Palm Oil Supply Research Articles

Supply Response Analysis on the Impact of Climate Change on Oil Palm Production in Malaysia

Climate change has significantly impact the economic development and trade of developing countries particularly those largely rely on agriculture. According to the World Bank, oil palm was the main contributor of GDP for Malaysia agriculture. Climate change affects oil palm growth and productivity in a number of ways, including reduction in sex-ration, disrupts the pollination process, abortion of newly produced inflorescence, drops in productivity, and increase in ranges and distribution of pests and diseases. Much of the economic researches devoted to employ production function and Ricardian approach. This study, therefore, focuses to model the effect of climate change on oil palm production by using supply response approach. An annual time series data used for the period of 37 years starting from 1980 until 2016, and Autoregressive Distributed Lags (ARDL) co-integration_-employed in achieving the objective of the study. Six econometric models consisting of linear and non-linear equations were constructed by incorporating temperature and rainfall as proxies for climate variable to estimate the yield response model. The results revealed that oil palm production was very negatively affected by changes in temperature compared to changes in rainfall. Meanwhile, the planted area and own price upsurge the supply of palm oil. The results also indicated that Model 3 and Model 6 were the best model to represent the linear and non-linear effect of climate_change on oil palm production, respectively. Quantifying the impact of climate change on palm oil production can help policy makers and relevant stakeholders to determine the best adaptation and mitigation measures.

Modified failure mode and effect analysis to mitigate sustainable related risk in the palm oil supply chain

ABSTRACT The increasing complexity and the special characteristics of palm oil supply chain lead the companies to be exposed to more risks. Failure in managing supply chain risk can generate huge losses for organisations. In order to maintain its existence and be more sustainable, palm oil industries should not only focus on the economic aspect but also the environmental and social aspects. This research aims to establish risk management to decrease the consequences of possible risks in the palm oil plantation supply chain. Failure Mode and Effect Analysis (FMEA) combined with the Analytical Hierarchy Process (AHP) were used to perform risk management processes. The data were collected through a survey at the management level of a case study company. The results showed that the unsafe and dangerous working environment, natural disasters, and unreliable transportation systems are the most dangerous risk. The proposed modified approach to risk management has been able to improve accuracy in prioritising the sustainable related risk in the palm oil supply chain.

The performance improvement of sustainable palm oil supply chain management after COVID-19: Priority indicators using F-AHP

The performance of sustainable supply chain management today, especially for palm oil, continues to experience a drastic decline from the social, economic, and environmental perspectives. Both the supply and demand sides are undergoing severe disruption due to the COVID-19 pandemic. To survive the COVID-19 situation and afterward, the palm oil industry needs to focus on priority indicators for immediate improvement. For that reason, our study aims to determine the primary indicators used to assess the performance of sustainable supply chain management to improve the palm oil industry's performance immediately. The F-AHP method is used to rank which indicators are focused on the COVID-19 situation and thereafter. The findings of this study designate that there are three main indicators, namely from the economic side (adaptability), the social side (improving employee health and safety), and the environmental side (sustainable supplier management). This finding is beneficial for the industry and for supply chain actors such as suppliers, customers, and the government in taking attitudes and setting policies related to sustainable supply chain management in the face of pandemic.

Feasibility Study Using Added Value Calculation Analysis for Palm Oil Supply Chain

The Palm Oil Supply Chain (POSC) is a series of companies dealing with materials or products derived from oil palm fresh fruit bunches. The chain is interdependent sequentially and cooperate in the control, management and improvement of the flow of products, money and information from the upstream side to the downstream side. The POSC consists of palm oil seed growers, farmers, traders, CPO factory, refinery factory, distributor/retailers, and consumers. The first party in the chain is the palm oil seed or seedling growers. These growers have a very important role for palm oil farmers because the quality of the seeds determines the quality of further fruits. The aims of this study are to evaluate the feasibility study of growing the seedlings, and measure the sensitivity of the factors to the profitability. By using modified Hayami method for the supply chain, the added value obtained is Rp5.950.227.861 which is 34,73% of the sales. The feasibility analysis calculation with an interest rate of 13.5%, shows the NPV of Rp 38.439.321.865, with the BEP of Rp 828.430.058, while ROI result 78,62%, Payback Periode value 1,27, Modified B/C Ratio 1,69, and IRR 78,33%.

