Monopsony in Indonesia's Agriculture: Squeeze on Small Farmers

The agricultural sector plays a pivotal role in Indonesia's economy, providing employment and
sustenance for a significant portion of the population. However, the sector faces a pressing
challenge in the form of monopsony-like conditions, where large supermarket chains wield
immense buying power, creating an uneven playing field for small-scale farmers. This dominance
by a few major buyers significantly impacts pricing, income stability, and ultimately, the
sustainability of the sector. Supermarket chains' bargaining power enables them to dictate low
prices for agricultural products. With limited alternative buyers, farmers have little room for
negotiation, often leading to prices that barely cover production costs, leaving farmers with minimal
profit margins. For instance, in 2020, Indonesian chili pepper farmers faced a drastic price drop due
to supermarket chain pressure, resulting in significant financial hardship (Wulandari, 2021).

The dominance of these chains also jeopardizes income stability for farmers. Supermarkets often
prioritize consistency in supply and appearance over price. This can lead to farmers being rejected
for minor cosmetic imperfections or fluctuations in harvest yields. This unpredictability makes it
difficult for farmers to plan and secure a stable income, hindering their ability to invest in better
farming practices or improve their livelihoods (Heryanto, 2022). The monopsony-like situation in
Indonesian agriculture creates a vicious cycle that threatens the long-term sustainability of the
sector. Low prices and income instability discourage farmers from continuing production, leading
to potential food shortages and increased reliance on imports. Moreover, the lack of financial
resources limits farmers' ability to adopt sustainable farming practices, further jeopardizing the
sector's environmental and social sustainability (Supriyadi, 2023).

Addressing this power imbalance is crucial to ensure a fair and thriving agricultural landscape in
Indonesia. Policymakers can implement measures to strengthen farmers' bargaining power, such as
promoting farmer cooperatives and providing access to alternative market channels. Additionally,
enforcing competition laws and regulating supermarket chains' buying practices can help prevent
excessive price suppression and unfair treatment of farmers (Wulandari, 2021). Monopsony-like
conditions in Indonesia's agriculture pose a significant threat to the livelihoods of small-scale
farmers and the overall sustainability of the sector. Addressing this issue requires a multi-pronged
approach that empowers farmers, promotes competition, and ensures fair trade practices. By
fostering a more equitable agricultural landscape, Indonesia can safeguard its food security and
promote sustainable rural development.

References
 Heryanto, B. (2022). The Impact of Monopsony on the Welfare of Vegetable Farmers in
Gunungkidul Regency. Journal of Agrieconomics, 12(1), 1-10.
 Supriyadi, D. (2023). Monopsony and Sustainability of Red Chili Farming in Malang
Regency. Journal of Agrieconomics, 13(1), 1-11.
 Wulandari, R. (2021). Analisis The Impact of Supermarket Monopsony on the Welfare of
Cayenne Chili (Capsicum Frutescens L.) Farmers in Malang Regency. Journal of
Agrieconomics, 11(2), 217-228.