This study examines the transformation of markets for high-value commodities in Indonesia and their impact on farmers, traders, and processors. The project addresses five research questions: 1) How are income and urbanization influencing consumer preferences for high-value commodities and for different types of retail outlets? 2) What are the patterns in the restructuring of food supply chains, particularly for high-value commodities? 3) What are the patterns, determinants, and effects of participation of farmers in modern supply chains for high-value commodities compared to traditional market channels? 4) What are the policies, institutional changes, and programs that would maximize the competitiveness and inclusiveness of the transformation of high-value supply chains? In addition, a fifth objective is to build research capacity in Indonesian institutions, particularly in value-chain methods and survey design and analysis. The commodity focus is on chillies, shallots, mangoes, mangosteens, and shrimp
The project is being implemented by the International Food Policy Research Institute (IFPRI), the University of Adelaide (UA), Michigan State University (MSU), the Centre for Agricultural Policy and Agribusiness Studies (CAPAS) at Padjadjaran University, and the Indonesian Centre for Agriculture, Socio-Economic and Policy Studies (ICASEPS).
On 4 November 2008, the project organized an all-day inception workshop in Bogor, Indonesia. The presentations and discussion focused on trends in high-value agriculture in Asia, the Indonesian horticultural sector, information gaps, project goals and activities, value-chain and survey methods, and communication strategies. Participants included representatives from IFPRI, UA, MSU, CAPAS, ICASEPS, and ACIAR, among others.
In addition, the team held a series of more informal meetings to plan out activities under the project and meetings with ACIAR project leaders managing ACIAR mango supply-chain projects in Australia, Indonesia and Pakistan (SMAR/2007/193 and HORT/2006/146). Finally, the team attended part of the 4th International Symposium on Tropical and Subtropical Fruits, held in Bogor, 3-7 November. Team members Ronnie Natawidjaja, Randy Stringer and Tom Reardon gave presentations at the Symposium.
In February 2009, Tom Reardon and Randy Stringer travelled to Indonesia to prepare more detailed plans for the key informant interviews and value chain analysis as part of the study of shrimp and mangoes.
In March, Randy Stringer travelled to Sydney to meet with David Shearer and Richard Callinan (University of Sydney) the project coordinator for another ACIAR shrimp project (FIS/2005/169), to organize collaboration and linkages between the two projects.
In April and May 2009, Wahida, one of the main ICASEPS collaborator in the project, visited the University of Adelaide as part of her John Dillon Memorial Fellowship to discuss chilli and shallot value chain work and meet three Indonesian PhD students who plan to work on the project.
In May, Dale Yi, an MSU graduate student, moved to Indonesia to begin his doctoral research on shrimp marketing with project funding.
In May-June, researchers from IFPRI (Nick Minot), UA (Randy Stringer), and MSU (Tom Reardon) travelled to Indonesia for a 2-3 week trip to meet with counterparts Ronnie Natawidjaja (CAPAS) and Wahida (ICASEPS). After a series of team meetings at CAPAS in Bandung, the team split up to carry out a rapid reconnaissance scoping missions to key producing zones. The vegetable team (IFPRI/ICASEPS) and UA visited farmers, traders, processors, and retailers in Bandung and Garut (highland chilli-growing districts), Brebes (a lowland chilli- and shallot-growing district), and Jakarta. The fruit/shrimp team (MSU/CAPAS) visited shrimp zones in Makassar and Lampung, as well as attending a shrimp workshop in Bali. The two teams joined together at the end of the trip to compare notes and discuss future plans. They also met with representatives of the IFC/Jakarta, where Tom Reardon (MSU) led a discussion on agribusiness trends.
Based on the scoping missions, the project has developed some tentative hypotheses. 1) In chillies and shallots, there is significant quality differentiation, but the effect of supermarkets and processors does not yet seem to extend to the farm level. Processors are not particularly quality sensitive, while supermarkets are quality sensitive, but are able to reach their targets by trader-level sorting and grading. 2) In mangoes, there is significant technical innovation, as farmers shift to the Gadung variety and make use of sprayer-traders. Although often credited to the export sector, the project finds that domestic demand is the main driver of technical change. 3) In the shrimp sector, there is significant growth and technical change, in the form of intensification and new species adoption. Although the standard view is that there are a few large-scale commercial shrimp farms and many tiny farms, the project finds a significant number of technically-advanced small/medium-scale producers.

