Does the World Price of Crude Palm Oil and Total of Production Determine Palm Oil Marketing Margins in Indonesia?

This study clarifies the issue of low-profit margins obtained by palm oil farmers due to price fluctuations through examining the multivariate relationship between the world price of Crude Palm Oil, Total of Crude Palm Oil (CPO) production, Palm oil price of Fresh Fruit Bunches and Marketing Margin applying the Wald test approach. Then with a cointegration approach trying to explore how the short-term balance and the long-term marketing margin price for the period January 2008 to December 2017. The findings prove that: (i) in the long run the world CPO price, the Indonesian CPO export price, the price of Indonesian palm oil FFB have a significant influence on the palm oil marketing margin price; whereas in the short term, the marketing margin price one month before, the current Indonesian CPO export price and one and four months before, the current price of oil palm (fresh fruit bunches or FFB) and one and four months earlier. (ii) Multivariate causality test shows that Indonesian CPO production has a one-way causality relationship with the volatility of world CPO prices. The results of this study are an effort to encourage an increase in the price of FFB at the level of oil palm farmers.