Demand And Supply Analysis Of Corn In Indonesia From 1970-1988

Corn is the second most important food crop in Indonesia. Harvested area has fluctuated around an average of 2.7 million hectares between 1970-1988. This is roughly one third of the area devoted to rice and twice that of cassava. Production is almost entirely a smallholder activity, which provides income and staple food for over 10 million farm households who rarely farm more than 2 hectares of land. Corn production in Indonesia is concentrated on Java and Madura, which account for almost 75 percent of production. On Java and Madura, almost all corn is produced on the eastern half of the land area. The province of East Java produces 45 percent of the nation's total output. The land types used for corn production are "tegalan" (rain-fed) and "sawah" (floodable rice land). The two tegalan systems differ from each other in the frequency of corn harvests and are classified as systems with multiple or a single corn crop per year. The two sawah systems are characterized by the degree of water control. Irrigated sawah has permanent irrigation infrastructure, while rain-fed sawah is flooded by rainfall runoff. Prior to the mid-1970's farmers used mostly local, low yielding corn varieties which produced less than 1 tone per hectare. By 1987, yield had increased to 1.9 tons. The release and spread of new, improved corn varieties since 1978 are largely responsible for growth in yield. Although corn is a secondary foodcrop to rice, it is a major source of calories and protein in the Indonesian diet. According to the food balance sheet of Indonesia, corn directly consumed by humans accounts for about 9 percent of all calories and 12 percent of protein intake. It is especially important in the diet of the poor, since it is cheaper than rice. Three-quarters of Indonesia's corn production is consumed directly by humans as a staple foodstuff. Corn is also a major ingredient in livestock feed, which ultimately is the largest component in meat and eggs. The modern feed industry was established in 1972 and has expanded rapidly through the end of the decade. However, it is not the main source of demand for corn. In the mid 1980's, livestock feeding absorbed an estimated one-fifth of annual corn production. The primary purpose of this study is not to examine or evaluate the existing corn program or policies, but rather to study factors affecting the demand for and supply of corn in Indonesia and to project production, total demand and per capita consumption in the future. The objectives of this study are as follows: 1) to select appropriate variables for establishing an estimated demand equation; 2) to select appropriate variables for establishing an estimated supply equation; and 3) to apply two estimated equations for generating projection of production, total demand and per capita consumption of corn to the year 2000.