Available online at HABITAT website: http://www.habitat.ub.ac.id
Analysis of the Structure, Conduct and Performance of the Chrysanthemum Flower Market in Pasuruan Regency (Study Case in Tutur Village)
Zakia Putri Sulaiman1*, Ratya Anindita2, Abdul Wahib Muhaimin3
1Postgraduate Program, Faculty of Agriculture, Universitas Brawiaya, Veteran St., Malang 65145, Indonesia
2,3Department of Socio-Economic, Faculty of Agriculture, Universitas Brawijaya, Veteran St., Malang 65145, Indonesia
Received: 2 November 2020; Revised: 14 March 2022; Accepted: 1 April 2022 ABSTRACT
With a total FOB value of $792,698, chrysanthemums had a strong export performance in the previous four years (2014–2018). This demonstrates that chrysanthemums are very competitive in the global market (Balithi, 2019). When comparing the land area in 2018 to the previous year, 2017, the land area declined to 11,105,178 m2, with a production of 488,176,610 and a productivity of 43.96 per hectare of land in 2017. (BPS, 2019). In this research, the structure, behavior, and performance of the chrysanthemum market were investigated with the help of 25 respondents and 18 merchants, with the SCP technique being applied. The findings revealed that monopolistic institutions were responsible for the market structure, which consisted of perfect competition at the farmer level and a monopoly at the marketing agency level, as well as significant obstacles to entry, product differentiation, and vertical integration. According to the findings of an investigation into the behavior of the chrysanthemum market in Tutur Village, wholesalers and flower shops are the marketing agents who conduct the greatest number of marketing duties. Wholesalers have a monopoly on market information, with farmers serving as price takers and, subsequently, marketing organizations serving as price makers. Farmers' marketing options are constrained as a result of the presence of capital linkages between them and intermediaries, and many choose to sell their products through intermediaries rather than directly to consumers. In Tutur Village, there are four different ways in which chrysanthemums may be sold. As a result of the formation of a market structure, each marketing agent employs methods and colludes with others to achieve success.
Following an investigation into market performance in Tutur Village, it has been discovered that channel 4 has the largest overall margin, followed by channel 5.
Keywords: cryshanthemum; structure; conduct; market; performance How to cite:
Sulaiman, Z. P., Anindita, R., & Muhaimin, A. W. (2022). Analysis of the Structure , Conduct and Performance of the Chrysanthemum Flower Market in Pasuruan Regency ( Study Case in Tutur Village ). HABITAT, 33(1), 1–12. https://doi.org/10.21776/ub.habitat.2022.033.1.1
1. Introduction
According to statistics from the Central Bureau of Statistics, the horticulture industry contributed 11.51 percent to the increase of the country's Gross Domestic Product (GDP) over the four-year period 2014-2018. (BPS, 2019).
This contribution is nevertheless much lower than the contributions made by the food crops and plantation agricultural sub-sectors, both of which rely on land as a source of production
infrastructure. In contrast, the additional value per horticulture planting area is over eight times more than the value of food crops or 6.5 times greater than the value of plantation crops (Agricultural Census, 2014). The chrysanthemum is the most valuable export from the Horticulture industry, namely decorative plants, in terms of dollar value (Directorate General of Horticulture, 2018). The strong export performance of chrysanthemum in the past four years (2014- 2018), with an average FOB value of $792,699, indicating that the flower has excellent competitiveness in the global market (Balithi, 2019). The land area declined to 11,105,178 m2 in 2018 when compared to the previous year
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*Corresponding author
E-mail: [email protected]
Available online at HABITAT website: http://www.habitat.ub.ac.id 2017, with a production of 488,176,610 and a
productivity of 43.96 percent, compared to the previous year 2017. (BPS, 2019). The predicted demand for imports has decreased somewhat, but if local output does not improve further, the estimated demand for imports is expected to remain high.
High output, on the other hand, has not had an adverse effect on farmers' negotiating power, as seen by the gap in price between chrysanthemum farmers and chrysanthemum consumers over the previous five years, which is around 40% higher. Farmers are abandoning their land as productive land, resulting in a reduction in the amount of land available for farming.
