The Impact of the Decline in the Price of Fresh Fruit Bunches on the Economy and Welfare of Palm Oil Farmers in Indonesia

Abstract

The government's policy in April 2022 which prohibited the export of CPO was finally revoked on May 23, 2022.  Even though in the end, the price of palm oil still fluctuated due to the limited CPO exports.  The purpose of this study was to examine the impact of falling TBS prices on the economy and welfare of oil palm farmers in Indonesia.  

The research method used is a qualitative method with library research techniques.  The results and discussion found that the decline in TBS prices greatly affected the level of the economy and the welfare of farmers, especially oil palm farmers who  mainly relied on plantation products.  It is hoped that the government policies that will be implemented will see the reality and how it impacts on the field.

Keywords: Fresh Fruit Bunches, Impact, Welfare, Economy, Oil Palm Farmers

Introduction

Palm oil is one of the contributors to the increasing economic figures of the Indonesian nation. In the agricultural sector, the oil palm plantation part in Indonesia is still the dominating star. Being an oil palm farm is certainly a good hope toimprove the family economy, apalalagi currently downstreaming palm oil  is still being sought to be developed so that it is not limited to CPO or Crude Pal Oil. So, it is hoped that in the future oil palm farmers can feel the benefits if the downstreamoil palm sector is increasingly diverse.

However, there are many obstacles to realizing good wishes for oil palm smallholders in Indonesia. Some of the policies implemented by the government actually harm oil palm farmers to cut profits that should be pocketed by farmers to connect and finance the needs of daily life. 

On April 28, 2022, the Indonesian government steadilyimplemented a policy to ban the export of CPO or crude palm oil products, causing the selling price of palm oil inthe region to decrease drastically.  

Even as a result of this export ban, palm oil farmers have suffered fantastic losses. Chairman of DPP Apkasindo, Gulat ME Manurung expressed his opinion that the ban on CPO exports is very detrimental to oil palm farmers. Wrestling said the total loss reached Rp 11.7 trillion as of the end of April alone. The policy of banning CPO exports that has been inaugurated by the government has caused the price of palm oil to fall by 40% to 70%.

Although in the end the government immediatelyrevoked the policy of banning CPO exports on May 23, 2022 (quoted by Rafika, 2022:19), the sales price of palm oil is still on the verge of being critically on the line. According to Wrestling (CNBC, 2022) in June 2022, the sales price of palm oil / FFB has touched IDR 500.00 – IDR 1,070.00. 

Not only does it have an impact on unstable palm oil prices and continuous declines, palm oil mills also experience losses. Some factories have to implement an open-and-close system to deal with this polemic.  

Thepalm oil alsowent awry because they required to buy FFB/Fresh Fruit Bunches (palm oil) from farmers but they were also pressed for industrial processing which was hampered. From the meeting held by APKASINDO on June 21, 2022 with 1,118 palm oil mills, it was concluded that as many as 58 palm oil mills were hit by the complete closure without operating, 114 of which were open and closed to adjust for the failure of palm oil prices this year.  

Fdeed, not only CPO was previously banned for export but also in the type of DMO andDPO so that the polemic on palm oil prices continued to be a scourge that frightened oil palm farmers.

Thus, researchers want to examine how the impact of the decline in palm oil prices on the economy and the welfare of oil palm smallholders in Indonesia. Researchers want todiscuss the polemic on palm oil prices and their impact on farmers.

Literature Review

Palm Oil Farmers Economy

The economy is a part of activities that concern production and consumption with interrelationships and reciprocity relationships and can helpthe welfare of the community. An economy that can be said to be good if it experiences an increase and growth in income or income. Similarly to the economy of oil palm farmers, if the producers or incomes of farmers increase then the economy is in good fase.

Vice versa, if the economy makes income decline and even has a detrimental impact, it can be said to be in a bad or bad phase. an economy can be said to be good if there are more opportunities for oil palm farmers toearn income or income after their role in caring for and selling oil palm.

