Failures and interventions on agricultural markets at the international, national and regional scale

Dr. Thomas Kopp was doctoral researcher in EFForTS. He completed his studies in May 2015.

Amongst all the countries that have experienced substantial declines in forested land in recent years, Indonesia ranks second in terms of the absolute loss of area (about 280 km² decline), and fourth in relative terms with about 15 % of the total land area. Initially triggered by substantial logging, this development has been exacerbated by the growing importance of rubber and palm oil in the agroforestry production system, due to the great increase in international demand for those products.

One of the best known examples for these developments is Jambi province (Sumatra), where the conversion of secondary forests to rubber and, in the recent past, palm oil production has been the major element of land use change.

Substantial economies of scale in processing, market power of the local mills, and the specific organisation of the downstream trade (middlemen, etc.) will affect trade flows and the extent of local market integration. The resulting market power will also impact price transmission along the supply chain. The marketing channels for these export-oriented products generate new dependencies along the value chain which are rarely studied for Indonesia. Similarly, the impacts of functioning of the local value chain on land use change are not frequently analyzed.

Project description:
The core of this sub-project is the analysis of rubber and palm oil value chains. It deals with the functioning of domestic and export markets, in particular at the interfaces between smallholders, traders, and local processors at the regional scale, and with respect to the linkages of local and international markets at the global scale. An integrated perspective along the supply chain will allow us to identify major drivers and institutional arrangements which have important implications for land use changes.

In the first analysis, the linkages between the structure of these export oriented value chains and the transformation of land are examined. The second object of the research is the impact of the organization of each value chain on the incomes of smallholders active in rubber and palm oil production.

The expected results will contribute to the development of political measures that support the emergence of value chains that distribute value added more equally between stakeholders. Furthermore, it will contribute to the development of methodological approaches to address the assessment of the trade-offs between economic and ecological functions of alternative transformation systems.

Data and sampling strategies: For the analysis of the regional value chain, an interview-based trader survey is carried out in 40 villages, selected to represent the whole lowland area of Jambi province. The selection followed a stratified, random sampling strategy on district (“Kecamatan”) level in five regencies (“Kabupaten”). The number of respondents will total to a sum of 300 individuals.

In the same villages in which this survey is conducted, the household survey of another SP takes place (C07), as well as a village survey (C08). This allows the respective SPs to combine data easily.

Before the research started, a census was carried out to identify all individuals working as traders in each village. As this census was not only “quick and dirty” but also taking place quite some time ago, many changes have occurred since: new traders established their business, and others had gone out of it.

Work program:
The 300 interviews (duration: 1.5-2 hours each) are carried out in teams of two by twelve student assistants from Jambi University. They enjoyed a ten days training session in the end of September / beginning of October 2012, including both class-room teaching and practical exercises. The hiring of these assistants, the general organisation, data quality management, etc. is carried out by one doctoral student from Göttingen University, supported by one student assistant from Göttingen University.

The field trips take between five and ten days, each of them covering one Kabupaten. It usually starts with a full day of preparation for deciding on the team composition, the routes, etc. Before visiting a village, the village head must be informed to facilitate accommodation and local support during survey activities. The fourteen abovementioned students are travelling with three cars, often passing through difficult terrain that can only be accessed by 4x4 vehicles. Upon arrival in a village, the officials have to be greeted, before appointments with the respondents can be arranged. The following days, interviews are carried out.