The marketing system of arabica gayo coffee in Central Aceh and Bener Meriah Regencies, Aceh Province: Structure, Conduct, Performance (SCP) approach

Abstract

Arabica Gayo coffee is the main commodity from Central Aceh and Bener Meriah regencies. Most (86%) of Arabica Gayo coffee production is exported to the world market and the specialty coffee that has been classified as certified organic, fairtrade and raintforest. The certification program has been able to increase the sales value of Arabica Gayo coffee in the world market which is commonly referred to as the premium price. In the Arabica Gayo coffee market, volatility prices at exporter’s level is not followed by volatility prices at farmer’s level. The fundamental problem for the majority of coffee farmers in Central Aceh and Bener Meriah is weak bargaining position of farmers in the pricing process. Competitive market conditions will affect the behavior of a marketing agency and the determination of price. However, how quickly do price changes which are responded by marketing agencies will be identified through analysis of market performance. Based on these problems, it is necessary to analyze the marketing system through the SCP approach i.e structure, conduct, performance. The aims of this study are to 1) analyze the structure, conduct and performance of Arabica Gayo coffee markets in Central Aceh and Bener Meriah, 2) analyze the influence of the structure, conduct and performance of the market to the formation of coffee prices at the farm level, and 3) formulate policies that can enhance bargaining position of farmers in the pricing process. The analysis used are the descriptive and quantitative analysis of the SCP approach. Quantitative data processing use Microsoft Excel 2007 and Eviews 6. The analysis showed that the structure of the market facing Arabica Gayo coffee farmers in Central Aceh and Bener Meriah is oligopsonistic. This is because the market conditions at the level of exporters concentrated with a small level of competition (CR4 = 71.12%). Moreover, the existence of barriers to entry due to the bond that exists between farmers with exporters to meet the standards of certified coffee. The structure of such markets allows firms (exporters) for price collusion. The amount of market power that affects the behavior of exporters owned marketing agency in the lower level. Institutions and practices of marketing functions involved are farmers, collectors, cooperatives and exporters. The marketing function is the function that made the exchange, physical and facilities. Arabica Gayo coffee marketing channels in Central Aceh and Bener Meriah consists of 4 channels. The first channel is farmer-collector-cooperative-exporters (non-cooperative). The second channel is farmer-collector-exporters (non-cooperative). The third channel is farmer-collector-exporters (cooperative)-exporterters (non-cooperative) and the fourth channel is farmer-collectors-exporters (cooperative). Whole farmers deliver their coffee to the collector. Dependence of farmers on the collector due to the limitations of the farmers in gaining access to market information and alternative marketing channels. This causes weak bargaining position of farmers in the pricing process. Conditions of oligopsony market structure which is faced by farmers and the weak bargaining position of farmers in the pricing process will affect the performance of the market. It is proved by the share price of coffee received by farmer still low (≤ 30%) with a relatively high margin. This condition is caused by the dependence of farmers to collectors and limited facilities and infrastructure owned by farmers with the result that most of farmers do not changed the value added of coffee market. so that farmers owned most of the farmers do not make changes to the value added which marketed coffee. On the other hand, vertical market integration analysis showed that coffee at the farmers market is not integrated with the coffee market at the collector level, cooperatives and exporters, meaning Arabica Gayo coffee price changes in the level of collector, cooperatives and exporters at this time and the previous time does not affect the price of coffee in the farm level. This suggests that farmers tend to be price taker in the short term and long term. The SCP approach has shown that volatility prices at exporter’s level is not followed by volatility prices at farmer’s level. This condition illustrates that Gayo Arabica coffee marketing system in Central Aceh and Bener Meriah inefficient. In an effort to improve the bargaining position of farmers is through the formation of farmer groups and empowerment of farmer groups continuously. In addition, the government's role in ensuring the necessary infrastructure coffee farmers, which according to the price monitoring of quality coffee, and inform the development of the market price (local and global) and to facilitate the direct partnerships between farmers and exporters. Although there has been cooperation between farmers and cooperative. It is expected that there is a change providing price certainty for farmers. This can be done through a professional cooperative of management system to improve the bargaining position of farmers in the pricing process.