Impact of contract farming on price: a case study of red chili farmers in Magelang regency

Abstract

Contract farming is a price control through the agreement of sale arrangement between farmer and firm taken before the starting of production process. Red chili price has a great fluctuation due seasonal production. The objective of the study is to analyze the influence factors red chili price on contract farming. The study compares the constraints on participation, and the impact to the price of red chili between contract and non-contract of farmers. The study carried out in Magelang District, Central Java Province on June to August 2019. Survey method was used with purposive sampling method to 45 respondent of non-contract farmers and 40 respondent for contract farmer. The data analysis used were statistical t-test and coefficient of variation. The results of the study indicated that farmer with contract farming has the minimum price of IDR 9000 per kg and increasing following market price, while the selling price of non-contract farming based on the market price which always fluctuated. Factors affect contract farmers are offering fixed price, and market guarantee while the non-contract farmers are least of information about contract farming. Contract farming should be promoted to sustain chili production and farmer income.