Oil Palm Industry Economic Journal Vol. 14 (1) March 2014 p. 34-41

The Impact of Palm Oil Mills’ Capacity on Technical Efficiency of Palm Oil Millers in Malaysia

Azman I*;
Received:    Accepted:    Available Online:


The general purpose of this study is to evaluate technical efficiency of palm oil mills in Malaysia. Specifically, the study attempts to examine if large mills are more efficient than small mills as well as to compare technical efficiency between integrated and non-integrated mills. In order to fulfill the objectives, econometric approach was used whereby crude palm oil production function was estimated by using OLS least squared technique. The Cobb-Douglas production model was used and the model is satisfactory in terms of goodness of fit. This is shown by the values of R2 (0.89) as well as F statistic (358.03). From the study, it was found that palm oil mills in Malaysia are technically efficient. In terms of processing capacity, large mills which have processing capacity more than 20 t/hr are more efficient than small mills. Integrated mills are also technically efficient as compare to non-integrated mills.

Keywords: palm oil, technical efficiency, FFB, processing, capacity

About Post Author


* Malaysian Palm Oil Board,
6 Persiaran Institusi, Bandar Baru Bangi,
43000 Kajang, Selangor, Malaysia.

E-mail: azman@mpob.gov.my