Trends in global dependency on the Indonesian palm oil and resultant environmental impacts

Rapid growth in the international demand for palm oil has triggered considerable global concern because oil palm plantations deteriorate the environment where they are developed, resulting in complex environmental impacts in the producer nations. Here, we illustrate the historical trends in the structure of Indonesian palm oil supply chains and how these have been affected by the final demand of other nations since 2000 by using the most recent dataset of global material flows of palm oil and a global input–output database. In addition, the combination of spatial land-use change with palm oil consumption along the supply chains illustrates the linkages between ultimate consumption and land-use changes due to the palm oil plantations. As a result, the major contributors to palm oil production in Indonesia were mostly stable, being India, China, Western Europe, the United States, and Japan. However, the contribution of Indonesia declined by 6% during 2000–2013, illustrating a possible shift towards palm oil being used for non-food demands, such as apparel and medicines. Building on consumption-based accounting schemes as demonstrated by this study are considered necessary to protect local ecosystems and society.

Non-state certification of smallholders for sustainable palm oil in Sumatra, Indonesia

Rapid expansion of oil palm plantations is one of the leading causes of Indonesia’s continued deforestation over the past decades. To reverse this trend against the wave of increasing global demand for palm oil, non-state certification programs, such as the Roundtable on Sustainable Palm Oil (RSPO), have been promoted to ensure sustainable palm oil production. However, limited empirical studies exist for understanding how RSPO is perceived and practiced by various stakeholders along the palm oil supply chain, especially at the source by small-scale farmers. We surveyed 181 certified independent smallholders in two sites in Jambi, Sumatra to understand: (1) the challenges and benefits of participating in RSPO; (2) the willingness of independent smallholders to continue their participation; and 3) the factors affecting their willingness. We found that most of the challenges of RSPO certification are not well understood by smallholders, except the need for organizational support. In both sites, extensive external support from a local NGO was the key factor that facilitated RSPO certification. Most of the respondents recognize both non-financial (e.g. knowledge, market access, and social recognition) and financial benefits (e.g. sales from RSPO credits) of certification. Although overall, direct financial benefits may be small, they can be a motivator for farmers to continue with certification and for others to consider joining the group when disbursed equitably in non-monetary and communal form, such as in shared food. In contrast, indirect and long-term benefits were not enough to motivate smallholders to maintain RSPO certification. This study provides important insights about the characteristics of the leaders (governing members) and factors affecting RSPO participation from actual experiences of certified smallholders. The information can be used to target early adopters to initiate the RSPO process in farmers’ groups and to develop appropriate facilitation strategies at different stages of certification development for independent smallholders.

STRATEGI RANTAI PASOK KELAPA SAWIT DI PROVINSI SUMATERA BARAT

Indonesia is a major producer and exporter of CPO (Crude Palm Oil) in the world with a dominance of 56% of total CPO production in the world and 57% of the total exports of countries in the world. According to GAPKI data the volume of CPO oil exports and derivatives during 2018 reached 32.02 million tons. The Sumatra region has the largest oil palm center in Indonesia, West Sumatra is one of the developing provinces and has potential in oil palm plantations with a total production of 568 680.4 tons / year (West Sumatra in Figures, 2019). However, there are sustainability issues that cover environmental, social and economic aspects which are strategic issues globally. This ongoing issue triggers various risks that can harm various parties and must be managed properly. One way to manage this problem is to supply chain efficiency. With the supply chain efficiency, success factors and palm oil supply chain strategies in the Province of West Sumatra can be determined. This research uses descriptive qualitative analysis method through interviews with related respondents and SWOT matrix. The results showed that success factors were found in the garden chain system, transportation from the garden to the factory, factory and transportation to the storage tank and consumers. The palm oil supply chain strategy obtained is the SO, WO, ST, WT strategy. To meet the integrated supply chain system and sustainable development of palm oil in addressing the existing issues, success factors and strategies for the palm oil supply chain in West Sumatra Province are needed in order to compete in the local and foreign markets.

Sustainable Palm Oil-The Role of Screening and Advanced Analytical Techniques for Geographical Traceability and Authenticity Verification.

