Vertical Market Integration of Curly Red Chili in Kulonprogo
This study analyzes the price behavior of curly red chili between producer and consumer markets in Kulonprogo Regency, Yogyakarta, to assess market integration. The research utilizes graphical and mathematical methods to understand price fluctuations during 2011-2015.
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Vertical Market Integration of Curly Red Chili in Kulonprogo Regency Yogyakarta Indonesia Susanawati Hilmi Priliadi Department of Agribusiness UMY
Introduction There are four regions producing red chili in the Special Region of Yogyakarta (DIY), i.e. Kulonprogo Regency, Sleman, Bantul, and Gunungkidul. During the period of 2011-2015, Kulonprogo Regency makes the highest contribution to the total production of red chili in the Special Region of Yogyakarta, which amounted to 168,280 quintals, equivalent to 71.95% of total production Regency Year 2011 107.226 2012 115.816 2013 2014 2015 Kulonprogo 109.208 125.075 168.280 Sleman Bantul Gunungkidul 27.855 5.251 3.369 28.599 16.702 3.453 41.938 17.651 2.538 36.157 12.244 2.124 44.307 19.693 1.599 2
Introduction During 2011-2015 the production of red curly chili in KulonprogoRegency fluctuates although it is not so significant. Year Harvest Area (Ha) Production (Quintal) Productivity (Quintal/Ha) 2011 1.278 107.226 83,90 2012 1.324 107.226 81,00 2013 1.341 108.459 80,85 2014 1.532 125.039 81,62 2015 1.380 114.816 83,20 3
Market integration analysis is needed to see whether changes in product prices at the retailer's level will affect changes in market prices at the farm level. Curly red chili is a vegetable that often experiences price fluctuations When the price of chili falls, curly red chili farmers will be harmed 4
Objectives This study aims to determine the price behavior at the producer market in Kulonprogo Regency and the consumer market in Pasar Induk Kramat(PIKJ), and thevertical integrationbetween thetwomarkets. 5
Methodology Thebasicmethod usedinthisresearchisdescriptivetofindoutthedescriptionof thedatatoanalyze The type of data used in this study is secondary data in the form of monthly prices of curly red chili at the producer level in Kulonprogo Regency and the consumer market in PIKJ during the period of 2011-2015. The behavior of curly red chili prices is analyzed using a graphical and mathematical approach. Graphic analysis is used to describe themonthly prices of curly red chili during 2010-2015 displayed in graphicalform. Graphical analysis is done using Microsoft Excel software. Mathematical analysis is done using Coefficient of Variation(CV)todetermine thefluctuationsinthepriceof curlyredchili. 6
The CV formula is as follows: Information: s x n CV = standard deviation = the average price of curly red chili = number of samples = coefficient of variation 7
The vertical integration between the producer market in Kulonprogo Regency and the consumer market in PIKJ is analyzed using the Index of Market Connection (IMC) model. The IMC model using the Autoregressive Distributed Lag Model approach is formulated as follows: Pit = b1 (Pit-1) + b2 (Pat -Pat -1) + b3(Pat -1) Information: Pit Pit-1 Pat Pat -1= the price of curly red chili in the consumer market in month t-1 bi = regression coefficient = the price of curly red chili in the producer market in the month t = the price of curly red chili in the producer market in month t-1 = the price of curly red chili in the consumer market in the month t 8
IMC Values are: Information: b1 b3 = regression coefficient of Pit-1 = regression coefficient of Pat-1 Information Short Term Long Term Strong integration b2 is close to 1 (> 0.5) IMC is close to 0 IMC < 1 b2 is close to 0 (<0,5) Weak integration IMC >1 b2 is very close to 0 No integration High IMC 9
Result and Analysis The price of curly red chili at the producer level in KulonprogoRegency fluctuates every month during 2010-2015. During 2010-2015, the price of curly red chili was the highest in December 2014, which was Rp. 72,100 per kilogram and the lowest price occurred in July 2011, which was Rp. 3,300 per kilogram. The low prices occur due to the harvest of curly red chili from May to July in which the peak harvests occur in July. 10
The combination of production and prices of curly red chili in The combination of production and prices of curly red chili in Kulonprogo KulonprogoRegency during 2010 Regency during 2010- -2015 2015 In December 2014 the price was very high but the production was also quite high during that time. The price of curly red chili in December 2014 was at the highest price, i.e. Rp. 72,100 and Rp. 65,214 in the consumer market with the total production of 12,809 quintals. In addition, there was a low production followed by a low price as happened in December 2012 in which the production was only 1,996 quintals while the price of curly red chili touched the figure of Rp 8,775 in the producer market and Rp9,214 in the consumer market. 11
Price behavior of curly red chili in the consumer market during 2010-2015 There is a significant price gap in certain months. The highest price occurred in December 2014 at a price of Rp65,215 per kilogram while the lowest price occurred in July 2011 at a price of Rp 5,454 per kilogram. 12
