Abstract
The main objective of the present study is to analyze the technical efficiency (TE) and evaluate its determinant in smallholder oil palm farming in Indonesia. The stochastic frontier analysis was applied to 20,409 selected oil palm farmers from the results of the 2014 Estate Cultivation Household Survey (ST2013 SKB) conducted by BPS-Statistics Indonesia. The results showed that all the input variables had a positive influence on oil palm production along with existing inefficiencies among heterogeneous smallholder farmers. They also indicated that the mean level of the TE among oil palm smallholders was 0.6694. Furthermore, variables such as farmer age, education, type of farmer, and location of the farm had positive and significant effects on TE. Therefore, the development policies in the oil palm smallholder sector might focus on promoting education and facilitate the accessibility of farmers to extension services by giving guidance on farming management based on environmentally friendly principles to improve production regarding land expansion.Keywords: smallholder, stochastic frontier, technical efficiencyJEL Classifications: C51, D24, Q15DOI: https://doi.org/10.32479/ijefi.10594
Highlights
Oil palm oil is a prima donna commodity in the Indonesian estate sector
The results showed that extension services, household size, age of farmers, access to credit, land conservation, household income, experience, education level, farmer group membership, and government intervention affected the technical efficiency of farmers
This null hypothesis was rejected at a significant level of 1%, so there was an effect of technical inefficiency on smallholder oil palm production
Summary
Oil palm oil is a prima donna commodity in the Indonesian estate sector It is one of the sources of foreign exchange earnings, where the contribution to the value of non-oil and gas exports reached 10% in 2019. There is a decreasing price due to trade restrictions and a decline in global demand, this commodity remains the hope of more than 2.6 million farmer households operating, on average, 2.26 hectares per household (Directorate General of Estates, 2019). This sector is an economic driver in some rural areas of Indonesia
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