However, in 2022, the economy of oil palm smallholders will experience a decline due to the plummeting price of FFB. As a result, oil palm farmers are entering into a bad phase of the economy . The price of FFB, which is inevitably sold cheaply because of plummeting price standards, makes the opinions of palm oil farmers incompatible with their role in caring for palm oil before selling it to mills. 

Of course, caring for palm oil before harvest requires hard work,such as fertilizing palm oil, harvesting at times that are as expected and cleaning the garden from parasitic plants so that the palm continues to grow well, however, the struggle does not pay off well because the price of FFB has dropped drastically so that it is detrimental.

Welfare of Oil Palm Farmers

Sunanti (quoted by Suwaji and Hermanto, 2019: 152) revealed that welfare is part of the order of life as a social livelihood, material and spritual form  followed by feelings of harmony and peace of birth and inner peace with the possibility for society to fulfill the needs of the physical, spiritual and social fields that are good for themselves  own, family and also community/social.

Widyastuti (quoted by Suwaji and Hermanto, 2019: 152) divides the core of well-being into three concepts, namely:

1.A state of prosperous life, meaning the fulfillment of all physical and spiritual needs and social needs.

2.Institutions, meaning part of the field of activity with relationto ya ng involving social welfare institutionsand all fields of the humanitarian profession by organizing efforts for social welfare.

3.Activity, meaning a form of business and activity related to a series of  organized businesses to achieve a welfare.

From the explanation of welfare above, it can be ascertained that prosperity includes success in meeting physical, spiritual and social needs. If welfare is linked to oil palm farmers now maka it can be said that their welfare is at stake.  Not without reason, this is because again it concerns unstable FFB prices, which  causes oil palm farmers to lack the expected welfare.  Especially forpalm oil pet ani who rely on plantation products to meet their daily needs.  Various policies implemented to improve the welfare of the community, especially farmers, actually make bitterness for the reality that occurs.

Method

The yang method used in this study is a qualitative method. Research to present the impact of FFB price reduction on the economy and welfare of oil palm smallholders in Indonesia. Qualitative method is a method that explains the results of research byusing words with in-depth studies. The technique used in this study is the literature study technique. Researchers are looking for data sources in the form of primary data from several national journals in the last 10 years with a discussion of theimpact of reducing FFB prices on the economy and welfare of oil palm farmers in various regions in Indonesia.

Results and Discussion

As a result of the plummeting price of FFB, of course, unstable prices by continuously causing a slump in prices strengthenedfarmers to suffer losses and greatly impacted the economy and welfare of oil palm farmers. The economy is closely related to welfare, so if the economy deteriorates, efforts to realize the welfare of oil palm farmers will also lead to theuk. Sabarudin (CNBC, 2022) is the Head of The Organization and part of the SPKS Member gave his response regarding the plummeting price of FFB. According to Sabaraudin, the price of  FFB has dropped by Rp100 – 200 per kg every day.

Sabarudin also revealed that farmers experienced happiness reaching  Rp1,500,000.00 – Rp2,000,000.00 per har in every month. Sabarudin also gave the total losses to independent palm oil smallholders throughout Indonesia from April to June stampedai Rp50 trillion. The loss rate is certainly not small, if successfully obtained by oil palm farmers, there is a lot of welfare that can be realized and the economy of oil palm farmers is increasing.  It is unfortunate that the Rp50 trillion money only serves anumber that does not benefit Indonesian palm oil farmers.

The impact of FFB decline on the economy and the welfare of oil palm farmers can be supported by the facts of several previous studies. Such as research researched by Mukmin (2015) with the title Impact of Palm Oil Price Reduction on the Welfare of Oil Palm Farmers on the East Coast of North Sumatra.  Mukmin's research results stated that with the low price of FFB, oil palm farmers on the East Coast are still struggling to meet their daily needs. Low palm oil/FFB price also adversely affects people's social and economic life as evidenced by the results of the t test that Ha is accepted and H0 is rejected. Mukmin also argued that the decline in palm oil prices caused the opinions of sa wit farmers todecline and the welfare of those who participated in the decline.

