IDEAS home Printed from https://ideas.repec.org/a/gam/jagris/v12y2022i11p1918-d972815.html
   My bibliography  Save this article

Technical Efficiency and Export Potential of the World Palm Oil Market

Author

Listed:
  • Hakimah Nur Ahmad Hamidi

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Norlin Khalid

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Zulkefly Abdul Karim

    (Center for Sustainable and Inclusive Development Studies (SID), Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Bangi 43600, Selangor, Malaysia)

  • Muhamad Rias K. V. Zainuddin

    (Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu (UMT), Kuala Terengganu 21030, Terengganu, Malaysia)

Abstract

Palm oils have been proven to have the highest yield among vegetable oils, which is one of the critical factors in ensuring global food security. However, the world palm oil market has not been entirely utilised due to intervention policies that disrupt the global trade flow. Hence, this study aims to identify the technical efficiency of palm oil exports and then analyse the export potential of two leading producers and exporters of palm oil, Malaysia and Indonesia. A stochastic frontier model (SFM) has been used to estimate the level of technical efficiency across two countries for a sample of 59 major palm oil importing countries during 2009–2019. Palm oil export potential is then calculated using the value of technical export efficiency obtained from the SFM. The main findings revealed the technical inefficiency of world palm oil exports. Comparing the two countries, the Indonesian average technical efficiency value is higher than Malaysian throughout the year. Moreover, the technical efficiency estimates reveal that Malaysia and Indonesia dominate different markets, except in the Netherlands. In terms of export potential, the study found that both major exporting countries of palm oil have great potential to tap more into the same countries, namely China, India, Thailand and the United States. The policy implications of this study suggest that policymakers from both countries should set up a new combined strategy to maximise the palm oil export to their trading partners. Low technical efficiency values in several importing countries show great potential to explore further. Hence, there is a vast potential market for palm oil export to be tapped in those countries.

