Analysis of Competitiveness and the Factors that affect Milk Production in Indonesia

Abstract

The aims of this study are (1) to analyze the development of milk industry in Indonesia, (2) to analyze the competitiveness of Indonesian milk, and (3) to analyze the factors that affect milk production in Indonesia. Data was from the Central Statistics Agency (BPS), the Directorate General of Animal Husbandry, Joint Cooperative Milk Indonesia (GKSI), International Financial Statistics (IFS) and Commodity Trade Statistics Database (Comtrade). This study used time series yearly data 2002 to 2010 of volume of milk production, domestic milk prices, corn prices and the number of cows. The method to analyze the competitiveness of Indonesian milk is Porter's Diamond approaches. Porter's Diamond analysis indicates a fundamental weakness of domestic milk competitiveness lies in the condition factor, supporting and related industries, government intervention, strategy structure and rivalry. Conversely, factors thought to contribute greatly to the condition competitiveness is demand conditions. The method to determine the factors that affect milk production in Indonesia is the panel data regression. The result that milk production is significantly affected by number of cows and not significantly affected by price of domestic milk and price of corn.