Abstract
The role of agriculture in labor absorption is still relatively high. In 2014, the agricultural sector employment reached 34%. In contrast with this condition, the added value generated by the agricultural sector accounted for only 14:43%. This causes the high poverty in rural communities who generally work in the agricultural sector (63% Household poor live in rural areas). Therefore, the government made many policies to improve farmer’s welfare. The purpose of this study was to assess the welfare of farmers by calculating Farmer’s Terms of Trade (FTT) Index. The study was conducted in Jombang Regency. Data was gathered by survey method on 183 households of farmers. The results showed that Farmer’s Terms of Trade (FTT) Index in Jombang in 2015 decreased from the year 2014 amounted to 0.117% from 112.1 became 112.0. The decreasing of FTT index was caused by the growth rate of price received index (IT) is lower than the growth rate of price paid index (IB). Agricultural policy using price producer instrument will be effective to improve farmer’s welfare when policy on price control at the consumer level also conducted in the same time.
Highlights
Agricultural contribution to GDP formation in 2014 was ranked third after manufacturing and trade industries. It suggests that the role of agricultural sector in Indonesian economy is still relatively large
= Index received by farmers in nyear = Index paid by farmers in nyear where: ITn: Index received by farmers in nyear IBn: Index paid by farmers in nyear Pni: Price of commodity/item-i in nyear (Rp/unit) P(n-1)I: Price of commodity/item-i in previous year (n-1) (Rp/unit) Q0i: Quantity of commodity/item-i in base year P0i: Price of commodity/item-i in base year (Rp/unit)
Based on components forming Farmer’s Terms of Trade (FTT), the price index received by farmers is the value they receive from the production of agricultural commodities
Summary
Agricultural contribution to GDP formation in 2014 was ranked third after manufacturing and trade industries It suggests that the role of agricultural sector in Indonesian economy is still relatively large. Studies conducted by Dillon, et al, 1999 and Simatupang, et al, 2000 stated that an increasing agricultural production through various modified technology and institution has not been able to increase revenues, farmers’ welfare, and to reduce poverty in rural areas. The purpose of this study was to determine the level of farmers’ welfare in Jombang Regency by FTT instrument
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