Analysis of Price Transmission Chili at the Level from Producer to Consumer in Tapin Regency

The fluctuating prices of chili peppers can significantly impact farmers positively and negatively. Farmers cultivating bird’s eye chili can reap substantial profits with high prices. However, they earn less when bird’s eye chili prices are low. Currently, market integration refers to the evolution of costs across different market sectors and the extent to which market sectors in various geographical locations are informed about the supply and demand occurring in a market. This study aims to: 1) analyze the price developments of bird’s eye chili at the producer, wholesale, and consumer levels in Tapin Regency; 2) examine the price transmission of bird’s eye chili from the producer level to the consumer level through prices at the wholesale level and the production of bird’s eye chili in Tapin Regency. The data used in this research are secondary in the form of monthly time series data. The study utilized the documentation method, with data collected from January 2017 to December 2022, totaling 72 data points. The data analysis method employed is the Vector Error Correction Model (VECM), with tests including the Stationarity Test, Optimal Lag Length Test, Stability Test, Cointegration Test, VECM Estimation, Impulse Response Function (IRF), and Forecast Error Variance Decomposition (FEVD). The findings indicate that the prices of bird’s eye chili exhibit monthly fluctuations. The higher price fluctuations at the producer level indicate that farmers have weak bargaining power in setting the prices of bird’s eye chili. The stationarity test shows that the prices of bird’s eye chili at the consumer (HK), wholesale (HG), and producer (HP) levels, along with bird’s eye chili production (PC), are stationary at the first difference. The optimal lag test, with the smallest Akaike Information Criterion (AIC), is lag 2. The cointegration test shows that the trace statistic and max-eigen values are greater than the critical value, thus accepting H1, indicating a long-term relationship. In the short term, the increase in bird’s eye chili prices is influenced by the two previous periods. The analysis results demonstrate asymmetric price transmission from the producer level to the consumer price level.