Spatial Market Integration and Price Transmission of Meat in Indonesia

Abstract

Food balance in the country tend to be deficit for main food staples as well luxurious foods like red meat. Food deficit has been prevailing until currently. Being the net importer of meat products, Indonesia is challenged to meet two pressing goals, first to protect farmers and secondly to secure meat availability. Trade flows between regions and access to information are challenging becuase Indonesia is an archipelagic country with high economic dispersion and inequality. This study aims to analyze spatial integration and price transmission of meat market in Indonesia. The data is a monthly prise series of meat from 7 provinces containing 50 observations. The data was analyzed using Vector Error Correction Model (VECM). This study reveals that there is a long run relationship among market price in seven provinces and the high long run relationship was found among provinces in Java island. The short run was also found among provinces. This findings represents that meat market in Indonesia was spatially integrated. This study recommends the goverment to formulate policies which providing infrastructure to avoid market exploitation and spread price information along provinces in Indonesia. This will help in enhancing efficiency of the marketing system in agricultural commodities and reduce market distortions. Acknowledgement : I would thank to my younger colleg Ahmad Syariful Jamil for co-authoring this paper.