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International Journal of Recent Technology and Engineering (IJRTE)
ISSN: 2277-3878 (Online), Volume-8 Issue-6, March 2020
Impact of Land Conversion on Oil Palm Production
and Income
Edison
Abstract: Objective of study was to evaluate impact of land In the meantime, productivity improvement should not be
conversion on oil palm production, evaluate its impact on income done by using more efficient technology, biological
of oil palm, and explore effect of social-economic aspects to land technology, mechanical technology and social technology.
conversion of oil palm. Research used cross section data of 200 However, this technology certainly leads to savings of
respondents. Data was analysed using qualitative and labour in the sector concerned (Adriani et al. 2017).
quantitative method. Results showed that a significant factors In agricultural business, production is obtained through
affected oil palm production which included land acreage, labour a long and risky process. The time gap required is not the
and capital. Significant factors affected income were selling price same depending on the type of commodity being cultivated.
and capital. Then, socio-economic factors affected land Not only time, the adequacy of production factors also
conversion of oil palm such as education, income and saving. It
found that paddy fields are more converted to oil palm fields, in contribute as a determinant of production achievement. In
which paddy fields were more in dryland than technical terms of time, the plantation business requires a longer
irrigation. Then, in terms of farming analysis, efficiency period compared to food crops and some horticultural crops.
smallholder oil palm was higher than efficiency paddy (B/C on Each type of plant also has a different periodization of each
paddy was of 1.02 and B/C on oil palm was of 1.71). other (Edison, 2020).
The new production process can run if the required
Keywords: land conversion, oil palm, production, income requirements can be met, this requirement is better known as
I. INTRODUCTION the production factor. Input contain four components, i.e.
Agricultural sector is a very crucial sector of its role in land, labour, capital, and skill or management (Daniel,
economy in most of developing countries. It can be found 2012). Each of these factors has different functions and they
from role of agricultural programme in supporting people as are related to each other. If one factor is not available, then
well as providing employment opportunities to people, the production process will not run, especially the three
contributing national income and supporting to various factors mentioned above. These factors of production are
product. Various data explored that in some developing something that absolutely must be available that will be
countries over 68% of people is in agricultural sector and more perfect if sufficiency requirements can be met. The
over 45% of national income is come from agricultural capital production factor is partially allocated to provide the
sector and almost all exports are agricultural commodity input of physical production, i.e. seeds, fertilizers and
(Todaro, 2008). pesticides. Production input is one of the determinants of
Development and modernization of agriculture in production activities, because plants need it to grow and
developing countries can contribute to increase production, develop well (Asni, 2015).
increase farmer income and provide markets for industrial Production activities are activities in a rather narrow
sector production, expand employment opportunities, scope and therefore discuss the micro aspects. In studying
increase exports and create savings for development. this aspect, the role of input production and output (output
Agricultural and rural development actually contains many or production) relationships gets the main concern. The role
dilemmas (Wildayana and Armanto, 2018). On the one hand of input can not only be viewed in terms of its kind or
availability in a timely manner, but also can be reviewed in
agricultural production and productivity must be improved. terms of efficiency of its use (Alwarritzi et.al. 2015).
Increased production and productivity is a must because it is Because of these factors the productivity gap (yield gap)
the basis and prerequisite for the process of industrialization between productivity and productivity produced by farmers
(De Vos, 2016). If high growth rates of the agricultural is required. In many cases, as long as this productivity
sector can be achieved, changes in production structures that occurs because of factors that are difficult to overcome by
reduce the level of relative productivity and even then will human (farmers) such as the existence of technology that
not be avoided unless the employment structure can also be can not be moved and the existence of environmental
changed following changes in the production structure. differences, such as climate. Since these two factors are very
difficult to overcome by farmers, the resulting differences
caused by these two factors lead to the productivity gap
from the experimental results and from the potential of a
Manuscript received on February 10, 2020. farm. (Soekartawi, 2006).
Revised Manuscript received on February 20, 2020.
Manuscript published on March 30, 2020.
* Correspondence Author II. REVIEW OF LITERATURE
Edison*, Dept. of Agricultural Economics, Universitas of Jambi,
Indonesia. E-mail: ediedison950@yahoo.co.id Land as one of the factors of production is a factory of
agricultural products which is the place of the production
© The Authors. Published by Blue Eyes Intelligence Engineering and process and the production is obtained. In agriculture, the
Sciences Publication (BEIESP). This is an open access article under the CC factor of land production has a very important position.
BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
According to Schwarse et al.
Retrieval Number: F7408038620/2020©BEIESP
DOI:10.35940/ijrte.F7408.038620 Published By:
Journal Website: www.ijrte.org Blue Eyes Intelligence Engineering
337 & Sciences Publication
Impact of Land Conversion on Oil Palm Production and Income
(2005), the change of function of land is the change of employment opportunities, and the increasingly damaged
one land use to another, so that many problems arise related environment (Saswattcha et al. 2016). Based on previous
to land use policies. studies, in this study it is suspected that there are factors that
This transfer of land functions generally involves influence the decision of farmers to transfer land functions.
transformation in allocating land resources from one use to These factors are the area of land with adequacy irrigation
another. Change of function of agricultural land is an issue water, difference in revenue from rice farming with cocoa
that needs attention because the community's dependence on and oil palm, the tendency of the development of paddy,
the agricultural sector, especially food. In land conversion cocoa and palm oil prices.
activities, it is very closely related to land demand and
supply, where supply or supply is very limited while land III. OBJECTIVES
demand is not limited (Krishna et al, 2016). Factors Objective of research was to evaluate impact of land
affecting land supply are natural physical characteristics, conversion on oil palm production, evaluate its impact on
economic factors, economic factors, and institutional income of oil palm, and explore effect of social-economic
factors. Besides the factors that demand for land are the aspects to land conversion of oil palm.
population, technological developments, habits and
traditions, education and culture, tastes and goals, and IV. RESEARCH METHODS
changes in attitudes and values caused by age development
(Irawan, 2012). Research method conducted using a survey
According to Pastusiak et al. (2017), land use change method. Research area was identified purposively in Tanjab
generally involves transformation in the allocation of land Timur District and Muaro Jambi District. Because Jambi
resources from one use to another. According to Vijay et al. becomes one of best production of oil palm in Indonesia.
(2016), changes in land use patterns are essentially Tanjab Timur District and Muaro Jambi District had high
permanent and can also be temporary. If the technically number land conversions to oil palm in Jambi.
irrigated paddy field turns into a residential or industrial Cluster Sampling methods was used to identify
area, then land conversion can be permanent. However, if respondents. In order to cover attentions from varies aspects,
the rice fields are turned into plantations, then the number of samples are 200 households (65 respondents on
conversion of land can be temporary, because in the coming paddy farmers, 65 respondents on oil palm farmers and 70
year it can be turned into fields again. The conversion of respondents on paddy with oil palm farmers). Study was
permanent land functions is usually greater than the evaluated in 2019.
temporary transfer of function. Irawan (2012) revealed that Cobb-Douglas production function model used in
the negative impact of the conversion of paddy land is the this study. Mathematically, expression of Cobb-Douglas
degradation of the carrying capacity of national food production function model is: (Soekartawi, 2009)
security, declining agricultural income, and increasing 1 2 m
Q = I I .. I v ………………… 1
poverty of local communities. In addition, other impacts are 1 2 m
the destruction of paddy ecosystems, as well as cultural And it can be expressed in logit form as:
Log Q = log + log I + log I + ... + log
changes from agrarian to urban culture, causing crime. 0 1 1 2 2 m
I + e …………………………………….. 2
According Wuepper et al. (2018) that land use change m
Where, Q is yield, I ... I are inputs component, and .....
that occurs has both direct and indirect impacts. The direct 1 n 1
= regression coefficient.
impacts caused by land conversion include loss of fertile n Input used consists land acreage, input labour, and
agricultural land, loss of investment in irrigation input capital. There are factors that affect income assumed
infrastructure, natural damage to the landscape, and including yield, price, input labour, and input capital.
environmental problems. From the studies mentioned above, Linkage input that affects yield and income is expressed in
it can be seen the factors that influence the decision of Cobb-Douglas production function (Gujarati, 2008).