Farmers have a poor negotiating position, and they are almost usually the price takers when it comes to establishing the price of chrysanthemums in the marketplace.
Following research (Solomon et al, 2017), this condition is consistent with the finding that farmers' difficulty in knowing market information regarding prices and the process of determining prices as well as their low level of knowledge regarding commodity quality is largely compensated by various traders.
According to the findings of his research, farmers' bargaining power tends to be low because the number of farmers is very large and there is no coordination and cooperation between farmers, increasing market competition, and finally price behavior will tend to be dominated by the interests of wholesalers. (Anandita and Baladina, 2017) to monitor and see the competition of several companies in the market, Partnerships or joint ventures between farmers and other agricultural business players, according to the definition (Sayaka, 2008) Ideally, it will increase marketing efficiency, assist farmers in receiving a fair selling price, and ensure that their produce can be absorbed by the market.
2. Theoritical Underpinning
(Adugna, 2019), On market knowledge, results are obtained, even though the market leads to an oligopoly market structure, the buying and selling behavior of traders or marketing institutions turns out to be more competitive.
Until now, it is very rare to find research on chrysanthemum on socio-economic aspects in the SCP approach, especially in the field of ornamental plant marketing, so this research becomes an important target to find out the cause
of the decline in production which has been found to be the main problem.
In line with this research (Gaya, 2014), in an analysis study of the soybean market structure in Borno State, Nigeria revealed that the retail market has a low IHH index indicating a low concentration. chrysanthemum in large quantities causes the assumption of a monopoly that dominates the weak farmer’s, therefore this research is very important to analyze the structure and behavior as well as the performance of the chrysanthemum market, especially on barriers to market entry.
In contrast to the SCP research on plantain marketing, which was also conducted in Nigeria by (Eronmwon et al., 2014) which obtained the results that there were many sellers and buyers who could enter and leave the market freely. SCP research was also conducted by (Ihdiani, 2016), The basic problem faced by cocoa farmers in Parigi Moutong is the weak bargaining position of farmers in determining prices. The results showed that the marketing of cocoa beans has four marketing channels, the market is oligopsony, the position of farmers as price recipients and there are barriers to market entry due to the role of traders. An alternative to improve the bargaining position of farmers in the price determination process is improving the quality of cocoa by fermenting it. This can be done through farmer empowerment programs that are carried out systematically and sustainably. So that the development of market needs immediately responded by farmers. Based on the statement above, it is necessary to conduct research on the structure, behavior and performance of the chrysanthemum market in Pasuruan Regency so that it can be a reference for business actors who will market chrysanthemum ornamental plants. Measurement of market structure is important to know because uncompetitive markets tend to behave unfairly (Anindita and Baladina 2017).
This is an equation in this study, namely analyzing marketing channels. This study looks at which channels make farmers profitable and efficient in selling their products to institutions by looking at farmer share, cost and profit share and comparing efficient marketing margins. The situation of this research, the determination of the price of a farmer has a weak bargaining power, on the other hand a consumer has a strong bargaining power. Bargaining power is by looking at the influence of market conditions.
Available online at HABITAT website: http://www.habitat.ub.ac.id 3. Research methods
This study uses a quantitative approach, namely the research method used to examine a particular population or sample, data collection using research instruments, quantitative/statistical data analysis, with the aim of testing the established hypothesis (Dwiastuti, 2017). The quantitative and qualitative approaches are used in this investigation. The determination of the place was made on purpose at Tutur Village, Tutur District, Pasuruan Regency, since it is the village with the highest chrysanthemum production in Indonesia. Tutur Village is the village with the highest chrysanthemum production in Indonesia. Using the census approach, 25 active farmers who had planted at the time of the research were recruited to participate in the study and serve as respondents.
Snowball sampling was used to identify the identities of as many as seven brokers, five wholesalers, and six florists, all of whom were identified via key informants. While the BPS and provincial and district directorates provided the main data for this research, the secondary data came from structured interviews and observations. The SCP technique, as well as the variables included inside it, are used in data analysis:
3.1. Market Structure
Market structure analysis using analysis a. Market shares:
Market share analysis will be useful to determine the share of production control in the market.
