The maize industry in the Province of Lampung, Indonesia

Abstract

The maize industry plays a significant role within the economy of the province of Lampung , Indonesia. In addition to its use for domestic human consumption, maize is also exported to countries such as Japan, Singapore and Malaysia. This study attempts to formulate analytical techniques for examining and/or estimating production activities , demand, supply and the marketing o f maize grown in Lampung. A Cobb-Douglas (C-D) production function was fitted to cross-sectional data of 106 units of samples of smallholders from north, central and south Lampung. A multi-equational model was employed in the case of north Lampung where rice production information was available . It was felt that the latter model was more realistic and less restrictive , since it incorporated the concept of factor sharing under a multiple cropping system. Sample farms were classified as small or large depending on the area being cultivated to maize. The study indicates that the potential to expand production is greater for the relatively large farms than for the small farms. Misallocation of resources (input factors ) seems to be a general problem in farm practices . Econometric models were formulated to estimate the supply response and both domestic and export elasticity of demand in the short and long-run, using time series data for the period 1957 t o 1974. To assess the market prospect s for maize, a market clearing equation was also used. The results show that the supply response of maize i s dependent not only on the price of maize, but also the prices of other food crops and the cost of factors of production. With respect to domestic demand, it was found that per capita consumption was responsive to the price of rice relative to other foods such as cassava, and the level of income. The demand for maize exported to Japan and Singapore was found to be responsive to the prices of substitutes used in livestock and poultry feeds, the size of the livestock population, and changes in the economic activity (i.e . income level ) in the importing countries . The market clearing equation indicated that there is a possibility of demand exceeding supply in the future . Unless serious efforts are under - taken to increase local production, the price of maize in the domestic market would therefore be expected to rise . Examination of the traditional marketing system reviews several imperfections which could be overcome by improving transport, storage and quality control throughout the marketing chain . Changes in the structure of the marketing chain and in government policy on maize marketing are also considered necessary . Such improvements would reduce the cost of maize marketing thereby enabling Indonesian maize to compote more effectively on the world market. The study also undertakes an analysis of the share of Indonesian maize within the world market.