Pricing of Oil Palm Fresh Fruit Bunches (FFB) in South Sumatra through the Perspective of Bilateral Monopoly Market

ABSTRACT : This study aimed to identify where the price of fresh fruit bunches (FFB) of palm oil is set by local governments in the price range of bilateral monopoly market approach, in terms of whether they have been providing protection to farmers and close to prices that reflect a balanced bargaining power, or more lead to the monopsonist price, or even lead to monopoly pricing.

The study was done on the condition and data (1998-2002) of three Perkebunan Inti Rakyat (PIR) --- plasma nucleus system plantation. They were PIR Transmigrasi of private and state enterprises management, and PIR-KUK. The analysis methode used were single-equation econometric model of demand and supply of FFB.

The results showed that the price of FFB established by local government has protected farmers from the possibility of monopsony market prices that can occur if no policy intervention. However, the FFB price level in a bilateral monopoly market perspective, which KUD (Farmers Cooperation) represents farmers as a monopolist, still tend to be closer to the monopsonist price. It also reflects the more powerful bargaining position of the nucleus rather than farmers, and the price of FFB as a derivatives position of global CPO prices. It takes commitment and a more serious effort by both sides to enhance cooperation partnership in order to get a fairer FFB price.

Keywords : Palm Oil, FFB, CPO, PIR, price, monopsony, monopoly, bilateral monopoly market
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