Furthermore, the research conducted by Suwaji and Hermanto (2019) entitled The Impact of Palm Oil Price Reduction on the Welfare of Farmers in Titian Resak Village, Seberida District, Indragiru Hulu Regency  , based on the results of research by Suwaji and Hermanto that the price of palm oil / FFB greatly affects the economy and welfare of farmers in Titian Resak Village. The price of FFB greatly affects the level of welfare of farmers so if the price of palm oil /FFB drops drastically, it will also have an impact on the level of welfare thatg drops drastically.

For 2022, with FFB prices continuing to decline, the level of the economy and welfare of oil palm farmers in Indonesia has also experienced a decline. As discussed above, palm oil farmers in 2022 as of June 2022 have suffered losses of up to IDR 50 trillion. Of course, the Rp50 trillion also illustrates the contribution of economic downturn and the welfare of oil palm farmers who are also threatened with decline. 

FFB prices are very instrumental in the development and improvement of the economy and welfare of oil palm farmers, which is why the government to further consider policies that should make oil palm farmers happy is actually harsh in reality. It is noted that since the ban on palm oil exports nationwide in April 2022 has decreased. 

According to data from GAPKI or the Indonesian Palm Oil Entrepreneurs Association (CNBC, 2022) stated that production only amounted to 16.46 million tons while only 8.38 million tons were exported. Compared far from last year's results, the production output was 51.3 million tons and the successful export was 34.23 million tons. The hope for the future is that the economy and welfare of oil palm farmers will increase, supported by government policies that canstrengthen oil palm farmers to be happy.

Conclusion

From the explanation above, it can be concluded that the price of FFB has a significant impact on the economy and welfare of oil palm farmers in Indonesia. So, currently, oil palm farmers are in a bad phase in terms of economyand welfare. If the economy of oil palm smallholders falls, such as declining incomes that are not in accordance with their efforts in caring for palm oil with good effort and hard work.  Some of the things that caused the price of FFB to plummet were the government's policyof prohibiting the export of CPO, DMO and DPO on April 28, 2022.

 Although finally on May 23, 2022, the government reopened CPO exports, the price of FFB still fluctuated up and even often fell sharply. In June 2022, the price of FFB has again plummeted asthe economic level and the welfare of oil palm farmers are again threatened. The price of FFB, which is still unstable, is plannedby the government to still limit CPO sales so that the price of FFB is still falling up and down.

Suggestion

The government is expected to immediately overcome thepolem IK FFB prices that continue to decline every day. Learn from previous experiences about the decline in FFB prices which has greatly impacted the economy and the level of welfare of oil palm smallholders in Indonesia. For further research, researchers hope that further research will use quantitative methods to produce data in the form of numbers.

Bibliography

Pohan, Believer. 2015. The Impact of Palm Oil Price Reduction on the Welfare of Oil Palm Farmers on the East Coast of North Sumatra. Journal of Economic Sciences and Development Studies. 15(2). 128. Pdf. (retrieved June 28, 2022).

Suwaji and Hermanto. 2019. The Impact of Palm Oil Price Reduction on the Welfare of Farmers in Titian Resak Village, Seberida District, Indragiru Hulu Regency. Journal of Management and Businesss. 8(1). 160. Pdf. (retrieved June 28, 2022).

Sari, Rafika. 2022. Impact of the Policy on the Prohibition of Export of CPO and Derivative Products. Quick Info. 14(10). 19. Pdf. (retrieved June 28, 2022).

Emeria, Damiana Cut. Farmers & Palm Oil Mills Start 'Shouting', This is Biang Keroknya. CNBC New Zealand.  June 28, 2022.

Link:https://www.cnbcindonesia.com/news/20220628013956-4-350851/petani-mill-sawit-mulai-teriak-ini-biang-keroknya