Msi = x 100%
b. Market concentration:
CR4 analysis will be useful to find out the largest share of production share in the market.
CR4 = ⋯. x 100%
IHH analysis will be useful to determine the degree of concentration of buyers from a market area, so that a general picture of the strength of the position of farmers can be known.
IHH = (Kr1)2 + (Kr2)2 +….+ (Krn)2 c. Barriers to market entry:
This analysis is conducted to see the percentage of barriers for producers or marketing agencies that can enter to compete for market share.
MES= x 100%
d. Product differentiation: Differentiation was analyzed descriptively whether there were different forms of chrysanthemum cultivated by the respondents. Product differentiation analysis is useful for distinguishing between perfectly competitive and monopolistic market structures.
e. Business integration; The integration was analyzed descriptively whether there was a form of acquisition from the chrysanthemum business with other commodities and other forms of business as a form of vertical and horizontal integration.
3.2. Market Behavior
a. Marketing function: The marketing function was analyzed descriptively as a form of behavior whether there was an exchange function or a facility function performed by the respondents.
b. Market information: Information is analyzed descriptively to respondents as a form of behavior to know or not the national price variable.
c. Pricing: Information is analyzed descriptively to respondents as a form of behavior in determining prices.
d. Marketing channels: Information is analyzed descriptively as the shape of the sales goals of each respondent.
e. Tactics and collusion: Information is analyzed descriptively to respondents as a form of twist by taking the form of a strategy for the purpose of increasing profits in chrysanthemum business.
3.3. Market Performance a. Marketing margin
The result is the difference between the price at the consumer level and the price received by farmers.
MP = Pr - Pf or MP = B + K b. Farmer's share
Farmer's share analysis will analyze the price share at the farmer level and show the percentage of the share that farmers get from the price at the trader
SPF = x 100 % c. Share costs and benefits
Aims to calculate the amount/percentage of marketing costs and profits obtained by
Available online at HABITAT website: http://www.habitat.ub.ac.id marketing institutions at the price the final
consumer pays.
SBI =
( )x 100% and Ski = x 100%
( )
d. Marketing efficiency:
Cost Efficiency: analyzed by comparing the selling price and marketing costs incurred by producers to see the efficiency of the specified price. The formula for cost efficiency is as follows:
EP= X100%
Operational Efficiency: analyzed by comparing the actual level of output with the maximum possible output to see the carrying capacity according to normal capacity with the criteria of under, over and efficient.
Used to compare the efficiency level between the formed marketing channels
MEI = e. Market integration:
Market integration analysis measures and shows how far the price changes that occur in the reference market and changes in the follower market and will be useful for predicting prices in all markets using the following tests. The stages of market integration analysis are:
1) Stationary Test 2) Test Lag length 3) Cointegration test 4) Granger Causality Test 5) VECM Test
4. Results and Discussion
The results of the study can be explained as follows:
4.1. Market Structure
a. Market Share and Market Concentration The concentration value of chrysanthemum farmers in Tutur Village is 29.85% and has a CR4 criterion of <40% which indicates that the market structure that occurs in chrysanthemum producers/farmers in Tutur Village is perfect competition. The market structure formed at the farmer level as chrysanthemum producers explains that farmers have a low concentration.
Meanwhile, in each marketing agency the concentration is quite high. For brokers, wholesalers and florists >50% which indicates a monopoly market.
Table 1. Market Share and Market Concentration No Marketing
Agency
Market Share
CR4 IHH
1 Farmer 0 2.87 94.3
2 Broker 0 4.06 64.8
3 Wholesalers 19 9.1 98
4 Florist 0 0.95 3.11
The MES value shown in the table above shows the Tutur Village chrysanthemum marketing agency above is worth > 50%, which means it will make entrants reluctant to enter the industry, because it will be difficult for potential new players to face competition with old players who can set lower prices as a result of their ability to produce above minimum average cost.