Palm oil production from oil palm (Elaeis guineensis Jacq.) is vital for the economy of Malaysia. As of late, sustainable production of palm oil has been a key focus due to demand by consumer groups, and important progress has been made in establishing standards that promote good agricultural practices that minimize impact on the environment. In line with the industrial goal to build a traceable supply chain, several measures have been implemented to ensure that traceability can be monitored. Although the palm oil supply chain can be highly complex, and achieving full traceability is not an easy task, the industry has to be proactive in developing improved systems that support the existing methods, which rely on recorded information in the supply chain. The Malaysian Palm Oil Board (MPOB) as the custodian of the palm oil industry in Malaysia has taken the initiative to assess and develop technologies that can ensure authenticity and traceability of palm oil in the major supply chains from the point of harvesting all the way to key downstream applications. This review describes the underlying framework related to palm oil geographical traceability using various state-of-the-art analytical techniques, which are also being explored to address adulteration in the global palm oil supply chain.

Micronutrient intake and prevalence of micronutrient inadequacy among women (15-49 y) and children (6-59 mo) in South Kivu and Kongo Central, Democratic Republic of the Congo (DRC).

Iron biofortified beans and carotenoid enriched cassava are proposed as a solution to combat iron and vitamin A deficiencies, respectively, in the Democratic Republic of Congo (DRC). To inform the need for biofortified foods, we conducted a survey in 2014 in two provinces of the DRC, South Kivu and Kongo Central. Unexpectedly, women of reproductive age (WRA; 15-49 y) and their children (6-59 m) had a low prevalence of biochemical iron and vitamin A deficiency, based on ferritin and retinol binding protein, respectively. To better understand the lack of biochemical deficiency of these nutrients, we examined the prevalence of inadequate intake for these and other select nutrients. Dietary intake was assessed using 24-hour recalls among 744 mother-child dyads. Repeat recalls on a non-consecutive day were conducted with a subsample of the study population to account for intra-individual variation and estimate usual intake. In WRA, the prevalence of inadequate iron intakes were 33% and 29% in South Kivu and Kongo Central, respecitvely. The prevalence of inadequate vitamin A intakes among WRA was low in South Kivu (18%) and negligible in Kongo Central (1%). Iron inadequacy was highest in infants (6-11 m) at 82% and 64% in South Kivu and Kongo Central, respectively. Among older children (12-59 m) in both provinces, the prevalence of iron inadequacy was similar at ~20%. There was a high prevalence of inadequate zinc intake in women and children (i.e. 79-86% among WRA and 56-91% among children 6-59 m) consistent with our findings of a high prevalence of low serum zinc in the same sample. Dietary data here corroborate the low prevalence of biochemical vitamin A deficiency but not iron. However, any change to the supply of red palm oil (primary source of vitamin A) would dramatically reduce population vitamin A intakes, thus a carotenoid enriched cassava program may be beneficial as a safety net measure. Crops biofortified with zinc also appear warranted. We caution that our findings cannot be extrapolated to the entire Congo where diverse agro-ecological landscape exist or when political and environmental shocks occur which challenge food production.

Socio technical analysis of palm oil plantation in North Sumatera Indonesia: making sustainable supply

This paper has an aim to present a socio-technical analysis of palm oil plantation in North Sumatera Indonesia. This analysis is beneficial to support stakeholders in the Indonesian palm oil industry in designing strategic plans for making sustainable supply of palm oil. North Sumatera province has large areas of palm oil plantation and acts as one of important crude palm oil producer for Indonesia. Palm oil industry contributes to the economic and to the life of citizen in this province. To sustain supplies from palm oil plantations, social and technical aspects are necessary to maintain. Social aspects such as the behaviour of palm oil smallholders in cultivating their plantations and technical aspects such as availability of technology to support palm oil cultivation influence the supplies from plantations. Socio-Technical Framework and SWOT (Strength, Weakness, Opportunity, and Threat) were used to analyze the existing condition of palm oil plantation in North Sumatera Indonesia. To get supporting information, interviews with farmers, suppliers, palm oil researchers were conducted. The result indicates that there are several weaknesses and threats reducing the chance to sustain the supplies of palm oil.

