Banana supply chains in Indonesia and Australia: surviving isolation from end markets

Abstract

Two banana supply chains (BSC), one in Indonesia (BSC1) and one in Australia (BSC2), are described based on case study research conducted in 2002. BSC1 sources bananas from small farmers for distribution through traditional markets in Jakarta. BSC2 includes farmers supplying to both major and independent retailers in Sydney through a wholesale agency with some farmer ownership. Farmers in both chains live in relative isolation from the main markets for their bananas. Prices for their bananas depend on the market prices in the city, upon which they have little control. This paper focuses on how farmers removed from key markets, deal with buyers to receive fair prices. In both chains, most transactions between farmers and their buyers were completed through a fixed price mechanism with little bargaining effort from the farmers. Because of their relative isolation, farmers relied on the buyers to offer them fair prices that reflect market movements in the city. Farmers in BSC1 based their trust on traditional value systems and the competition to secure banana supply in the villages. In BSC2, farmers’ trust in their agent developed over time in their relationships and by making comparisons between the prices farmers received for their bananas and the market information they have.