The research arrives as Indonesia's palm oil industry faces a critical productivity challenge. Although the country remains the world's largest producer of palm oil, much of its plantation area consists of aging trees with declining yields. At the same time, replanting programs have progressed more slowly than expected, while labor shortages have made harvesting increasingly difficult. These structural problems have raised concerns about the industry's long-term competitiveness despite record export earnings.
Why Productivity Has Become a Market Signal
Palm oil companies are traditionally evaluated through financial indicators such as revenue, profitability, and cash flow. However, plantation businesses also generate valuable operational data that may reveal future performance before it appears in financial statements.
Among the most important operational indicators are:
- Fresh Fruit Bunch (FFB) Yield, which measures the amount of harvested fresh fruit per hectare.
- Oil Extraction Rate (OER), which measures how efficiently crude palm oil is extracted from harvested fruit.
According to Hasibuan, these agronomic indicators provide investors with direct information about plantation quality, management effectiveness, and operational discipline. Unlike accounting figures, harvest productivity is difficult to manipulate because it reflects biological conditions, plantation management, harvesting practices, and workforce performance.
How the Research Was Conducted
The study analyzed secondary data from 10 palm oil plantation companies listed on the Indonesia Stock Exchange. Five represented large-capitalization companies and five represented medium-capitalization firms.
The dataset covered four reporting periods:
- 2023
- 2024
- 2025
- First Quarter 2026
In total, the analysis included 40 observations. Operational data on FFB Yield and Oil Extraction Rate were collected from annual reports and company operational disclosures, while stock prices were obtained from Indonesia Stock Exchange trading records. The researcher then applied panel data analysis to identify how changes in operational performance were reflected in stock prices over time.
The companies in the sample reported FFB yields ranging from 17.5 to 24.2 tons per hectare, with an average of 20.59 tons per hectare. Oil extraction rates ranged between 19.8% and 24.0%, averaging 21.69%.
Harvest Productivity Drives Investor Confidence
The most significant finding was the strong relationship between harvest productivity and company valuation.
The study found that:
- FFB Yield has a positive and statistically significant effect on stock prices.
- Every additional one ton of fresh fruit bunches per hectare is associated with an average 21.4% increase in stock price.
- Even a more achievable improvement of 0.5 ton per hectare corresponds to an estimated 10.2% increase in market value.
- Harvest productivity alone explains nearly 59% of stock price variation within the companies observed during the study period.
These findings indicate that investors interpret higher harvest productivity as evidence of superior plantation management. Higher yields generally reflect healthier tree age composition, better planting materials, effective fertilization, improved pest management, disciplined harvesting practices, and sufficient labor availability.
As a result, productivity serves as a credible signal that the company possesses sustainable operational capabilities rather than temporary financial improvements.
Oil Extraction Efficiency Offers Little Additional Information
The study produced a surprising result regarding oil extraction efficiency.
Although Oil Extraction Rate (OER) showed a positive relationship with stock prices when analyzed independently, it became statistically insignificant when evaluated alongside harvest productivity.
The explanation lies in the close relationship between the two indicators.
Higher-quality fruit and disciplined harvesting practices generally improve both FFB Yield and Oil Extraction Rate. Because these two variables share much of the same underlying information, investors appear to rely primarily on harvest productivity when evaluating plantation performance.
In other words, OER does not provide enough additional information beyond what investors already learn from harvest yield itself.
Implications for Companies, Investors, and Policymakers
The findings carry important implications across Indonesia's palm oil sector.
For plantation companies, improving harvest productivity should become a strategic priority—not only to increase production but also to strengthen investor confidence. Public communication with shareholders should emphasize improvements in FFB Yield because this metric appears to influence market valuation more directly than extraction efficiency.
For investors, harvest productivity provides an additional non-financial indicator that can improve investment decisions. Monitoring plantation productivity may offer earlier signals of future company performance than relying solely on financial statements.
For policymakers, the research reinforces the importance of accelerating palm oil replanting programs and expanding harvesting mechanization. Measures that improve plantation productivity could create benefits beyond agricultural output by increasing shareholder value and supporting capital market performance.
As Thezar Fiqih Hidayat Hasibuan of Universitas Medan Area concludes, Indonesia's capital market appears to reward companies that consistently improve harvest productivity. In the context of a national productivity crisis, strong FFB Yield functions as the clearest signal of plantation excellence, while oil extraction efficiency mainly reinforces information that investors have already captured through harvest performance. This finding extends previous research on the value relevance of non-financial information by demonstrating that agronomic performance can meaningfully influence stock market valuation.
Author Profile
Thezar Fiqih Hidayat Hasibuan is a lecturer and researcher at Universitas Medan Area, Indonesia. His academic expertise includes financial accounting, capital markets, corporate finance, firm valuation, and the role of financial and non-financial information in investment decision-making. His research focuses on how operational performance influences corporate value, particularly within Indonesia's plantation industry.
Source
Hasibuan, Thezar Fiqih Hidayat. Harvest Volume or Extraction Efficiency? The Value Relevance of Fresh Fruit Bunch Yield and Oil Extraction Rate to the Stock Prices of Indonesian Palm Oil Plantation Companies Amid the Productivity Crisis. International Journal of Sustainable Applied Sciences (IJSAS), Vol. 4, No. 7, 2026.
DOI: 10.59890/ijsas.v4i7.24.
URL: http://ijsasjournal.my.id/index.php/ijsas
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