Analysis of Production Costs, Revenue and Profitability of Smallholder Oil Palm Farming in East Kutai Regency, Indonesia

Abstract

Oil palm is one of the most important plantation crops. Oil palm development can increase farmer/community income, provide industrial raw materials, and generate foreign exchange through CPO exports. The majority of residents in Dusun 3, Marga Mulia Village, rely on oil palm plantations for their primary income because they are considered to have long-term prospects, high profits, and relatively easy cultivation techniques. Economic and feasibility analysis of smallholder oil palm farming is essential to evaluate the profitability and sustainability of the business. The purpose of this study was to determine the production costs, revenues, and income of smallholder oil palm businesses and to assess their feasibility using the Revenue/Cost (R/C) ratio. The study  was conducted from February to April 2025 in Dusun 3, Marga Mulia Village, Kongbeng District, East Kutai Regency, East Kalimantan Province.  The study used a saturated or census sampling method, resulting in a sample size of 24 farmers from the entire population. The criteria were oil palm farmers with oil palm plantations aged between 10 and 12 years. Data were collected through primary and secondary methods through observation, interviews, and literature review, and then analyzed using descriptive quantitative analysis. The results show that the average production cost was IDR 15,014,749.18/ha/year, the average revenue was IDR 47,895,964.08/ha, and the income was IDR 32,881,214.89/ha/year. The smallholder oil palm business in this area is declared profitable and feasible to be developed with an R/C ratio of 3.19, indicating that every IDR 1.00 of production costs generates IDR 3.19 in income.