TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Oligopoly rules the shallots game
At different times of the year, Indonesians’ love for spicy food can be costly for millions of households on account of the prices of a number of commodities, such as chilies, garlic and shallots, often soaring ahead of and during festive seasons, including the year-end holidays and Idul Fitri
Change Size
A
t different times of the year, Indonesians’ love for spicy food can be costly for millions of households on account of the prices of a number of commodities, such as chilies, garlic and shallots, often soaring ahead of and during festive seasons, including the year-end holidays and Idul Fitri.
In the case of shallots, the unstable price of the commodity is an ironic situation, as local farmers provide more than enough for the entire nation throughout the year.
The price of shallots — a key ingredient in many Indonesian dishes, from the ever-popular Padang cuisine and fried rice, to various kinds of sambal (hot sauce) — hit Rp 44,000 (US$3.30) per kilogram in Jakarta early this month ahead of Ramadhan.
Although the price dropped to around Rp 39,000 per kg on Wednesday, that is still 50 percent higher than the average price recorded in January.
The Jakarta Post’s field observations in the Central Java regency of Brebes, the country’s largest shallot-producing region, have found that the wide access gap among farmers, middlemen and retailers to distribution channels is the main source of the pricing problem in the business worth almost Rp 40 trillion annually based on current retail prices.
Despite the relatively short production cycle of shallots, growing the vegetable on a massive scale can be tricky for small farmers as it is highly prone to damage.
The high-risk shallot production business has led many farmers in the regency to opt for the ijon system, in which local middlemen speculatively buy unripe shallots at low prices and take over their maintenance until harvest time.
This long-standing ijon practice has made a number of local middlemen very powerful in an oligopolistic market structure, enabling them to control shallot prices, including by withholding supplies to other regions during harvest seasons.
The middlemen, however, defend their existence, arguing that the hold-and-sell strategy they practice is aimed at guaranteeing farmers’ prosperity amid the looming risks of harvest failures and mounting production costs.
