PRICE TRANSMISSION ELASTICITY ANALYSIS OF CRUDE PALM OIL AND FARMER’S SHARE IN INDONESIA: A CASE OF SELF RELIANCE PALM OIL FARMER IN MUSI BANYUASIN DISTRICT, INDONESIA

Abstract

This study that will examine how self-reliance farmers can conduct their oil palm plantation business activities. Palm oil cultivation carried out by self reliance farmers with its own funds, ranging from procurement of agriculture equipment and inputs to the marketing of product. The marketing of oil palm in the form of Fresh Fruits Bunch (FFB) to the Palm Oil Factory through existing marketing agencies, including collectors or wholesaler. This marketing system will affect the price that the famer received (Famer's Share) and will have an impact on their income. In recent years, some agricultural commodities that have export value such as palm oil face fluctuating selling prices, where CPO selling prices are influenced by the world prices which automatically impacts the price of FFB in the farmer’s level. The research conducted in Musi Banyuasin District, South Sumatra Indonesia. This research used primary and secondary data including characteristics, land area, production, cost, FFB Price, and marketing channel. This research also concerns to examine elasticity of price transmission, marketing channels and farmer's share of oil palm. The results obtained there are two patterns of marketing channels, which are efficient to adapt. This study shows share at the farmer level was 66.03% and share at the trader level was 33.97%. The elasticity value of price transmission obtained et < 1, which is et = 0.858, that’s means the elasticity of price transmission is inelastic, where the rate of change in FFB price at the farmer level is smaller than the rate of change in world CPO prices.

Keywords

• ffb
• cpo prices
• marketing channels
• elasticity value