In contrast to the SCP research on plantain marketing also conducted in Nigeria by (Eronmwon et al., 2014) which obtained the results that there are many sellers and buyers who can enter and exit the market freely.
b. Product Differentiation
There was product differentiation at the farmer level, only 12% of respondents with different technologies such as spraying tools and greenhouses and 8% of respondents with new varieties. Retailers make differentiation such as flower creations and chrysanthemum tea but have never sold more than 5 pcs. There is no product differentiation at the broker or wholesaler level.
Differentiation strategy or added value is difficult because the consumption of chrysanthemum is in the form of what is produced directly by farmers.
Table 2. Product Differentiation
No. Institution Differentiation Amount
1. Farmer Technology
Varieties
12%
8%
2. Broker - 100%
3. Wholesalers - 100%
4. Florist chrysanthemum
tea
16.6%
Parties who control all types of businesses in the chrysanthemum business such as brokers and also chrysanthemum cultivation are also said to carry out vertical integration when they have subsidiaries that produce supporting materials in chrysanthemum cultivation. As a form of monopoly market structure.
Vertical integration is one of the direct effects of the dominance of the monopoly market structure of traders over the perfectly competitive market structure of farmers. In the
Available online at HABITAT website: http://www.habitat.ub.ac.id chrysanthemum marketing agency, the ones who
do the vertical integration are brokers, wholesalers, and florists.
Table 3. Business Integration No Institution Business
Integration
Type
1 Farmer
56%
16%
28%
Chrysanthemum, Cow
Chrysanthemum, Apple/orange Chrysanthemum, Poultry
2 Broker
71.42%
28.57%
Chrysanthemum, Broker
Chrysanthemum, Saprotan
3 Wholesalers
50% Chrysanthemum,
Merchant 4 Florist
100%
50%
Florist decorist 4.2. Market Behavior
a. Marketing Function
Based on the table of marketing functions above, the implementation of marketing functions is dominated by wholesalers and florists who are monopoly and have an impact on the costs incurred. More and more perform marketing functions and result in the market being superior. According to (Yusrina, 2017) the marketing function will create marketing costs which will affect the profits of a business where on the other hand there is an increase in added value in increasing more profits. So that the practice of marketing functions as a form of
market behavior of individuals in the market and also as the influence of the monopoly market structure that is formed.
Table 4. Marketing Function
Function Farmer Broker Wholesalers Florist
Buy 0% 100% 100% 100%
Sell 100% 100% 100% 100%
Transport 75% 100% 80% 100%
Save 8% 28.57% 100% 100%
Process 100% 0% 40% 33.3%
Grading 100% 0% 100% 100%
Advertisement 12% 0% 40% 100%
Fund 100% 100% 100% 100%
Risk 100% 100% 100% 100%
b. Market Information
Farmers' marketing expertise is very limited due to the fact that the primary emphasis is only on producing and selling chrysanthemums. In addition, ideal competition for farmers results in all farmer information being controlled by merchants. When compared to farmers, the degree of market knowledge acquired by marketing organizations such as brokers, wholesalers, and retailers covers a wide level of market knowledge because of their overwhelming market dominance.
Table 5. Market Information No. Marketing
Agency
National Price
Market Location
Demand Trends
1. Farmer 15% 80% 50%
2. Broker 71.42% 100% 85.71%
3. Wholesalers 80% 100% 60%
4. Florist 83.3% 100% 100%
c. Pricing Table 6. Pricing
No. Marketing Agency Process Amount Pricing method Amount Mechanism
1. Farmer (fixed)
Bargaining 68%
100%
-Aim
-Competitor's Price
-Target -Cost
100%
100%
85%
100%
Price taker (perfect competition)
2. Broker (fixed)
Bargaining
57.14%
42.84%
-Aim
-Competitor's Price
-Target -Cost
100%
100%
28.57%
100%
Price Maker (Monopoly)
3. Wholesalers Bargaining 100% -Aim
-Competitor's Price
-Target -Cost
100%
100%
100%
100%
Price Maker (Monopoly)
Available online at HABITAT website: http://www.habitat.ub.ac.id According to the findings of this research,
farmers were positioned as price takers as a result of the farmer's market structure, which provided ideal competition. Despite the fact that the pricing mechanism is defined via negotiation, farmers will get a price that has been decided by a broker on their behalf. When it comes to determining the price of chrysanthemums at the farm level, the method that is used is one of totally competitive market competition. Because farmers do not have the ability to affect pricing, chrysanthemum growers in Tutur Village do play a role as price takers, according to the villagers.
