ECONOMIC ASPECTS OF SOYBEAN PRODUCTION AND MARKETING IN INDONESIA

Abstract

Indonesia is a great archipelago, consisting of five main islands and about 13,000 smaller ones. Topographical features and soil types can be classified into three major groupings: 1) mountainous land area, 2) level or undulating to hilly land, and 3) low swampy lands. Indonesia is the fifth most populous country in the world after China, India, Russia, and the United States of America. It is predominantly a rural society, as well as an agricultural country. Agricultural policy has emphasized intensification, extensification, diversification and rehabilitation. This policy has been supported by the development of better irrigation schemes, improved on-farm water management, implementation of special intensification packages and increased labor productivity. In 1969, the government of Indonesia launched the first five year plan with agriculture as the focal point to promote economic growth. Food crops consist mainly of paddy rice, followed by maize, soybeans, sweet potatoes and cassava. Since 1969, rice production has been the primary focus in increasing food production, however, during the 1970's the growth in irrigated land slowed, and in turn rice production declined. The production of second crops such as maize, soybeans, groundnuts and cassava was largely neglected in government policy up to 1974. The declining rate of rice production during 1972-1974 encouraged the government to take into consideration for food policy these second crops, which in part act as a substitute for rice. Before 1974, total production of maize was declining, but small gains had been made by soybeans and groundnuts. In the case of soybeans, the domestic production cannot meet the demand. To fulfill the unmet demand, soybeans have been imported. It is projected that imports of soybeans will only increase in the future. Based on the availability of production resources particularly land in the outer islands, the possibility exists to increase domestic production. The principal objectives of this study are; 1) to describe and analyze the economic potential and constraints in the development of soybeans in Indonesia, and 2) to formulate policy recommendations regarding production, distribution, and consumption of soybeans.