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Rubber Smallholders' Economic Condition Under The Rubber Price Fall and Possible Solution in South Sumatra, Indonesia

DWI WULAN SARI 三重大学

2020.06.24

概要

The Indonesian economy has been growing rapidly. In particular, the agro-industry sector has experienced economic growth. Rubber and oil palm are the main crops for agro-industry. Production of both these crops has increased significantly, and many farmers are dependent on these crops. From 2000 to 2017, rubber production has increased from 1,501 thousand tons to 3,603 thousand tons, and oil palm production has increased from 36,380 thousand tons to 158,343 thousand tons.

The products from these crops, natural rubber and palm oil, are international commodities, and a large proportion of production is exported. Therefore, production of both crops has been influenced by international market conditions, and increased demand for these products has encouraged crop production, not only in Indonesia, but also in other countries, particularly southeast Asian countries. As many countries have expanded production, international competition in the market has become severe and international prices have fallen. Between 2000 and 2011, the price of rubber increased from 0.67 US$/kg to 4.82 US$/kg. However, the price has fallen since then, reaching 1.57 US$/kg in 2017 (World Bank, Commodity Markets, 2018). The price of palm oil showed a similar change; it increased until 2011 and has fallen after that. The price was 46% lower in 2017 than in 2011.

These price falls have influenced farm gate prices, particularly that of rubber. As shown in Figure 1 and Figure 2, the price of rubber was 67% lower in 2016 than in 2011, while the price of palm oil in 2016 was higher than that in 2011. The fact that the price of palm oil did not fall may be due to the government’s commitment to maintaining the price, while the price of rubber is determined by market mechanisms.1

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