Food system transformation in Indonesia: factors influencing demand and supply for alternative pest management farming systems.

Abstract

In Indonesia, demand is growing for food with additional food safety and quality assurances, termed credence attributes. Indonesian food retailers are selling fresh fruits and vegetables labelled as organic and pesticide-free. Some of these claims are underpinned by retailer-mandated food standards, which include specific farming systems that can be verified and certified. If these private sector standards are set too high, smallholders may be excluded from food markets. Additionally, if claims are not certified by a reputable third-party then information asymmetry is an issue. Little is known about the types of food certifications and claims most valued by Indonesian consumers. Chapter 2 addressed the gap in the literature on demand for credence attributes in Indonesia through analysis of data collected as part of a food consumption study of 1180 urban Indonesian households. In the study, consumers indicated their willingness-to-pay (WTP) for three certified food products. Consumers were on average, willing to pay 17 to 19 per cent more for certified organic horticultural products (chillies and mangoes). WTP data was analysed using a Cragg double-hurdle model. The empirical results suggest the target market for certified organic food products in Indonesia is higher educated females who live in higher incomes households and frequently shop in modern food retail outlets (supermarkets). Higher food quality and safety requirements are likely to be a challenge for smallholder farmers in Indonesia. Thus, Chapters 3 to 5 provide insights on what can be done to create an “enabling environment” for smallholders. The analysis of survey data from 687 shallot-producing households (Chapter 3) found that conventional farmers are less educated, have fewer production and household assets, have limited access to modern technology such as computers and the Internet, are more risk averse, and are less likely to join a farmers group. The prevailing attitude towards farmers groups lowers the probability that conventional farmers are exposed to new technologies. Shallot farmers adopting Alternative Pest Management (APM) practices made significant changes to production activities, in particular they used less chemical inputs. The results of a Best-Worst Scaling analysis (Chapter 4) suggest that the most important attributes for the average Indonesian shallot farmer when considering a new crop or non-conventional farming system are related to relative economic advantage. A Latent Class Analysis identified three segments of producers with unique preferences for technology attributes. Clusters were characterised post-hoc using farmer and farm household characteristics, adoption behaviour, access to credit, participation in farmer groups and sources of production information. Unfortunately the analysis did not lead to a clear story on why preferences for technology attributes differed. Finally, in Chapter 5, Stochastic Production Frontier (SPF) analysis found that conventional methods of producing shallots resulted in higher productivity compared to APM methods, with significant differences in the productivity of land, chemical pesticides, insect traps and labour. However, the yield loss associated with APM shallot farming systems was only than 1.5 per cent lower. Ultimately, the findings of the study suggest that training programs for smallholders on how to implement APM farming practices will result in improved yields for adopters.