The activities of the integration of oil palm and cattle (ISAPI) by group of farmer and its development strategy in Lamandau district, Central Kalimantan Province

The sustainable cattle farming approach is integrated with plants and the most potential is the oil palm plantation industry, because the potential of feed resources is cheap and abundant available. The research activities carried out in the Farmer Group in Lamandau district after 3 years of introduction of oil palm-cattle integration (ISaPi) through the introduction of technology for making organic fertilizer and complete feed based on the oil palm plantation industry. The information was obtained from primary data through interviews with farmer groups and key informants from the Agriculture Service and PBS of Oil palm during the Focus Group Discussion (FGD) and secondary data was obtained from study desks. Field survey was also conducted. Data were analyzed descriptively and SWOT. Lamandau Regency is ideal for developing ISaPi activities, because of the potential feed resources from the oil palm plantation industry, in the form of oil palm fronds, solid palm oil and palm kernel meal (BIS). Oil palm plantations in Lamandau District with an area of 175,480.46 ha if only 25% of ISaPi activities have the potential to develop livestock around 73,977 animals throughout the year, due to the supply of solid palm oil from 1 PKS, forage in the oil palm area and oil palm fronds. There are 10 farmer of groups and One individual that consistently applies ISaPi activities with various models of application adjusted to the availability of human resources, access to palm oil mills (PKS) and capital from each farmer group. The difference in the application of ISaPi is in the formulation of animal feed (solid palm only or complete feed) and the allotment of organic fertilizer that was produces. Increased productivity and income from the farming is a major factor in ISaPi’s activities keep it running. The strategy for developing of ISaPi activities in Lamandau District by taking into account existing of internal and external factors is to maximize the utilization of the potential of existing resources to increase farm productivity (palm, livestock and horticulture) and diversify farm income by applying technology that is already available and controlled by groups of farmer. With the application of technology, it will be able to increase the added value of products which it was produced. The limiting factors such as access to PKS, product marketing and capital were need support and commitment from related parties, especially the local government and this has been initiated by the local government.

ANALISIS DAN PENENTUAN STRATEGI PERBAIKAN NILAI TAMBAH PADA RANTAI PASOK KELAPA SAWIT (STUDI KASUS PROVINSI RIAU)

Palm oil has become a leading commodity for improving the economy in Indonesia. At present, many people depend their lives on the plantation and oil palm agro-industry sectors through the establishment of supply chain links. In the palm oil supply chain, there are business actors from upstream to downstream. However, nowaday, every actor has different added values ​​for each level. This study aimed to measure the level of added value at each level of the palm oil supply chain and at the same time determine the strategy of added value improvement in the future. Based on calculations made by the Hayami method, added values at the level of independent smallholders, traders, and factories were 18.6%, 20%, and 28%, respectively. While the profits obtained by farmers, traders, and factories were Rp 4,125,900, Rp 56,400,000, and Rp 4,127,324,500, respectively. Then, by using the Non-numerical Multi Expert Multi Criteria Decision Making Method, recommended strategies have been obtained, among others through improving GAP, and development of cooperation and partnerships. Keywords: added value, palm oil, supply chain, strategy

From Agroforestry to Agroindustry: Smallholder Access to Benefits From Oil Palm in Ghana and the Implications for Sustainability Certification

Oil palm production in Ghana—which is primarily cultivated by smallholders (60%+)—plays an important role in local economies and rural livelihoods. As a multi-functional crop, it is embedded in the everyday life of rural and urban Ghanaians both by individual households and on an industrial level. The sector is currently experiencing a resurgence under Ghana’s New Patriotic Party (NPP) rule and is being targeted by the Roundtable on Sustainable Palm Oil (RSPO) for yield intensification and increased export production. End goals of these efforts include poverty alleviation, environmentally responsible development efforts, and agricultural diversification in rural areas. We apply Ribot and Peluso’s “theory of access” (2003) to assess the barriers and opportunities for smallholder oil palm farmers, and the degree to which these are addressed by RSPO interventions. Our results highlight how Ghanaian smallholders gain many benefits from palm oil production as a source of regular income, a drought-resilient crop, and a source of cooking oil for household use. However, they also report different levels of access to finance, markets, land, and technical support, along with differing views and visions of the oil palm sector’s development. The focus of governmental and RSPO initiatives on international trade-based incentives overlooks this diversity and, in particular, the importance of local markets for Ghanaian livelihoods. This poses a threat to women millers and traders, poorer producers, and the local markets they supply who risk losing access to the palm oil supply chain. More generally, these findings illustrate the importance of understanding how markets interact at multiple local to international scales, in order to design interventions that will more equitably reach and benefit local communities.

