Price Behavior and Market Integration of Shallot in Java Indonesia

Abstract

In Indonesia, shallot is a main seasonal vegetable crop that is always needed by society. This condition leads to price fluctuation in producers and consumers level. The purpose of the paper is to examine price behavior, market integration, and leading market of shallot in Indonesia. This study uses producers and consumers monthly prices data at two producer’s markets (Cirebon, Brebes and Nganjuk district in java) and consumer’s market in Kramatjati Central Market, Jakarta ( KCMJ) during 2009-2013. Shallot price behavior is analyzed by Coefficient of Variation (CV). Market integration is analyzed by Engle and Granger model of co-integration. Granger causality test is used to identify the leading market. Result from the study show that monthly price behavior of shallot during 2009-2013 in producers and consumers market area have the same pattern. Shallot price in producers market is relatively more volatile than that of consumers market. Shallot price in Brebes relatively more volatile than that of in Cirebon and Nganjuk. As much as 50% shallot market integration in Indonesia is strong. In relationship of Nganjuk-KCMJ more integrated than of Brebes-KCMJ.In relationship of Cirebon-KCMJ also integrated despite weak. It takes six months to make adjustment if there is imbalance in the short-term relationship between Nganjuk-KCMJ and seven months for Brebes-KCMJ. The producer’s markets in Cirebon, Brebes and Nganjuk influence consumer’s market in KCMJ in determination shallot price. Two-way relationship accur between Cirebon-KCMJ, Brebes-KCMJ and Nganjuk-KCMJ in determination of shallot price, but in the difference lag. If price fluctuation occurred in fact, the government might not carry out intervention, because market mechanism was able to customized it.