Potentials to reduce deforestation by enhancing the technical efficiency of crop production in forest margin areas

Abstract

The establishment of tree crop plantations such as oil palms, coffee, or cocoa considerably contributes to the loss of tropical forests. Taking the case of cocoa production in Central Sulawesi as an example, this chapter investigates whether there is a potential for reducing deforestation by improving the productivity of tree crop plantations in rainforest margin areas by better crop management. Increased productivity would enable farmers to earn a living from a smaller area of land; thus, the expansion of low-productivity perennial cropping systems into forest land can be viewed as a waste of forest resources. In order to assess whether the productivity of the existing cocoa plantations in the research area could potentially be improved, the level of technical efficiency attained is estimated. A farmer is technically inefficient if he fails to produce the maximum output attainable for the level of inputs he uses. Technical inefficiency is caused by lacking know-how, for example with respect to the timeliness of agricultural operations such as weed control or crop hygienic measures. After introducing the concept of technical efficiency (TE) and describing the method of Stochastic Frontier analysis to empirically estimate the level of TE, we show how this method was applied to our Sulawesi case. Using data collected in a sample of 202 farm households, we estimate separate Stochastic Frontier production functions for the two most important crops in the research area: cocoa, the primary cash crop, the cultivation of which has become widespread only in the 1990s, and irrigated rice (paddy) that has been grown for generations. Apart from estimating the levels of TE attained, we also investigate the influencing factors of efficiency in one single statistical procedure. The estimated average TE in rice production is 77% as opposed to only 37% in cocoa cultivation; thus, the potential to increase production by improving crop management (not by increasing the level of input use!) is particularly large in the case of cocoa. The analysis of the factors influencing TE shows that poverty and illiteracy have an efficiency reducing effect in both rice and cocoa production. Agricultural extension services significantly increase efficiency in rice cultivation while this effect is not observed in cocoa production. Acknowledging that increasing the productivity of perennial cropping systems in forest margin areas may also create incentives for deforestation, we then discuss the conditions under which enhanced productivity can be expected to have a forest saving or a forest clearing effect. We finally assess the likely outcome of improved TE in the case of Central Sulawesi and conclude that the comparatively low efficiency level currently found indicates a considerable potential for reducing deforestation by increasing farm incomes on already converted forest land, thus meeting both environmental and economic objectives. Policy interventions aimed at realizing this potential should include improved agricultural extension focusing on technical advice on the proper management of cocoa, but, at the same time, they need to control the influx of migrants attracted by the profitability of cocoa cultivation.