Price determination is dependent on goals, competitor prices, targets, and expenses, according to Anandita and Baladina (2017).
d. Marketing channel
Figure 1. Chrysanthemum Marketing Channel Channel I: In marketing channel I, 16% of chrysanthemum farmers in Tutur Village directly sell their chrysanthemum crops to consumers, which is said to be a big event florist even though this channel is rare. As many as 64% of respondents also sell to brokers and 20% of respondents sell to wholesalers. Consumers who want to buy directly from farmers must order in advance and be paid in cash. In the first channel, farmers cannot sell chrysanthemum in small quantities. Usually consumers who order are hotels and private companies that can buy a lot, but not more than 25%. This is because there is a contract with a broker who provides seed loans that will sell another 50% of the harvest.
Chrysanthemum farmers in Tutur Village act as price makers for consumers and price takers for collectors/brokers. This is because farmers directly determine the selling price to consumers.
The selling price from farmers to consumers follows the prices of local traders. The main consumers in the first channel are flower decorators and event flower decorators.
Channel II: 64% of farmers sell their crops to brokers who take them in stages and sell to final consumers such as flower decorators and event flower decorators for the broker's channel.
A total of 28.57% of brokers sell to consumers directly. The broker was also found to be a chrysanthemum farmer and also provided seed loans to farmers in need, with the agreement that the harvest had to be sold to the broker who provided the seed loan. Consumers come from neighboring districts who work as decorators, flower arrangers and flower boards.
Channel III: 64% of farmer respondents sell to brokers. This channel involves two marketing agencies, namely brokers and wholesalers. For brokers, 71.42% of broker respondents sell to wholesalers. As with the previous marketing channel, farmers sell their crops to brokers. Wholesalers who buy chrysanthemums from brokers are generally due to a lack of supply of chrysanthemum cut flowers. This can be caused by errors in the prediction of demand and demand from potential consumers. Wholesalers are forced to buy from brokers to meet the supply of chrysanthemum.
Consumers in marketing channel III generally come from other provinces. Then as many as 4%
wholesalers sell to consumers.
Channel IV: In this channel the marketing agency is longer than the other channels. In channel IV, 20% of respondents sell chrysanthemum by farmers and 60% of wholesalers sell to wholesale florists. Wholesale florists are located outside the province of East Java, namely Bali, Semarang, Jakarta. The delivery of chrysanthemums is carried out by wholesalers out of town to deliver the chrysanthemums according to the contract to the florist or which will be delivered to the shipping No. Marketing Agency Process Amount Pricing method Amount Mechanism 4. Wholesale Florist (fixed)
Bargaining
66.6%
33.3%
-Aim
-Competitor's Price
-Target -Cost
100%
100%
0%
100%
Price Maker (Monopoly)
Available online at HABITAT website: http://www.habitat.ub.ac.id agent at a cost to be fully borne by the
prospective florist.
e. Collusion and Tactics
Table 7. Collusion and Tactics of Institutions No. Marketing
Agency
Strategy Type
Percentage (%)
1. Farmer -Buying
land elsewhere
24%
2, Broker -Offer sold to him only.
-Request 10 more bunches
71.42%
28.57%
3. Wholesalers -Increase and decrease prices at certain retailers
80%
4. Florist -Gives
glycerin
6%
At the farmer level, tactics/strategies were found as many as 24% of farmer respondents said they bought land outside Tutur Village and used their vacant land that was not used for cultivation. In collusion brokers, it was found that 71.42% of respondents added more stalks and offered to sell them only to them. The market concentration is quite tight and the monopoly market structure among brokers still influences the behavior of traders. In this condition, the broker has the opportunity to take advantage of the market information under his control to take excessive profits from the farmers. Because farmers are in the position of price takers (price takers) while brokers act as price makers. The strategy wholesalers found that 80% of respondents had strong and hard channels so that it was easy to raise and lower prices (not fixed).