Determining soil fertility using principal componen regression analysis of oil palm plantation in West Sulawesi, Indonesia

Palm oil is one of the most popular vegetable oils in the world besides soybean oil. Nowadays, more than 80% of the world’s palm oil supply comes from Indonesia and Malaysia. As the largest supplier, Indonesia must be improved and maintained its productivity with good management, such as maintaining soil fertilization to produce the best oil palm. This activity requires analysis of the soil chemical factors and soil conditions (fertile or not) from oil palm plantations, which involves a large amount of data. Principal component regression is an appropriate statistical method to solve the problem. In this method, the coefficient of the regression model is the coefficient of the principal components (PCs). Dimension reduction is performed on the predictor variables that have a high correlation so that the PCs have an insignificant correlation. The data are obtained by measuring soil samples around the trees from oil palm plantation in West Sulawesi, Indonesia. The data consist of sixteen variables and thirty-six observations (0-20 cm) for each variable. There are three PCs that become predictors of the regression model with information absorption rates reaching 78%, i.e., some macronutrients (Potassium oxide, Potassium, Calcium, and Cation exchange capacity), soil acidity and organic properties (Carbon and Nitrogen). Furthermore, the accuracy of the estimation value in this logistic regression model reaches 90% by using stepwise backward method.

Production Optimization Design in Supply Chain Crude Palm Oil with Genetic Algorithm Method

Indonesia is the world's largest producer of crude palm oil (CPO). At peak harvest conditions, frequent accumulation of fresh fruit bunches (FFB) due to abundant raw materials. Based on data from one palm oil mill in the province of North Sumatra, the percentage of FFB stays in the field overnight, which is 41% of the total FFB though, on the one hand FFB that has been harvested must be processed immediately because it can affect the quality of oil to be produced. Besides that, the factors of production and storage processes are also very influential on the quality of CPO. The imbalance in production planning shows that production planning is not yet optimal in the CPO supply chain so that a production optimization design is needed in the CPO supply chain. The genetic algorithm was chosen in the completion of the optimization model because of the complex characteristics of the CPO supply chain. The purpose of this research is to optimize the palm oil supply chain system to minimize production costs. This method shows that the optimum production yield for the third quarter of 2017 is 12,202,285 kg. With the proposed system an increase in the percentage of CPO production was obtained by 8.34% compared to the actual system.

Supply chain performance measurement and improvement of palm oil agroindustry: A case study at Riau and Jambi Province

Supply chain performance measurement and improvement is required to control the performance and define a strategy to improve agroindustry’s competitiveness. The objectives of the research were to identify supply chain configuration and mechanism, and to analyze the supply chain performance and define the supply chain performance improvement for palm oil agroindustry. The research was conducted at Riau Province and Jambi Province as the central palm oil production in Indonesia. The Supply Chain Operation Reference (SCOR) and Analytical Hierarchy Process (AHP) were applied to analyze the supply chain performance and the performance improvement strategies were formulated descriptively with expert discussion. The results showed that the average performance of farmers, traders and refinery at Riau Province were 77.77%, 74.60% and 79.20%. The average performance of farmers, traders and refinery at Riau Province were 72.66%, 75.39% and 83.11%. This research had succeeded to define the strategies to improve palm oil supply chains at Riau Province and Jambi Province. The strategies were focused on good agricultural and good handling practice, specifying the palm oil prices refractions based on quality and implementing the information system to improve the supply chain performance.

