Farm Size, Cost Structure, and Private Profitability in Smallholder Rice Farming: Evidence from Musi Rawas Regency
DOI:
https://doi.org/10.30737/agrinika.v10i2.7873Keywords:
cost of competitiveness, cost of production, rural development, rice farming, size of farmingAbstract
Smallholder rice farming in Indonesia faces persistent challenges in maintaining economic viability under limited operational scale and rising production costs. Understanding whether farm-size advantages arise primarily from lower production costs or from higher output prices is therefore important for assessing the economic performance of rice farming. This study aims to examine the association between farm size, cost competitiveness, and private profitability and to determine whether the observed farm-size–profitability relationship is more consistent with differences in unit production costs or realised farm-gate prices. Cross-sectional data were obtained from 228 rice farms in Musi Rawas Regency during the first planting season of 2024. Farms were classified by harvested area into ≤0.50 ha, >0.50–1.00 ha, and >1.00 ha. The analysis employed descriptive statistics, the Kruskal–Wallis test, pairwise Mann–Whitney comparisons with Holm correction, and ordinary least squares regression with HC3 standard errors and sub-district fixed effects. The median total production cost per hectare declined from IDR6.41 million in the smallest farm-size group to IDR5.81 million and IDR3.14 million in the two larger groups, with statistically significant differences across farm-size classes. Unit production costs also differed across groups, although consistent pairwise differences were mainly observed between the smallest and medium-sized farms. In the multivariate models, larger farm size was significantly associated with lower production cost per hectare, whereas its associations with unit production cost, realised farm-gate price, and the R/C ratio were not statistically significant at conventional levels. The accounting decomposition indicates that the positive farm-size coefficient in private profitability is mechanically more consistent with the unit-cost component than with the price component, although this pattern is statistically inconclusive. These findings suggest the presence of a farm-size cost advantage but do not establish that expanding cultivated area directly improves profitability. Potential policy implications include facilitating operational consolidation, shared machinery services, collective input procurement, and more reliable irrigation management for smallholder rice farms.
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