farmers to switch from rice to non-paddy rice. In this study Cobb-Douglas production function will be used to
the factors that caused farmers to change their land use know effect input on paddy production as:
include the area of land owned by farmers in the study area, 1 2 3
Q = I I I u ………………. 3
the adequacy of irrigation water for wetland rice, differences 0 11 12 13 1
in revenue from rice farming with cocoa and oil palm, and Through logarithmic formulation, equation (3) is stated to
trends in the development of prices for lowland rice, cocoa, linear equation using Ordinary Least Square (OLS) method
and palm (Hadi, 2014). There are several causes of the high as:
Log Q = Iog + log I + log I + log I
land use change including low profitability of lowland rice 1 0 1 11 2 12 3 13
+ u …………………………….. 4
farming, non-compliance with spatial regulations (weak law 1
enforcement on spatial planning), desires to get short-term Where, Q1 is yield, I11 is land acreage, I12 is labour, I13 is
capital, and - = regression coefficient.
benefits from the conversion of paddy land, and low 1 3
coordination between institutions and departments related to Equation model that expressed paddy income is as
use planning land (Amurtiya et al., 2016). follows:
Log Q = log + log I + log I + log
Land is a strategic resource and has economic value. 2 0 1 21 2 22 3
I + log I + u ……………. 5
The area of agricultural land continues to decline each year, 23 4 24 2
Where, Q is paddy income, I is yield, I is price, I is
especially paddy fields. Extensive paddy fields are very 2 21 22 23
important to obtain maximum production results. But along input labour, I is input capital, - is regression
coefficient. 24 1 4
with the land use change that occurred, the area of wetland
rice has declined. In addition there are some losses that must
be calculated as a negative impact of the function of rice
fields, such as the loss of potential rice production, loss of
Retrieval Number: F7408038620/2020©BEIESP Published By:
DOI:10.35940/ijrte.F7408.038620 Blue Eyes Intelligence Engineering
Journal Website: www.ijrte.org 338 & Sciences Publication
International Journal of Recent Technology and Engineering (IJRTE)
ISSN: 2277-3878 (Online), Volume-8 Issue-6, March 2020
Input model that explain oil palm yield is expressed expressed that oil palm needed few labour than rubber plant
as: which became one of crucial plants.
Log Q = log + 1 log I + log I + log I
3 0 31 2 32 3 33 Agricultural Production Costs.
+ u …………………………….. 6
3 In traditional paddy farming, some costs are linkage
Where, Q is oil palm production, I is land acreage, I is
3 31 32 labour costs from preparation till harvest. Meanwhile,
labour used, I is capital, - is regression coefficient.
33 1 3 improvement in paddy cultivation using machinery, paddy
Furthermore, input model that explain income of
oil palm is expressed as: becomes more expensive. Production costs paddy was 2
Log Q = log + log I + log I + log I million IDR/ha/year per planting season. It covered fertiliser
4 1 41 2 42 3 43 costs (26%), land processing and harvest costs (74%).
+ log I + u …………………. 7
4 44 4 Furthermore, cost on oil palm is about 3 million
where, Q is oil palm revenues, I is yield, I is selling
4 41 42 IDR/ha/year. It covered fertiliser costs (38% ), and
price, I is labour used, I is capital, - is regression
43 44 1 4 harvesting costs (62%). Cost for cultivation and harvesting
coefficient. in paddy was about 68% of production costs.
Finally, equation input model that affect area paddy
that convert model to oil palm plantation is as: Paddy and Palm Oil Productivity.
Log Q = log + log I + log I + log I
5 1 51 2 52 3 53 Paddy productivity is about 5.5 tons/ha/time, then when
+ log I + log I + log I + u ….. 8
4 54 5 55 6 56 5 farmer cultivates twice in a year, productivity is 11
Where, Q is oil palm income, I is yield, I is price, I is
5 51 52 53 tons/ha/year. However, farmers grow mostly one each year
input labour, I is input capital, I is land acreage, I is
54 55 56 with productivity about 2,75 tons/ha/year. This condition
water availability, - is regression coefficients.