For florists, 6% of respondents gave glycerin if the chrysanthemum was deemed not fresh and had not been sold. This is a strategy because as a retailer the florist must choose so that it can be sold to consumers.
4.3. Market Performance
a. Marketing Margin and Price Share
Table 8. Marketing Margin Calculation No. Marketing
Agency
Selling price
RPM Share Price (%)
1. CHANNEL I
Farmer 9291 0.84 59.9
Florist 15500 0.26 40.05
Margin 6209
2. CHANNEL II
Farmer 8856 0.76 74.4
Broker 11900 0.22 25.5
Margin 11900
3. CHANNEL III
Farmer 8856 0.76 55.3
Broker 11900 0.22 19.0
Wholesalers 15987 0.068 25.5
Margin 7131
4. CHANNEL IV
Farmer 8250 0.76 40.6
Wholesalers 15500 0.30 35.7
Florist 20300 0.097 23.64
Margin 12050
In accordance with Table 15, Channel IV has the largest marketing margin of all of the channels. According to the information on this channel, the florist expended the highest amount of marketing expenses, totaling Rp 18505. In part due to the fact that most florists pay for delivery, the high expenses involved and the poor earnings created by the florist are sold to prospective clients such as children, women, and homes in tiny kiosks. In addition to labor costs, florists must account for expenses such as advertising, storage, loading and unloading, packing, sorting, administration, shipping, and user fees, among other things.
The farmer's portion of the profits Farmers in Tutur Village are receiving a share of the prevailing price at the consumer level in this research, which is stated as a percentage in order to determine how much of the price distribution they are receiving. Farmers' shares, according to Januawiata et al. (2014), are related to marketing margins in a negative manner, with a larger marketing margin resulting in a smaller farmer's share acquired. It is the most efficient marketing route when the marketing margin is modest and the farmer's share is high; conversely, it is the least efficient marketing channel when the marketing margin is huge and the farmer's share is low. The channel with the biggest farmer share is channel II.
Available online at HABITAT website: http://www.habitat.ub.ac.id b. Share Costs and Profits
Table 9. Calculation of Cost and Profit Share
No. Institution Fee/Tie Skis (%) SBI (%) DMk (%) DMb (%)
1. Farmer 5030 60 - - -
Florist/ retailer 3006 21 19 52 48
2. chrysanthemum farmer 5030 74 - - -
Broker 852 18 7 72 28
3. Farmer 5030 55 - - -
Broker 852 14 5 31 12
4. Farmer 5030 40.6 - - -
Wholesalers 1437 20.6 15 35 25
Florist 2794 8.8 14.8 15 25
In this study, it can be shown based on calculations that farmers benefit in channel I and II and lose in channel IV, while brokers benefit in channel II, wholesalers benefit in channel IV, and finally, florists benefit in channel I. Share costs and profits. shown in the table above proves that monopoly market performance tends to be
enjoyed by traders as the party that performs many functions and is the strongest. In line with the view (Downey and Erickson, 1992), that if the farmer share far exceeds 40%, the business is categorized as efficient. So the marketing advice of chrysanthemum in Tutur Village is efficient.
c. Marketing Efficiency Table 10. Cost Efficiency
Marketing channel Institution Transportation Type Price gap Marketing Fee
I Florist Car 6209 3006
II Farmer
Broker
Van Pick Up
3826 3044
730 852
III Broker
Wholesalers
Van Van
3044 4087
852 1437
IV Wholesalers
Florist
Van Travel
7250 4800
1437 2794 Based on Table 45, it can be said that all
marketing channels are efficient according to the costs incurred in the transportation function.
Some institutions carry out the transportation function and some do not, one of which is a broker on channel III and farmers on channel I.
Table 11. Operational Efficiency
Channel Institution Transportation Average Capacity % Note.
