Assessment of Maize and Soybean Pricing

Muhammad Firdaus,Dea Amanda,Fuza Fuza,Hastuti Hastuti

doi:10.17358/jma.17.2.153

Abstract

Prices of maize and soybean fluctuated significantly at both producer and consumer levels in Indonesia. This study aims to analyze the pricing of maize and soybean at the consumer level by employing the vector error correction model and to analyze the market behavior in determining consumer prices by using the game theory. The results show that maize prices at the consumer level are positively influenced by producer price, wholesale price, as well as gasoline price shocks and are also negatively affected by supply shocks. Soybean prices at the consumer level are negatively influenced by producer price shocks and are positively affected by wholesale price shocks. Shocks in terms of supply result in the fluctuating prices received by the consumers. It is due to the dominant pricing strategy, which is through collusion performed by the maize and soybean retailers. Some market efficiencies are encouraged to reach more stabilized prices. Keywords: game theory, maize, soybean, market efficiency

Highlights

Based on some legal documents from the Government of Indonesia, both maize and soybean are categorized as strategic commodities as they are used as main materials for protein sources
The availability of maize in Indonesia derives from the maize production outside of Java that has been experiencing a production growth of 7.54 percent per year over the last five years
The results showed that the determination of the selling prices of maize and soybean in collusion is the optimum strategy because it has generated a greater payoff

Summary

Introduction

Based on some legal documents from the Government of Indonesia, both maize and soybean are categorized as strategic commodities as they are used as main materials for protein sources. Various strategies have been carried out by the government as an effort to increase food production. These efforts have not been able to achieve optimal results; the demand for food cannot be met by domestic food production. As a strategic national commodity, the availability of maize must be maintained. This indicates the need for various efforts to control the stability of maize production annually. The availability of maize in Indonesia derives from the maize production outside of Java that has been experiencing a production growth of 7.54 percent per year over the last five years (the period of 2012 to 2016). The production growth is influenced by the growth of harvested areas outside of Java by 4.19 percent per year (Ministry of Agriculture [MoA], 2016)

Objectives

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Conclusion