1 6 caused paddy farmers had small income than oil palm
V. RESULT AND DISCUSSION farmers. Indonesian Central Bureau of Statistics data (2018)
showed that productivity of dryland paddy was 5.31
Characteristics of Respondents tons/ha/year. This meant that paddy productivity carried out
Farm size. Farm size each farmer was in average 2,00 in research area is smaller than paddy productivity in
hectare, and area farming owned was generally unity in Indonesia. Meanwhile, oil palm productivity on averages
different cropping patterns. In average, farm size of rice was 22.5 tons of fresh fruit bunches/ha/year in research area.
farmers was 1,58 hectare while farm size of oil farm farmers When, It was compared to other plantations results about 24
was 1,69 hectare. With variation cultivated land, agricultural tons/ha/year, that result was closed to 1 ton/ha/month.
activity is classified as small farmers. In research area,
respondents plant oil palm by changing their paddy in the Input Affecting Production and Income on Paddy
existing land and it was not allow to extent their cultivation (a). Analysis Input Affecting Production on Paddy
land only if they buy other land. Therefore, cultivated paddy To test Hypothesis in this research, it is used
area is usually little bit different from oil palm cultivated quantity model from cross-section data about 65 samples.
area. Land conversion from paddy to oil palm, did not cause Estimation of input affecting paddy production was
much different in their farming land. Before farmers change
to use new technology, farmers were not successful on Table 1. Estimation of Paddy Production
paddy cultivation. Some of them move to do other job to Item Coefficient Std. Error t- value Probability
look for new better life. Others leave their land to Constanta -12.672
inheritance of land cultivation to their children. Log I 0.489 0.129 3.78 0.0007
11
Log I 0. 012 0.015 0.78 0.0782
Labour Use. Labour use in paddy was in averages of 12
Log I 0. 594 0.120 4.93 0.0002
27,9 workdays/cultivation season on per existing land. This 13
is rather high because they did not use mechanization. This 2
condition can be seen when they worked on land preparation R adj 0.8142
F-stat 74.25
and harvesting. If they used only human labour, it took
around 25 workdays per hectare. When it used machine to 2
From estimation, it found that adjusted R equals of
harvest, it needed only around 4 hours per hectare. 0.8142. It had meaning that input of land acreage, input
Mechanisation can increase farmers ability to operate their labour and input capital was to explain paddy production.
land. On research area, considering movement agricultural Model can explain problem about 81.425 and about 18.58%
mechanisation, it had changed paddy farming from labour was influenced other problems not included in model. F-test
intensive to capital intensive. Mechanization has been used was 74,25. It had a meaning together (simultaneously)
in land cultivation i.e. hand tractor. Doing seedling did not among land acreage, input labour, and input capital affected
also used because of existing of tabela (direct seed planting variation paddy production.
without seedling method). It also used Combined harvesters
for harvesting. Condition was the same as Brhanu (2018) (b). Analysis of Input Affecting Paddy Income
who stated that applying mechanical technology could Paddy income covers income earned from paddy after
increase productivity significantly. deducting cost incurred to get paddy. Estimation of input
Labour on oil palm cultivation is not really different affecting paddy income was
from paddy. Oil palm joining to private plantation do all
activities for their activities. Oil palm used labour was only
about 18 workdays for every 6 months for 2 ha. Therefore,
farmers’ leisure time is high, allowing farmers to work on
other activities. Result was the same as Krishna et al. (2016)
Retrieval Number: F7408038620/2020©BEIESP
DOI:10.35940/ijrte.F7408.038620 Published By:
Journal Website: www.ijrte.org Blue Eyes Intelligence Engineering
339 & Sciences Publication
Impact of Land Conversion on Oil Palm Production and Income
Table 2. Estimation Income on Paddy production, price, input labour and input capital affected
Item Coefficient Std. Error t- value Probability variation oil palm income.
Constanta 31.113 Analysis Input Causing Paddy Converting to Oil Palm
Log I 3.903 1.297 3.01 0.0001
21 It found that estimation of input affecting paddy
Log I 3.284 0.623 5.27 0.0009
22 converting to oil palm can be seen as follows:
Log I 0.924 1.593 0.58 0.0000
23
Log I 0.884 0.902 0.98 0.0028
24 Table 5. Estimation Input in Oil Palm Conversion
2 Item Coefficient Std. Error t- value Probability
R adj 0.8269 Constanta 18.254
F-stat 91.78 Log I 0.712 0.172 4.13 0.0001
51
Log I 0. 538 0.217 2.48 0.0009
2 52
It found from estimation that adjusted R equal of Log I 0. 607 0.116 5.78 0.0000
53
0.8269. It had meaning that input quantity, price, input Log I 0. 671 0.227 2.96 0.0028
54
Log I 0. 328 0.388 1.87 0.0046
labour and input capital was to explain paddy income. 55
Log I - 0.209 0.127 1.64 0.0053
Model can explain variation paddy earnings about 82,69%. 56
And about 17.31%, was influenced other variables not 2
R adj 0.8109
included in model. F-test was 91,78. It had a meaning F-stat 46.32
together (simultaneously) among production, price, input
labour and input capital affected variation paddy income. Result found that adjusted R2 was about 0.8109. It had
meaning education factor, social factor, income factor,
Input Affecting Oil Palm Production and Income money factor, land suitability, water factor was to influence
(a). Analysis Input Affecting Oil Palm Production land conversion of oil palm. Model can explain variation of
Estimation production on oil palm used cross-section oil palm about 81.09%. And, about 18.91% was influenced
data about 65 samples. Estimation input affecting oil palm not included in model. F-test was 46.32. It has a meaning
production can be seen as follows: together (simultaneously) among social factor, income
factor, money factor, land suitability, water factor affected
Table 3. Estimation Production on Oil Palm converting oil palm.
