positively associated with oil palm productivity. However, much of the spatial variation cannot be explained by variables typically included in socioeconomic studies. The geosplines help to control for possible bias even when the identified spatial variation cannot be fully explained. From a policy perspective, knowing where regions with high and low yields and input intensities are located can help to geographically target suitable support programs. From a research perspective, more work on trying to explain spatial heterogeneity in smallholder production is needed, possibly combining quantitative and qualitative approaches.