The Efficiency of Palm Oil Fresh Fruit Bunches in West Pasaman, Indonesia (2010-2017)

Abstract

Palm oil production is important to the economic development of West Pasaman Regency (PASBAR) as most of its village population work in the agricultural sector, particularly in the field of palm oil plantations. The contribution of agricultural sector to Gross Regional Domestic Product (GRDP) is relatively large, approximately 46%, the biggest in comparison with other sectors.  Crude Palm Oil (CPO) is one of the main end products from Fresh Fruit Bunches (FFB) processing that is mainly purposed for export.  The export of CPO in PASBAR is characterized by two functions, i.e., the exporting and the producing firms.  CPO’s factories own nearly all the exporting firms.  This paper argues that there is unfair competition between exporting firms and agents or wholesales in buying FFB in the domestic market. The same misconduct occurs between agents or wholesalers when buying FFB from small collectors, who in turn, buy from palm oil farmers. The purpose of this study is to analyze the efficiency in marketing chains from exporting firms to palm oil farmers. The methods used are desk study, field survey, and questionnaires. The dynamic regression model is used as a quantitative approach. The research results indicate that marketing practice is not efficient as the purchasing prices received by palm oil farmers are low and inadequate. Several efficiency indicators determine it, i.e.: (i). Pbi<Mmi; (ii).Pbi+Ci > Pmi; (iii) FS average 60 %, its not close to 100 %   (iv) ME> 1 (v) Et <1. This implies that the buying price of FFB is less favorable to palm oil farmers. Monopsony in FFB market is one of the main reasons this occurs.