Item Coefficient Std. Error t-value Probability Therefore, social factors (such as education, interested),
Constanta 21.618 economic factors (such as income, money), and land factors
Log I 0.589 0.125 4.73 0.0001
31 (such as land, water) have impact significantly in conversion
Log I 0. 972 0.190 5.11 0.0009
32 paddy to oil palm. Specifically, factors caused land
Log I 1.002 0.138 7.26 0.0000
33
conversion paddy to oil palm which was economic factor
2
R adj. 0.8293 and social factor.
F-stat 41.94 Based on estimation, it found that water factor showed
2 negative effect but not significant. It meant that paddy that
It found that from estimation that adjusted R equal convert to oil palm was not technical irrigation land. Result
0.8293. It had meaning that land acreage, input labour and also explored that level education of farmers, paddy acreage
input capital was to explain oil palm production. Model can had impact to switch to oil palm plantation as well as
explain variation oil palm production about 82.93%. And income factor and money factor. Good education factor
about 17.07% was influenced not included in model. F-test
was 41,94. It had a meaning together (simultaneously) caused farmers to be better knowledge in use technology or
among land acreage, input labour and input capital affected innovation and conversion to be more valuable crop.
variation oil palm production. On economic point of view, oil palm had better
economic aspect than paddy which can be seen on oil palm
(b). Estimation of Input Affecting Oil Palm Income efficiency (B/C value) better than paddy. Oil palm is a
Income is oil palm earned from production of oil prospect crop that creates better guaranteed income than
palm minus costs incurred to get production. Estimation of other crop i.e. paddy. Good economic value oil palm creates
input affecting oil palm income can be seen as follows: farmers interest to grow oil palm, rather than to paddy.
Based on economic analysis, it found that it has good
Table 4. Estimation Income of Oil Palm opportunity cost of conversion from paddy to oil palm.
Item Coefficient Std. Error t- value Probability Expenditure cost paddy was IDR. 1,658,500, - per hectare
Constanta 4.249 each year and it created income of IDR. 1,667,250, - per
Log I 0.642 0.253 2.54 0.0001
41
Log I 0. 997 0.216 4.61 0.0009
42 hectare per year. Meanwhile, oil palm cost was IDR.
Log I 0. 926 0.857 1.08 0.0000
43 4,612,625, - per hectare every year and it got income IDR.
Log I 1. 121 0.143 7.82 0.0028
44 7,824,148, - per hectare per year. So, difference between
2
R adj 0.7528 cost of oil palm and paddy per hectare was IDR. 3.295,625,
F-stat 32.89 - and income gap was of IDR. 6.156.898, -. It had meaning
that each additional cost IDR. 3.295,625, - from paddy,
Result found that adjusted R2 was about 0.7528. It had farmers got more income of IDR. 6.156.898, - from oil
meaning that production, price, input labour and input palm. Therefore, opportunity cost of land conversion paddy
capital was to explain income of oil palm. Model can to palm oil was IDR. 6.156.898. This analysis showed that
explain variation of oil palm about 75.28%. And, about B/C ratio paddy was 1.02 and
24.72% was influenced not included in model. F-test was B/C ratio oil palm oil was 1.71.
32,89. It has a meaning together (simultaneously) among
Retrieval Number: F7408038620/2020©BEIESP Published By:
DOI:10.35940/ijrte.F7408.038620 Blue Eyes Intelligence Engineering
Journal Website: www.ijrte.org 340 & Sciences Publication
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