Eurasia: Economics & Business (Dec 2023)
EXPLORING THE DYNAMICS OF FOOD PRICES AND FARMER’S TERMS OF TRADE: REFLECTING ON THE WELFARE OF INDONESIAN FARMERS
Abstract
This research explores changes in staple food price trends and their impact on the Farmers' Term of Trade (FTT) as a primary indicator of farmer prosperity. Utilizing secondary data analysis, the study processes monthly staple food price data from January 2018 to July 2023 and FTT data from January 2019 to July 2023. This analysis employs a coefficient of variation method to track food price changes and calculates the FTT value based on the comparison of the price index received by farmers to their expenses, serving as a marker of farmer welfare. The study's findings reveal a significant influence of food price alterations on FTT and farmer welfare. There is a marked difference in the dynamics of staple food prices and FTT across various regions in Indonesia. These price variations are influenced by changes in agricultural input costs, such as fertilizers and labor wages, impacting the FTT value. Sectoral analysis indicates that during the Covid-19 era, food crop farmers have a lower level of prosperity (>100) during the pandemic. This study highlights the importance of farmers' understanding and adaptation to the dynamics of food prices and FTT. Adaptation strategies may include changes in production strategies, government support, crop diversification, and the adoption of new technologies, even amidst external challenges such as climate change. The interaction between food price dynamics, FTT, and its relation to farmer welfare provides essential insights for formulating more effective policies to support farmer welfare and food security in Indonesia.
