Authors: Diana Chalil, Riantri Barus, Hasnah, Anisa Dwi Utami, and Bayu Krisnamurthi
Abstract. Oil palm smallholders usually have low yield encouraging them to extend land areas. Some studies suggested increasing yields can lead to higher income and prevent smallholders from extending land areas. This paper aims to analyze the correlation between oil palm smallholders’ Technical Efficiency (TE), income, household expenditure and deforestation mitigation potential. Research was conducted in July 2021, involving 160 smallholders, selected using the disproportionate stratified random sampling method. South Angkola and Batang Toru in South Tapanuli, Indonesia were selected as the research locations. Data was analyzed using the stochastic frontier analysis. The mean of TE level of smallholders (0.8) implies that the yield level of oil palm only reaches 80% of potential yield. Landholding size, farmers’ education, and group involvement influence significantly TE level. At current production level, farmers get an income about IDR 49 million/year. An additional income of IDR 6.3 million/year is needed to cover household expenditure, which is equal to 0.2 ha. With 4,142 oil palm smallholding households in South Tapanuli, the total reduction in land needs will be around 838 ha. At optimal level of production (TE=1), the income could increase to IDR 64.5 million/year. It is higher than the household expenditure, thus no additional land is needed.
