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Cashew Nut's Market Structure in South East Sulawesi

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Cashew Nut's Market Structure in South East Sulawesi International Journal of Civil Engineering and Technology (IJCIET) Volume 10, Issue 02, February 2019, pp. 2454–2463, Article ID: IJCIET_10_02_243 Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJCIET&VType=10&IType=2 ISSN Print: 0976-6308 and ISSN Online: 0976-6316 © IAEME Publication Scopus Indexed CASHEW NUT’S MARKET STRUCTURE IN SOUTH EAST SULAWESI Wa Ode Alzarliani* Agribusiness Department, Post Graduate Program of Agricultural Faculty, Halu Oleo University, Kendari, Indonesia Bahari, Sitti Aida Adha Taridala, Idrus Salam Agribusiness Department, Post Graduate Program of Agricultural Faculty, Halu Oleo University, Kendari, Indonesia *Corresponding Author Email: [email protected] ABSTRACT The climate and land in Southeast Sulawesi that is very supportive in the development of farming commodities and cashew nut becomes one of the huge potentials to be developed. This study analyzed the structure of the cashew nut market which conducted purposively from May to August 2018 in five cashew nut production center in Southeast Sulawesi. The results of the study show that the number of sellers is more than the buyers which show imperfect market competition. The analysis of market valuations shows that the market structure that addresses low competition among traders is very unlikely. At the level of inter-island traders and market structure, wholesalers lead to tight oligopolies that are agreed upon as price agreements can be made, even at the inter-island level of traders leading to a tight oligopoly market. Meanwhile, the market structure of cashew nuts at the level of wholesalers and retailers leads to a dominant corporate market without strong competitors. Market entry challenges indicate that new competitors will have high challenges when entering the cashew market at inter-island traders, Middlemen, wholesalers and retailers. The overall analysis shows that new competitors will get very high challenges at the retailer level with an MES value of 81.38%. Key words: Marketing, Market Structure, Cashew, Cashew Nuts. Cite this Article: Wa Ode Alzarliani, Bahari, Sitti Aida Adha Taridala, Idrus Salam, Cashew Nut’s Market Structure in South East Sulawesi, International Journal of Civil Engineering and Technology 10(2), 2019, pp. 2454–2463. http://iaeme.com/Home/issue/IJCIET?Volume=10&Issue=2 1. INTRODUCTION Cashew nut commodities have enormous potential to be cultivated and developed in Southeast Sulawesi. The supporting conditions of climate and land in this Province is very profitable in developing cashew nuts farming, so, for some people in Southeast Sulawesi, they http://iaeme.com/Home/journal/IJCIET 2454 [email protected] Cashew Nut’s Market Structure in South East Sulawesi make cashew nut farming as a source of livelihood in meeting their family needs and the development of other businesses. Based on statistical data which obtained from Central Agency on Statistics of Southeast Sulawesi in 2016, shows that almost all regencies or cities in the Southeast Sulawesi Province develop cashew nut plants. Information on land area, production, and productivity of cashew nut based on the district areas can be seen in Table 1. Table 1. Cashew nut Production Area of Southeast Sulawesi in 2016 No District/City Large Production Productivity (Ha) (Ton) (Kg/Ha) 1 Buton 6.124 912 148 2. Muna 24.962 6.337 253 3. Konawe 5.002 1.047 209 4 Kolaka 1.752 198 113 5 South Konawe 15.766 6.102 387 6. Bombana 17.074 1.098 64 7. Wakatobi 664 216 325 8. North Kolaka 75 25 335 9. North Buton 5.889 1.810 307 10. North Konawe 4.727 572 121 11. East Kolaka 807 215 266 12. Konawe 5.366 622 115 13. West Muna 8.844 709 80 14. Buton Centre 11.743 1.819 154 15. South Buton 3.691 709 192 16. Kendari 1.274 299 234 17. Baubau 803 176 219 Information of Table 1 represents the total production of cashew nut in Southeast Sulawesi which shown uneven distribution and only concentrated in five districts area. This situation might become one factor of price fluctuations and would affect the marketing system of cashew nut could be inefficient. Witjaksono et al (2008) explained that this becomes the problems faced by farmers such as the problem of marketing distribution and insufficient price where the prices of cashew nut at the level of the farmer are lower compared to prices at the level of traders. This is supported by the existence of middlemen and wholesaler who are directly involved in carrying out activities with their respective roles who acting as a price maker. Therefore, it can be said that market factors might not be a problem in the cashew nut marketing, because most of the farmers seemingly doesn’t have problems in marketing the cashew nut. This is supported by the existence of large-scale village traders and inter-island traders who compete with each other in seizing the market. The existence