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Abstract

The objectives of this paper are (1) to describe sugar marketing in Lampung Province and (2) to analyze sugar price transmission, both vertically and spatially. Lampung was chosen as site of this study since this province is the largest sugar production in Indonesia. Primary data for this analyses was obtained through a case study approach by observing a dynamic of sugar marketing from producers up to consumers. Secondary data of monthly retailed sugar prices were collected from several sugar producing cities and major international markets. Sugar marketing in Lampung Province was portrayed through a system approach. Sugar price vertical transmission was analyzed through Ravalion’s model (1986) and spatial transmission was analyzed through VAR/VEC model. Result of study showed that, firstly, sugar marketing agents in Lampung mainly consist of farmers, farmers groups, coordinators, sugar factories, groceries, distributors and retailers. Secondly, sugar price transmission, both in the short and long terms, showed that change of prices at consumer as well as distributor levels were not related or affected sugar price at farmer level. Sugar distributor and grocery were two marketing agents who responded rapidly to sugar price changes at consumer level. It is clearly showed that either in the short or long terms, farmers were in the position as a price taker rather than a price maker. In general, the sugar price in Jakarta, Lampung and Medan markets affected sugar price at other cities in Indonesia. Therefore, it is important to strengthen the capacity of farmer groups of sugar farming in order to increase farmer’s bargaining power.