Advanced Search
MyIDEAS: Login

High value products, supermarkets and vertical arrangements in Indonesia

Contents:

Author Info

  • Chowdhury, Shyamal
  • Gulati, Ashok
  • Gumbira-Sa'id, E.

Abstract

" Indonesian economy has experienced some major changes during the last three decades and transformed from a predominantly agricultural economy to one that relies more heavily on its non-agricultural sector. Within agriculture, there has also been a change in the contribution of different sub sectors and high value products have grown relatively rapidly making agriculture more diversified. Similar to the changes in agricultural production, food consumption in Indonesia has shown a pattern of change over the past three decades, from a diet characterized primarily by the staple foods of cereals and cassava, to one that includes a larger share of fruits, fish, meats, dairy products and processed foods. Alongside the change in composition of food demand, newer forms of retail have also come up commonly known as supermarkets. However, the emergence of modern retailing has other consequences that go beyond consumers. It requires deep integration with farmers and can influence the production and transaction costs at farm level. It can also influence the distribution of value among different agents involved in production, intermediation, and retailing. In this paper we pursue three interrelated objectives. First, we review the structural changes that have taken place in Indonesian agriculture for the last three decades and the state of high value products. Second, we examine the driving forces behind the production of high value products and the constraints that limit their production. Third, we review the emergence of supermarkets and the vertical arrangements among farmers, traders/distributors, and supermarkets. We have relied both on primary and secondary data sources. Most of the secondary data has come from government directorates, different ministries and the central bureau of statistics (CBS) of the Government of Indonesia. In cases where secondary information was not readily available, we have also collected primary data. Our findings suggest that during the last three decades, there has been a significant structural change in Indonesian agriculture and the production of high value commodities and products –estate crops, livestock, fisheries, fruits and vegetables, and floriculture – has grown faster than the cereals. However, the extent of diversification towards high value products has remained limited to few regions and to few products within each sub sector. Factors that have contributed most in diversification are the rapid growth in income and accompanied changes in urban consumption in favor of high value products and agricultural mechanization. The economic crisis that was triggered by the currency crisis has had a long negative impact on agriculture sector. Structural changes in Indonesian agriculture have been accompanied by changes in consumption pattern in urban areas in favor of high value products and by a major change in retailing in the form of growth of modern supermarkets. To cater to the demand of changed urban consumption needs, supermarkets have been integrating with farmers through formal and informal contracts. This vertical relationship between farms and supermarkets that has been emerging in Indonesia has been helpful to follow grades and standards, to improve quality, and to reduce transaction costs and information asymmetries. It has also been helpful to reduce price and production risks at farm level and to ensure a higher price for farmers compared to traditional value chain. However, it seems that the participation of small holders in the vertical relationship depends largely on vendors. Within the vertical chain, supermarkets appropriate a monopsony rent. Important policies that can be drawn from this study are the greater emphasize on rural infrastructure, user right of state-owned estate to smallholders, promotion of public-private partnerships, encouragements of vertical arrangements, grades and standards, and bringing up the modern retailing sector under the purview of regulatory oversights." Authors' Abstract

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ifpri.org/sites/default/files/publications/mtidp83.pdf
Download Restriction: no

Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series MTID discussion papers with number 83.

as in new window
Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:fpr:mtiddp:83

Contact details of provider:
Postal: 2033 K Street, NW, Washington, DC 20006
Phone: 202-862-5600
Fax: 202-467-4439
Email:
Web page: http://www.ifpri.org/
More information through EDIRC

Related research

Keywords: Diet ; High value agricultural products ; Supermarkets ;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pingali, Prabhu L. & Rosegrant, Mark W., 1995. "Agricultural commercialization and diversification: processes and policies," Food Policy, Elsevier, vol. 20(3), pages 171-185, June.
  2. Minot, Nicholas, 1986. "Contract Farming and Its Effect on Small Farmers in Less Developed Countries," Food Security International Development Working Papers 54740, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  3. Fernando Balsevich & Julio A. Berdegué & Luis Flores & Denise Mainville & Thomas Reardon, 2003. "Supermarkets and Produce Quality and Safety Standards in Latin America," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1147-1154.
  4. Joyce Cacho, 2003. "The Supermarket “Market” Phenomenon in Developing Countries: Implications for Smallholder Farmers and Investment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1162-1163.
  5. Shyamal K. Chowdhury, 2004. "Search Cost and Rural Producers' Trading Choice between Middlemen and Consumers in Bangladesh," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(3), pages 522-541, September.
  6. Joshi, P.K. & Gulati, Ashok & Birthal, Pratap S. & Tewari, Laxmi, 2003. "Agriculture diversification in South Asia," MSSD discussion papers 57, International Food Policy Research Institute (IFPRI).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Narrod, Clare & Roy, Devesh & Okello, Julius & Avendaño, Belem & Rich, Karl & Thorat, Amit, 2009. "Public-private partnerships and collective action in high value fruit and vegetable supply chains," Food Policy, Elsevier, vol. 34(1), pages 8-15, February.
  2. Larry C.Y. Wong, 2007. "The Role of Supply Chains and International Networks in Enhancing the Agricultural Sector’s Competitiveness in Cambodia, Laos, Myanmar and Vietnam (CLMV)," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture, vol. 4(1), pages 1-10, June.
  3. Dyck, John H. & Woolverton, Andrea E. & Rangkuti, Fahwani Yuliati, 2012. "Indonesia's Modern Retail Food Sector: Interaction With Changing Food Consumption and Trade Patterns," Economic Information Bulletin 127495, United States Department of Agriculture, Economic Research Service.
  4. World Bank, 2008. "India - Taking Agriculture to the Market," World Bank Other Operational Studies 7919, The World Bank.
  5. Han-Hsin Chang & Charles van Marrewijk & Randy Stringer & Wendy Umberger, 2013. "Investment, awareness, supermarkets, and profits: heterogeneous chili farmers in Indonesia," Working Papers 13-13, Utrecht School of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fpr:mtiddp:83. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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