Financial Feasibility, Cost Structure, and Profitability Determinants of Smallholder Pepper Farming: An Integrated Cost-Revenue and Sensitivity Analysis

Abstract

Aprian, Ratnawati Tahir, Jumiati Jumiati, Hasriani, Muh. Ikmal, Ardi Rumallang, Akbar Akbar, Saleh Molla, Artisa Anggraeni Amin

This study evaluates the financial feasibility, cost structure, and profitability determinants of smallholder pepper (Piper nigrum L.) farming using processed farm-level cost and revenue data from 22 respondents. The analysis integrates farm budgeting, revenue-cost ratio analysis, cost-share decomposition, sensitivity simulation, and regression-based interpretation of profitability drivers. The results show that pepper farming is financially feasible under observed production and price conditions. Average total revenue reached IDR 292,900,000 per year, while average total cost was IDR 52,280,000 per year, generating average net income of IDR 240,620,000 and an R/C ratio of 5.62. Variable costs dominated total production costs, especially labor cost, which accounted for 49% of total cost, followed by pesticide cost (19%), fertilizer cost (15%), depreciation (14%), and land tax (3%). Sensitivity analysis indicates that profitability remains feasible under simulated adverse scenarios, although output price and production shocks reduce profitability more sharply than moderate variable-cost increases. A 20% price or production decline reduced the R/C ratio to 4.48, whereas a 20% increase in variable costs reduced it to 4.80. The regression-based interpretation suggests that farm size and farming experience strengthen profitability, while a high labor-cost share reduces financial efficiency. These findings highlight that smallholder pepper farming has strong income potential, but long-term sustainability depends on yield stability, labor efficiency, input-use optimization, and improved market-risk management.

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