Impact of smallholder inclusivity to the sustainability of the marketing channel

Abstract

Smallholders are a group of oil palm growers in Indonesia, having a share of more than 40% of the Indonesian oil palm plantation area. There are a number of weaknesses that limit their inclusivity in the industry, posing a risk to their sustainability. This study analyses this hypothesis through 3 different types of smallholders representing the highest to the lowest level of inclusivity, namely ex-plasma partner, independent partner, and independent non-partner. Data were collected from 217 smallholders, 8 village collectors, 4 RAM and 2 mills from the province of Riau, Jambi and South Sumatra. Higher selling prices, lower profit margins, and more efficient marketing channel are used to indicate business sustainability. Shepherd, Acharya and Aggarwal, and Composite Index agree that higher selling prices and lower profit margins improve the marketing channel efficiencies, while the Marketing Efficiency Index and Soekartawi marketing efficiency values agree that lower cost of production will do so. The results show that on average, plasma/ex-plasma smallholders present the highest selling price, lowest total profit margin, and high production costs. This is caused by fertilizer usage that follows the recommended amount, improving productivity. Therefore, it can be concluded that inclusivity could improve the sustainability of smallholder marketing channels.