Suggested Citation

  • Hakimah Nur Ahmad Hamidi & Norlin Khalid & Zulkefly Abdul Karim & Muhamad Rias K. V. Zainuddin, 2022. "Technical Efficiency and Export Potential of the World Palm Oil Market," Agriculture, MDPI, vol. 12(11), pages 1-16, November.
    • Handle: RePEc:gam:jagris:v:12:y:2022:i:11:p:1918-:d:972815
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2077-0472/12/11/1918/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2077-0472/12/11/1918/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Geetha Ravishankar & Marie M. Stack, 2014. "The Gravity Model and Trade Efficiency: A Stochastic Frontier Analysis of Eastern European Countries' Potential Trade," The World Economy, Wiley Blackwell, vol. 37(5), pages 690-704, May.
    2. Santos Silva, J.M.C. & Tenreyro, Silvana, 2011. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," Economics Letters, Elsevier, vol. 112(2), pages 220-222, August.
    3. Jarrett Hart & Dragan Miljkovic & Saleem Shaik, 2015. "The impact of trade openness on technical efficiency in the agricultural sector of the European Union," Applied Economics, Taylor & Francis Journals, vol. 47(12), pages 1230-1247, March.
    4. Dragan Miljkovic & Silvia H. Miranda & Saleem Shaik, 2013. "Trade openness and technical efficiency in Brazilian agriculture," Applied Economics Letters, Taylor & Francis Journals, vol. 20(2), pages 103-106, February.
    5. Chukwujekwu A. Obianefo & John N. Ng’ombe & Agness Mzyece & Blessing Masasi & Ngozi J. Obiekwe & Oluchi O. Anumudu, 2021. "Technical Efficiency and Technological Gaps of Rice Production in Anambra State, Nigeria," Agriculture, MDPI, vol. 11(12), pages 1-13, December.
    6. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
    7. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    8. William Martin & Cong S. Pham, 2020. "Estimating the gravity model when zero trade flows are frequent and economically determined," Applied Economics, Taylor & Francis Journals, vol. 52(26), pages 2766-2779, May.
    9. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    10. Rao Muhammad Atif & Liu Haiyun & Haider Mahmood, 2017. "Pakistan's agricultural exports, determinants and its potential: an application of stochastic frontier gravity model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(3), pages 257-276, April.
    11. Fare, R. & Grosskopf, S. & Logan, J., 1985. "The relative performance of publicly-owned and privately-owned electric utilities," Journal of Public Economics, Elsevier, vol. 26(1), pages 89-106, February.
    12. Kumbhakar, Subal C., 1987. "The specification of technical and allocative inefficiency in stochastic production and profit frontiers," Journal of Econometrics, Elsevier, vol. 34(3), pages 335-348, March.
    13. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nazir Muhammad Abdullahi & Xuexi Huo & Qiangqiang Zhang & Aminah Bolanle Azeez, 2021. "Determinants and Potential of Agri-Food Trade Using the Stochastic Frontier Gravity Model: Empirical Evidence From Nigeria," SAGE Open, , vol. 11(4), pages 21582440211, December.
    2. Luis R. Murillo‐Zamorano, 2004. "Economic Efficiency and Frontier Techniques," Journal of Economic Surveys, Wiley Blackwell, vol. 18(1), pages 33-77, February.
    3. Hussein Al-Zyoud & Asheref Illiyan & Vasim Akram, 2022. "Impact of Economic Openness on Macro Technical Efficiency in South Asia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 28(3), pages 91-103, November.
    4. Roberto Colombi & Gianmaria Martini & Giorgio Vittadini, 2017. "Determinants of transient and persistent hospital efficiency: The case of Italy," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 5-22, September.
    5. Pontus Mattsson & Jonas Mansson & William H. Greene, 2018. "TFP Change and its Components for Swedish Manufacturing Firms During the 2008-2009 Financial Crisis," Working Papers 18-27, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. Roberto Colombi & Subal Kumbhakar & Gianmaria Martini & Giorgio Vittadini, 2014. "Closed-skew normality in stochastic frontiers with individual effects and long/short-run efficiency," Journal of Productivity Analysis, Springer, vol. 42(2), pages 123-136, October.
    7. Pontus Mattsson & Jonas Månsson & William H. Greene, 2020. "TFP change and its components for Swedish manufacturing firms during the 2008–2009 financial crisis," Journal of Productivity Analysis, Springer, vol. 53(1), pages 79-93, February.
    8. Wu, Yanrui, 1995. "The productive efficiency of Chinese iron and steel firms A stochastic frontier analysis," Resources Policy, Elsevier, vol. 21(3), pages 215-222, September.
    9. Dairo Estrada & Poldy Osorio, 2004. "Effects of Financial Capital on Colombian Banking Efficiency," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 22(47), pages 162-201, December.
    10. Evangelia Desli & Subhash Ray & Subal Kumbhakar, 2003. "A dynamic stochastic frontier production model with time-varying efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 10(10), pages 623-626.
    11. Luis R. Murillo-Zamorano & Juan Vega-Cervera, "undated". "The Use of Parametric and Non Parametric Frontier Methods to Measure the Productive Efficiency in the Industrial Sector. A Comparative Study," Discussion Papers 00/17, Department of Economics, University of York.
    12. Massimo Del Gatto & Adriana Di Liberto & Carmelo Petraglia, 2011. "Measuring Productivity," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 952-1008, December.
    13. Ahmad, Munir & Boris E., Bravo-Ureta, 1996. "Technical efficiency measures for dairy farms using panel data: a comparison of alternative model specifications," MPRA Paper 37703, University Library of Munich, Germany.
    14. Hanousek, Jan & Kočenda, Evžen & Shamshur, Anastasiya, 2015. "Corporate efficiency in Europe," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 24-40.
    15. Martini, Gianmaria & Scotti, Davide & Viola, Domenico & Vittadini, Giorgio, 2020. "Persistent and temporary inefficiency in airport cost function: An application to Italy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 999-1019.
    16. Michaelides, Panayotis G. & Belegri-Roboli, Athena & Marinos, Theocharis, 2008. "Technical Efficiency in International Air Transport," MPRA Paper 74490, University Library of Munich, Germany.
    17. Kumbhakar, Subal C. & Tsionas, Efthymios G., 2005. "Measuring technical and allocative inefficiency in the translog cost system: a Bayesian approach," Journal of Econometrics, Elsevier, vol. 126(2), pages 355-384, June.
    18. Álvaro Ramírez Suárez, 2013. "Análisis de eficiencia económica de fincas arroceras: una aplicación de una función determinística de ingresos brutos frontera," Revista Lebret, Universidad Santo Tomás - Bucaramanga, vol. 5, pages 213-240, December.
    19. Rao Muhammad Atif & Haider Mahmood & Liu Haiyun & Haiou Mao, 2019. "Determinants and efficiency of Pakistan’s chemical products’ exports: An application of stochastic frontier gravity model," PLOS ONE, Public Library of Science, vol. 14(5), pages 1-15, May.
    20. Antonio Giuffrida & Hugh Gravelle, 2001. "Measuring performance in primary care: econometric analysis and DEA," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 163-175.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jagris:v:12:y:2022:i:11:p:1918-:d:972815. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.