Rice Market Spatial Integration during Covid-19 in Indonesia

Abstract

Restrictive policies during the Covid-19 pandemic have significantly disrupted the distribution of trade between regions in Indonesia. The availability of production and affordability of prices is essential to always pay attention to during the Covid-19 period, especially for rice commodities, whose role is very strategic. Rice price stabilization will be more effective and efficient in an integrated market. This study aims to analyze the disparity of rice prices before and during Covid-19 and the spatial integration of the rice market in Indonesia. The data used is the daily price of rice at the consumer level from August 1, 2018, to August 31, 2021. The analysis area consists of 12 reference provinces, and the rest are assumed to be followers. The method used in this research is Johansen Cointegration, Causality, and Vector Error Correction Model (VECM). The results showed that the inter-provincial rice marketing system in Indonesia in terms of price efficiency had already occurred. This can be seen from the results of the study, which show that the disparity in rice prices is not significant even during the Covid-19 period, and price transmission has been well integrated throughout the province in the long term. Meanwhile, in the short term, the deficit reference provinces, namely Jakarta and Papua, are more integrated with other provinces than surplus provinces. This allows rice supply from the surplus market to be very important in determining the price of rice in the two provinces. The adjustment rate to the average equilibrium price is 0.0086% per day, so the total adjustment time is three months and 26 days. Meanwhile, when Covid-19 occurred, the average adjustment rate was 0.00078% per day, so the total adjustment time was prolonged during Covid-19 by 1282 days or three years and six months. The results also show that East Java, West Java, Central Java, South Sulawesi, Riau, Papua, and DKI Jakarta are reference markets that can determine prices in other provinces while other provinces become follower markets.