This study examines the transformation of markets for high-value commodities in Indonesia and their impact on farmers, traders, and processors. The project addresses four research questions: 1) How are income and urbanization influencing consumer preferences for high-value commodities and for different types of retail outlets? 2) What are the patterns in the restructuring of food supply chains, particularly for high-value commodities? 3) What are the patterns, determinants, and effects of participation of farmers in modern supply chains for high-value commodities compared to traditional market channels? 4) What are the policies, institutional changes, and programs that would maximize the competitiveness and inclusiveness of the transformation of high-value supply chains? In addition, the project seeks to build research capacity in Indonesian institutions, particularly in value-chain methods and survey design and analysis. The commodity focus is on chilies, shallots, mangoes, mangosteens, and shrimp.
The project is being implemented by the International Food Policy Research Institute (IFPRI), the University of Adelaide (UA), Michigan State University (MSU), the Centre for Agricultural Policy and Agribusiness Studies (CAPAS) at Padjadjaran University, and the Indonesian Centre for Agriculture, Socio-Economic and Policy Studies (ICASEPS).
In May-June 2009, researchers from all five institutions were in Indonesia doing rapid reconnaissance work in the field (see previous annual report).
Over June-August, Dale Yi, Tom Reardon, and other members of the shrimp team carried out informal interviews in the shrimp sector in South Sulawesi and Sumatra. A report was completed in December.
During August-September 2009, Ms. Sahara Djaenudin, an ACIAR John Allwright PhD student at UA, completed field appraisal and reconnaissance work on chilies in Ciamis. The earlier field work by Minot, Stringer and Wahida suggested Ciamis as a major emerging zone for producers supplying the modern sector.
In October-November 2009, Nick Minot (IFPRI) and Wendy Umberger (UA) travelled to Indonesia to plan the urban consumer survey. In Indonesia, they worked with Wahida (ICASEPS) and Hery Toiba (an Indonesian graduate student at UA) on the questionnaire and the sampling design. The team conducted out a focus group discussion with a dozen women in Bogor to explore urban shopping patterns. The team visited the three cities where the survey will be carried out to gather information to select the sample.
Also in November, Wahida (ICASEPS) and Randy Stringer (UA) carried out a second round of interviews with chili producers, traders, wholesalers in Bandung and Bogor. This work provided the basis for the first draft of the producer survey and information to inform the sample selection.
In February, the team prepared a draft questionnaire for the survey of chili farmers and recruited 15 enumerators. In February-March 2010, Nick Minot (IFPRI) travelled to Indonesia to conduct the training for the survey, test the questionnaire, and make final revisions. The data collection took place over March and April 2010. By the end of May, 80% of the survey data had been entered.
Also in February, Ronnie Natawidjaja and his CAPAS team completed two reports on the results of the informal interviews with farmers and traders: one on mangoes in South Sulawesi and one on mangosteens in West Sumatra.
At the end of May, Tom Reardon travelled to Indonesia to work with Dale Yi to finalize the shrimp producer questionnaire and launch the survey. The survey will take place over June and July 2010. Questionnaires for the mango/mangosteen sprayer-trader and farmer surveys are also being finalized.
As discussed in the last annual report, the following hypotheses have been developed from informal interviews: 1) There appears to be significant quality differentiation in chilies and shallots, but high-quality products are separated by traders, with relatively little direct effect at the farm level. Supermarkets are quality sensitive, but processors are most interested in obtaining low prices. 2) In mangoes, production methods are changing as farmers shift to the Gadung variety and make use of sprayer-traders. Transformation of this sector appears to be driven more by the domestic market than by exports, contrary to widespread opinion. The conventional wisdom is that there are a few large-scale commercial shrimp farms and many tiny farms, but the project finds a significant number of technically-advanced small/medium-scale producers. 3) Focus groups of urban consumers suggest that even among educated, professional women in the cities, there is a reluctance to buy fruits and vegetables from supermarkets. The produce in supermarkets is perceived to be more expensive but lower quality compared to traditional markets. These hypotheses will be more rigorously tested as the results of the farmer and consumer surveys are analysed.