MODEL PENAWARAN DAN PERMINTAAN MINYAK KELAPA SAWIT INDONESIA DI PASAR INTERNASIONAL

ABSTRACT
 
 Indonesia is the leading producer of palm oil in the world. In 2016 Indonesia and Malaysia produced 81% of the world's palm oil. This study aims to analyze the response of the supply and demand for Indonesian palm oil in the world market. This study used time-series data from 1980-2016. The model built is an econometric model, simultaneous equations. To answer the research objectives, the data were analyzed using the Two Stages Least Square (2SLS) method. The main finding of this study is that in the short term, there are no responsive variables. In the long term, the variable that is responsive to the supply of Indonesian palm oil is the lag area of Indonesian palm oil. In the Malaysian palm oil supply equation, the response variable is the lag area of Malaysian palm oil. In terms of domestic demand for Indonesian palm oil, there are no responsive variables both in the short and long term. In the equation of demand for Malaysian palm oil, the responsive variables are the price of Malaysian palm oil and the price of Malaysian coconut oil. In the international demand for palm oil, the responsive variables are the increase in world palm oil prices, world palm oil prices, 2-year lag in world palm oil prices, and GDP per capita Pakistan. In terms of price, the responsive variable affecting the price of Indonesian palm oil is the world price of palm oil.

Determining optimal replanting rate in palm oil industry, Malaysia: a system dynamics approach optimal policy search in oil palm plantation feedback loops using system dynamics optimisation

One of the important factors that contribute to the stagnant growth of Malaysia's crude palm oil production is the accumulation of ageing oil palm plantation area. Given the scarcity of new plantation area in Malaysia, it is very important that an optimal replanting rate has to be determined to decrease the accumulation of ageing area. The objective of this study is to determine an optimal replanting rate for oil palm industry in Malaysia. This study compared the trend results of fresh fruit bunches (FFB) yield using base run system dynamics (SD) and SD with optimisation analysis. Findings indicate that the proposed optimal replanting rate based on SD revealed the maximum production of the FFB yield by year 2050 compared to base run analysis. Findings from this study proposed the appropriate planting strategy to ensure the continuous supply of palm oil without significant disruption if high replanting rate has been implemented.

Determining optimal replanting rate in palm oil industry, Malaysia: a system dynamics approach optimal policy search in oil palm plantation feedback loops using system dynamics optimisation

One of the important factors that contribute to the stagnant growth of Malaysia's crude palm oil production is the accumulation of ageing oil palm plantation area. Given the scarcity of new plantation area in Malaysia, it is very important that an optimal replanting rate has to be determined to decrease the accumulation of ageing area. The objective of this study is to determine an optimal replanting rate for oil palm industry in Malaysia. This study compared the trend results of fresh fruit bunches (FFB) yield using base run system dynamics (SD) and SD with optimisation analysis. Findings indicate that the proposed optimal replanting rate based on SD revealed the maximum production of the FFB yield by year 2050 compared to base run analysis. Findings from this study proposed the appropriate planting strategy to ensure the continuous supply of palm oil without significant disruption if high replanting rate has been implemented.

Comparative Palm Oil Trade Performance in Indonesia, Malaysia, and the Philippines

Purpose – As one of the most traded commodities in the world with tremendous economic significance, palm oil is an inexpensive source of oil. This paper examined and compared the palm oil trade performance of the Philippines relative to its top palm oil producing neighbors, Indonesia and Malaysia, by analyzing import-export volume trends of the said food commodity, consumption and production trends, self-sufficiency, import dependence, and shifting patterns of comparative advantage. Design/Methodology/Approach – Secondary data covering the period from 1964 through 2018 were collected from various sources, and descriptive analysis coupled with trend analysis were employed with respect to import and export, production, and consumption performance. Other trade indicators were computed, to wit: balance of trade, self-sufficiency ratio, import dependency ratio, and normalized trade balance. Implications were drawn after the comparative analysis among the three countries was done. Findings – An increase in the volume of the palm oil supply in the Philippines is evident, and this is attributed to increasing importation. Relative to Malaysia and Indonesia, the Philippines lags behind in international trade. While Philippine palm oil industry growth has been stagnant in terms of international trade by virtue of its net importer status, Malaysia and Indonesia have overtaken the country significantly, having attained self-sufficiency in the commodity with trade surpluses, and the gap is expected to widen in the coming years. It is interesting to note that the Philippines, Malaysia, and Indonesia had identical production volumes and growth rates until the last decade of the 21st century. A steadily growing industry, palm oil is foreseen to continue being a vital industry, not only to top producing countries such as Malaysia and Indonesia but also in the Philippines, which is trying to improve its palm oil trade performance by expanding production. Research Implications – The study findings imply expansion and income opportunities not only for local oil palm producers, processors, and traders in the Philippines but also for foreign market entrants.