Evaluation of Upstream Value Chain Analysis in Oil Palm: Insights from Smallholder Farmers in West Region Malaysia

This study aims to analyze upstream marketing channel selection by farmers, determining cost and return involved, and major problems faced by all actors at West Region Malaysia. The objective of this paper is to identify the upgrading opportunities in Malaysia's oil palm value chain. A survey was carried out among 156 oil palm independent smallholder farmers (ISHF), 4 middlemen, 5 collection centres and 2 millers who were selected randomly in Johor state which is among the largest independent smallholders in the region and data were collected based on structured interviews. Cost Benefit Analysis and Margin Analysis have been used as the empirical strategy. Farmers' socio-demographic characteristics, selected marketing channel, cost benefit analysis, and marketing margin have been used as main explanatory variables. Results indicate that most of oil palm independent smallholders chose marketing channel with highest Net Present Value (NPV) and Gross Marketing Margin. The motivations driving the purchasing or selling of fresh fruit bunches or FFB were: high quality of FFB, competitive price, low marketing and transportation costs. The results indicate that there is a margin for the value chain to upgrade their products while staying competitive. A strong and great market access is essential to support wider knowledge, distribution and information among the marketing channels. In addition, a joint action of value chain stakeholders is needed to exploit these opportunities.