of such competition is due to the amount of cashew nut supply produced in Southeast Sulawesi that cannot meet market demand. The condition of the availability of cashew nuts that cannot meet the market demand should be able to place farmers as cashew producers who have a strong bargaining position who acts like a king as well as a price maker, as is the law of supply the less the amount of goods offered and the more demand, the higher the price of the item, but the reality in the field showed that the farmer as the price taker is lower compared to the marketing institutions that get higher prices in the marketing system. The prevailing price at the level of the farmer is 120.000 IDR (8.52 USD) while the applicable price at the consumer level is 155.000 IDR (11 USD) in this instance price fluctuations currently become a major problem in the marketing system. http://iaeme.com/Home/journal/IJCIET 2455 [email protected] Wa Ode Alzarliani, Bahari, Sitti Aida Adha Taridala, Idrus Salam Price fluctuations occurred because the production of the commodity was only concentrated in certain regions, production patterns that are not synchronized between producer regions, inadequate facilities, imbalances in the quantity of demand and quantity of supply (Irawan, 2007). Furthermore, Besanko et al (2011) stated that price fluctuations are one of the obstacles to market entry and management of a commodity. 2. RESEARCH METHODS 2.1. Location and Time of Research This research was carried out in the cashew nut production center in Southeast Sulawesi Province which spread in 5 districts which included Barangka Village, Buton Regency, Moko Village, Central Buton District, Lawela Village, South Buton Regency, Labasa District, Muna Regency and Kalia District Lia City of Baubau. the location was determined purposively under some considerations that the 4 regencies and 1 city were cashew production centers and the market player such Middlemen/processors, inter-island traders/processors, wholesalers and retailers should be taking a role in marketing activities on determined location. This research was conducted from April to August 2018. 2.2. Sources of the data There were two types of the data in supporting this study, namely primary data which obtained directly through interview and direct observation to the players who taken the role in cashew nut production in the selected locations which consist into 187 cashew nut farmers, 162 processors, 40 processing farmers and 49 traders while the traders as the market player could be divided into 25 middlemen/processors, 6 retailers, 7 wholesalers, and 11 inter-island traders. While Secondary data was obtained through the Department of Agriculture, Central Agency on Statistics of Southeast Sulawesi, research journal reports on research results and the results of literature studies which relevant to this current study. The research method used survey methods with consideration of extensive research areas in 4 districts and Baubau city. Data collection in this study was carried out by conducting direct observations in the field (observation), interviews with farmers, processing farmers, processors, traders, and filling out questionnaires and literature. 2.3. Market Structure Analysis The market structure was analyzed descriptively and qualitatively which includes the number of sellers and buyers, the level of market knowledge and product differentiation (Education and Isitor, 1990). Analysis of market structure quantitatively analyzed market share according to the concept of Besanko (2010), market concentration according to the concept of Martin (1989) and challenges when entering the market were measured based on the concept of Jaya (2001) Market share analysis The calculation of the market share of cashew nuts in Southeast Sulawesi was done by calculating the market share of traders who offer cashew nut from Muna Regency, South Buton Regency, Central Buton, South Buton, and Baubau City. If the market share gets higher, it can be concluded that the strength of traders in the cashew nut market is strong or has a market share. Market share can be calculated using sales revenue or production capacity (Besanko et al. 2010). The calculation of the market share of cashew nut collectors in Southeast Sulawesi used the ratio between sales of cashew nuts in the district to total sales in Southeast Sulawesi. Analysis of market share for each marketing institution can be formulated as follows: http://iaeme.com/Home/journal/IJCIET 2456 [email protected] Cashew Nut’s Market Structure in South East Sulawesi (1) Information: MSi (Market Share) = Merchant market share i (%) Si = Sales of cashew by traders i (tons / year) Stot = Total sales of cashew by all traders (tons/year) With criteria: 1. Pure monopoly, if one company has 100% of market share. 2. The dominant company if it has 50-100% of market share and without strong competitors. 3. Rigorous oligopoly, if the merger of 4 traders has a 60-100% market share.
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