I Farmer
Florist
- Car
-
100 62 Under
II Farmer
Broker
Pick Up Van
1000 1400
80 107
Efficient Over
III Broker
Wholesalers
Van Van
1350 1400
103 84.6
over over
IV Broker
Wholesalers Florist
Van Van Car
1400 850 160
107 65.38 100
over Under Efficient The normal capacity of chrysanthemum
from a box car is 1300 bunches. Based on the description of operational efficiency and price, it can be concluded that the four marketing
channels of chrysanthemum cut flowers are efficient in terms of price but not operationally efficient. Only farmers on channel II and florists on channel IV are efficient. Other institutions and
Available online at HABITAT website: http://www.habitat.ub.ac.id farmers carry out deliveries with vehicle carrying
capacities that are more than optimal or below optimal. If you look again, brokers and traders are in over status due to mastery of the sales
made. The use of transportation capacity above optimal can damage the vehicle and endanger safety, while below the optimal capacity will increase shipping costs.
Table 12. Market Efficiency Index (MEI)
No. Channel Marketing Efficiency Index
Farmer Broker Wholesalers Florist
1. I 0.82 - - 0.83
2. II 1.09 0.93 - -
3. III 0.72 0.70 0.72 -
4. IV 0.48 - 0.66 0.66
Based on Table 47, it can be seen that the highest Marketing Efficiency Index values are in the first and second channels with a value of 1.09 which are owned by farmers when selling to brokers with a small margin ratio because brokers function to deliver chrysanthemums to consumers directly. This channel has a high MEI value due to a small margin compared to other channels.
While the lowest MEI value is in channel IV, which is 0.48 which is owned by farmers when selling to wholesalers, because of the very high margin in this channel. The difference in MEI values in each marketing channel can be caused by differences in carrying out the marketing functions carried out and the costs incurred as well as the length of the marketing chain or the large number of marketing institutions involved in the chrysanthemum marketing process, resulting in high margins. In marketing channels III and IV, the marketing chain is longer than channels I and II. This is because the third and fourth marketing institutions take high profits because the costs of the marketing function are mostly carried out and the sales objectives are outside Pasuruan Regency.
d. Market Integration
Figure 2. Producer and Consumer Price Movements
Based on the results of the analysis of monthly price movements of chrysanthemum 2015-2019 in the city of Surabaya, it shows the trend of rising and falling prices of chrysanthemum and variations in the pattern of price increases following or the same. Market integration analysis in this study uses monthly price data from 2015 to 2019 for prices in the Surabaya City market and prices in the Pasuruan Regency market as a producer market. The variation and pattern of price increases is the same because price increases in Surabaya City are immediately followed by price increases in Pasuruan Regency. This is also influenced by the facilities of traders outside the city to distribute chrysanthemum to other provinces and brokers who also work as farmers.
Table 13. Stationary Test Variable ADF
Statistics
Critical Value
5%
p- value
info
Pasuruan Regency
- 6.569789
- 2.913549
0.0183 S City of
Surabaya
- 8.170576
- 2.912631
0.0637 S Stationarity testing of time series data in this study uses the Augmented Dickey Fuller (ADF) test at the level and first difference levels.
The data is not stationary at the level. The stationary test of chrysanthemum prices in Pasuruan Regency and Surabaya City shows that the two prices above are not stationary (2015- 2019). This is indicated by the ADF test, with a statistical ADF value > ADF critical, with a confidence level (α) = 0.05 at the level, so it needs to be tested again at the 1st different level.
Then the 2 variables are stationary in the same order.
Available online at HABITAT website: http://www.habitat.ub.ac.id Table 14. Cointegration Test
Hypothesized No. of CE (S)
Trace statistics
0.05 Critical Value Max Eigen Statistics
0.05 Critical Value
None* 23.92887 15.49471 15.77529 14.26460
At most 1 8.153575 3.841466 8.153575 3.841466
As shown in Table 13, the price of chrysanthemums in Surabaya and Pasuruan Regency has a trace statistic value greater than critical value with a probability value of 0.05, which indicates that there is cointegration; in addition, the Max Eigen Stat value greater than critical value indicates that there is cointegration in the equation model over the long term, which indicates that there is cointegration in the equation model.
