Analysis of the Risk of Rubber Prices Using the ARCH-GARCH and VaR Methods on Farm Income in West Aceh District

Abstract

The fluctuating price of rubber is often detrimental to farmers because farmers generally cannot manage the timing of the sale to get a profitable selling price. High price fluctuations provide opportunities for traders to manipulate price information on farmers and cause farmers not to enjoy the higher true price. This research aims to see how risky the price is received by rubber farmers and its effect on farm income in West Aceh District. This study uses the ARCH-GARCH method and VaR calculations for price risk analysis and Simple Linear Analysis to analyze the effect of price on farm income. The results showed that the price risk received by rubber farmers was high, namely 41.699% during the one-year sales period. The regression results show that the price significantly affects the income of rubber farming in West Aceh Regency with a probability of 0.000. The value of R2 is 0.935, which means that rubber prices influence 93% of rubber farming income, and variables outside the model influence 7%. The selling price of rubber influences the income of rubber farming. If the price of rubber is low, the farmers cannot afford to pay for rubber maintenance, thus disrupting rubber productivity. Decreased productivity will reduce farm income in the West Aceh Regency, which means that the price of rubber influences 93% of rubber farming income, and 7% is influenced by variables outside the model.