Research on World Agricultural Economy

Farmer Perspectives and Intentions in Establishing Palm Oil Processing Plants: Evidence from West Sumatra

Hasnah Hasnah

Faculty of Agriculture, Universitas Andalas, Padang 25163, Indonesia

Melinda Noer

Faculty of Agriculture, Universitas Andalas, Padang 25163, Indonesia

Rudi Febriamansyah

Faculty of Agriculture, Universitas Andalas, Padang 25163, Indonesia

Devi Analia

Faculty of Agriculture, Universitas Andalas, Padang 25163, Indonesia

DOI: https://doi.org/10.36956/rwae.v7i1.2529

Received: 25 July 2025 | Revised: 23 September 2025 | Accepted: 29 September 2025 | Published Online: 26 December 2025

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Abstract

The development of downstream palm oil processing at the smallholder level in Indonesia remains limited, despite its potential to enhance farmer welfare and promote equitable value chain participation. Persistent disparities in fresh fruit bunch (FFB) prices, slow progress in smallholder-led industrial initiatives, and farmers’ vulnerability to market fluctuations point to the need for inclusive downstream strategies. The study aims to assess farmers’ perspectives on the establishment of palm oil processing plants at the farmer level. Simple random sampling was employed in selecting 200 smallholders across Dharmasraya and West Pasaman regencies.  The research employs a mixed-method combining Structural Equation Modeling–Partial Least Squares (SEM–PLS) and qualitative analysis using NVivo in data analysis.  The findings reveal that farmers’ expectations of benefits and their readiness significantly influence their intention to build palm oil processing plants. Mediation analysis further shows that readiness partially mediates the relationship between farmer demographic profiles and their intention to invest in processing infrastructure. Most farmers expressed willingness to establish processing plants if they clearly perceive the benefits, such as increased income, price stability, and employment opportunity. However, they face substantial challenges, particularly limited financial capital and inadequate access to technology. These constraints highlight the need for comprehensive support from various stakeholders, including government agencies, cooperatives, and private sector partners, to enable farmers to participate in downstream processing. Strengthening farmer readiness through informal education, technical assistance, and inclusive financing mechanisms is essential to promote sustainable and equitable development in the palm oil sector.

Keywords: Downstream Industry; Farmer Perception; Palm Oil; SEM–PLS

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