Price behavior of curly red chili in the producer market and consumer market during 2010-2015 It can be seen that when the prices in the consumer market are high, the prices in the producer market in KulonprogoRegency will also be high. The price movements that occur in the market of producers in KulonprogoRegency are in line with the price movements that occur in the consumer market. 13
Vertical Integration between Producer Markets in Kulonprogo Regency and Consumer Market in PIKJ Two markets are said to be integrated if the price changes in a market are responded to the changes in prices in other markets. This is because changes in prices in a market are partially or totally transmitted to the prices in other markets, both in the short and long term. The calculationresultsisobtainedusingEViewsVersion10 throughtheregressionof price variablesin themarketofKulonprogoRegency in thecurrentperiod(Pit), pricesin the marketof KulonprogoRegency in thepreviousperiod(Pit-1), thecurrentpricesin PIKJ consumermarket(Pat), pricesin themarketin thepreviousperiodof PIKJ consumers(Pat- 1) andthedifference in pricesin thecurrentPIKJ consumer market(Pat) withtheprevious period(Pat-1) 14
The regression results of the factors that influence the price of curly red chili in the producer market in Kulonprogo Regency Regression Coefficient 0,465991 Variable Std. Error t-Statistic Prob. The previous period of curly red chili price in the producer market in Kulonprogo Regency 0,110398 4,221018 0,0001* The difference in prices of curly red chili in PIKJ consumer market in the current period with the previous period The previous period consumer level price of curly red chili R-squared Adjusted R-squared S. E. of Regression Sum squared resid Log likelihood F Statistic Prob (F-statistic) 0,795348 0,088089 9,028895 0,0000* 0,525002 0,109170 4,809018 0,0000* 0,756664 Mean dependent var. 0,745768 S. D. dependent var 5503,990 Akaike info criterion 2,03E+09 Schwartz criterion -710,2253 Hannan-Quinn criter. 69,44642 Durbin-Watson stat 0,000000 16540,42 10915,98 20,11902 20,24650 20,16972 1,943451 15
The Prob T value shows the difference in price of curly red chili in PIKJ consumer market at the present period with the previous period of 0.0000 which is smaller than 1%. It means that the difference in price of curly red chili in PIKJ consumer market in the previous period has a significant effect on the variable price of curly red chili in the market of Kulonprogo Regency at the current level of trust 99%. Prob. T for the variable price of curly red chili in PIKJ consumer market in the previous period is 0.0000 which is smaller than the value of 1%.Thus, at the 99% confidence level, the price of curly red chili prices in the previous period of PIKJ consumer market has an effect on the variable price of curly red chili in the market of KulonprogoRegency in the present period 16
The regression results of the factors that influence the price of curly red chili in the producer market in Kulonprogo Regency After testing the model, the IMC model is calculated using the equations obtained from the regression results as follows: Pit = 0,465991(Pit-1) + 0,795348(Pat-Pat-1) + 0,525002(Pat-1) Based on the regression equation above, it can be seen that the value of b1 is 0.465991 and the value of b3 is 0.525002. The calculation is done by entering the regression coefficients b1 and b3 into the following formula. 17
Short Term Vertical Integration based on the IMC value, it can be seen that there is a strong integration in the short term between the prices in KulonprogoRegency producer market and prices in PIKJ consumer market. It is seen from the index of marketing connection (IMC) value 0.89 (<1) The strong degree of market integration in the short term in KulonprogoRegency shows that the flow of information between farmers and PIKJ consumer market is so smooth that the prices among farmers are affected by prices in PIKJ consumer market. 18
Long Term Vertical Integration Long-term vertical integration is related to the relation between price changes in the reference market transmitted to the local market in the long term. It can be seen from the coefficient value of b2. The analysis is on farmers' markets in KulonprogoRegency as a producer market and PIKJ as a consumer market. Based on the regression equation, it can be seen that in the long run the prices in the market of the producer of KulonprogoRegency have strong integration. It is indicated by the b2 coefficient of 0.795348 (> 0.5), which means that the price of curly red chili in the market of KulonprogoRegency is influenced by the price of curly red chili in PIKJ consumer market 19
Conclusion The behavior of curly red chili prices in the market of Kulonprogo Regency and PIKJ consumer market tends tofluctuatewiththesamepatternof movement The integration between the producer markets in Kulonprogo Regency and PIKJ consumer market in Kramat Jati Central Market occur both in the short and long term. There is a strong integration in the short term between the prices in Kulonprogo Regency producer market and prices in PIKJ consumer market which can beseenfromtheindexvalueof marketingchecks(IMC)of 0.89 (<1). It showsthat thechangesinthepriceofcurlyredchili inPIKJconsumer marketattheprevioustimeaffect the price of curly red chili in the market of Kulonprogo Regency producer at the present time. In the long run, the value of b2 indicates that the increase in the price of curly red chili of Rp. 1,000 in the consumer market PIKJ willincreasethepriceof curlyredchiliRp.795,348 inthemarketof theproducerof KulonprogoRegency. 20
