Small-Scale Vegetable Farmers’ Participation in Modern Retail Market Channels in Indonesia: The Determinants of and Effects on Their Income

Alim Slamet,Masahiro Ichikawa,Akira Nakayasu

doi:10.3390/agriculture7020011

Abstract

The rise of supermarkets in Indonesia since the end of the 1990s have been transforming the food retail sector and providing further market opportunities for small-scale farmers, in which most of Indonesia’s farmer falls into this category. The aim of this paper is to examine the supermarket participation and its effect on the well-being of small-scale farmers. We compare the differences between participants and non-participants in supermarket channels in order to explore the constraints on supermarket participation. By applying a treatment effects model which allows capturing the possibility of selection bias, we examine the factors that determine farmers’ participation as well as the effect on their income. The results show that younger farmers with higher levels of education, irrigated land, who have packaging equipment and storage facilities, and are located near paved roads, are more likely to participate in the supermarket channels. On the other hand, farmers who have sprayer equipment are more likely to participate in the traditional market channels. The effect analysis shows that small-scale farmer participation in the supermarket channels can boost their income.

Highlights

Modern retail sectors in Indonesia have been growing rapidly in the last two decades [1,2,3].This trend is similar with other developing countries [4], as indicated by the increasing share of supermarkets in food retail in China [5], Brazil [6], Kenya [7], Guatemala [8], Thailand [9], and Vietnam [10]
Farmers who participated in supermarket channels were typified as being younger and more well-educated farmers, who had higher non-land assets, apply increased use of inputs and had increased yields of production, better written records of their activities, and who were more likely to perform post-harvest activities before selling their products to the buyer and were more likely to have perceived their income from vegetable farming to have increased compared to five years ago in comparison to traditional farmers
The results of the channel-selection model showed that there were several constraints faced by small-scale farmers who participated in the supermarket channel that were related to their level of education, irrigated land, packaging equipment, and storage space ownership, rather than farm size, or other household and farm assets

Summary

Introduction

Modern retail sectors in Indonesia have been growing rapidly in the last two decades [1,2,3] This trend is similar with other developing countries [4], as indicated by the increasing share of supermarkets in food retail in China [5], Brazil [6], Kenya [7], Guatemala [8], Thailand [9], and Vietnam [10]. By 2014, the share of the modern retail sector (supermarkets, hypermarkets, convenience stores, and minimarts) in total grocery retail sales had reached 16%, having increased from 5% in 1999, while the share of traditional grocery retail in total grocery retail sales showed a decrease in number from 93% in 1999 to 83% in 2014 (Table 1). Many of the supermarkets, such as Hero and Gelael, were owned by Agriculture 2017, 7, 11; doi:10.3390/agriculture7020011 www.mdpi.com/journal/agriculture

Objectives

Results

Conclusion