Oil Palm Industry Economic Journal Vol. 2 (1) March 2002 p. 28-33

Factors Affecting Fluctuations in Net Returns from the Processing of Oil Palm Fruit Bunches

Mohd Arif Simeh
Received:    Accepted:    Available Online:


This paper attempts to elucidate factors which affect the efficiency of oil palm fruit processing in a selected palm oil mill. Three efficiency proxies are used, i.e. revenue per tonne (RPT) of fresh fruits bunches (FFB), cost per tonne (CPT) and net revenue per tonne (NRPT), with the analysis being focused on a 30-month time series data. From the study, it was found that the RPT of the mill was positively correlated with the differentials in the oil extraction rate and kernel extraction rate (KER), differentials in crude palm oil (CPO) price as well as FFB intake. The differentials in OER and KER, in particular, were significant income generators, as they resulted in increases in RPT as high as 20% and 12% respectively. Nevertheless, both OER and KER had declined at the rate of 0.27% and 0.22% per month, respectively and the processing toll was negatively correlated with RPT by 1%, indicating the need to crosscheck the sources of RPT variability. The study also identified two causal factors, which affected CPT variability. These comprised maintenance, either major or routine, and depreciation. The study also revealed that the amount of FFB received was positively correlated with either RPT or NRPT and was found significant in reducing CPT. This implied economies of scale, as denoted by the significance of the utilization factor and workers’ overtime.

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