Table 15. Granger Causality Test
Hypothesis Obs F-
Statistics
Prob Surabaya City does
not Granger Cause Pasuruan Regency
58 3.65470 0.0326
Pasuruan Regency does not Granger Cause Surabaya City
0.74749 0.4785
Because its probability is smaller than the actual level value of 0.05, the Surabaya City price hypothesis, which has an impact on the Pasuruan Regency price, is the only one that is rejected using the probability value that was obtained. According to the results of this study, the price of chrysanthemums in the city of Surabaya influences the price of chrysanthemums in the province of Pasuruan. Table 52 also demonstrates that the F-Statistic value for variable 1 is less than 0.05, with a value of 0.03 in the case of the test. The probability value for the second variable is higher, at 0.47, than it is for the first. This situation arises as a result of the fact that Surabaya is the reference market for chrysanthemums, and the Pasuruan Regency market is interwoven with it. It is the responsibility of chrysanthemum wholesalers and brokers of chrysanthemum commodities to market them in other provinces and price-setting merchants to establish prices outside of the Pasuruan Regency, which means that Pasuruan Regency prices, particularly farmers' prices, are not given priority. After everything is said and done, should there be a change in the price of goods in Surabaya, this will be noted and will
result in the price of goods in the Pasuruan Regency market being in about the same proportion. According to the causal link that has been established, only the price of Surabaya City has an impact on the price of the Pasuruan Region. It can be concluded that the development of chrysanthemum prices in Surabaya City is closely followed by the development of chrysanthemum prices in Pasuruan Regency, resulting in efforts to increase profit opportunities in sending chrysanthemums while paying close attention to the development of chrysanthemum prices in Surabaya City.
Table 16. Long-Term VECM Test Cointegrating Eq: CointEq1 D(FARMER
DISTRICT(-1))
1.0000000
Surabaya City (-1) -0.079373 (0.03748) [-2.11747]
C -1094.058
The price of chrysanthemums in Surabaya City has an impact on the price of chrysanthemums in Pasuruan Regency, with a difference of -0.079 in the price of flowers in the region. The negative sign indicates that if the price of chrysanthemum decreases by one percent, the Pasuruan Regency market will respond positively by lowering the price by -0.79 percent, and vice versa, if the price of chrysanthemum increases by one percent, the market will respond negatively by increasing the price by one percent. If the price of chrysanthemums rises by one percent, the price of chrysanthemums in Pasuruan Regency would fall by -1094 percent as a result of the increase in price. The T table for sample 56 has the values 1673 and 2003 in it. Consequently, the t table is bigger than the t statistic, indicating that there is a long-term association between the variables. It also implies that the price of the city of Surabaya is going away from the equilibrium, which means that it is moving away from the price of farmers.
This suggests that the prices of farmers in the
Available online at HABITAT website: http://www.habitat.ub.ac.id Pasuruan Regency are influenced by the pricing
of monopoly merchants.
Table 17. Short Term VECM Test Error
Correction
D(TUTUR VILLAGE_D ISTRICT,2)
D(TUTUR_S URABAYA VILLAGE,2)
CointEq1 -0.609988
(0.20586) [-2.96318]
0.462353 (0.96902) [0.47713]
D(FARMER_
DISTRICT(- 1))
0.250472 (0.18582) [ 1.34794]
-0.086174 (0.87470) [-0.09852]
D(FARMER_
DISTRICT(- 2))
0.038337 (0.16571) [ 0.23135]
-0.100482 (0.78004) [-0.12882]
D(FARMER_
DISTRICT(- 3))
-0.030048 (0.15335) [-0.19595]
-0.041495 (0.72185) [-0.05748]
D(PETANI_S URABAYA(- 1))
0.054087 (0.03197) [ 1.69170]
-0.083802 (0.15050) [-0.55682]
D(PETANI_S URABAYA(- 2))
0.012572 (0.03247) [ 0.38725]
-0.059943 (0.15282) [-0.39224]
D(PETANI_S URABAYA(- 3))
0.026967 (0.03287) [ 0.82039]
0.023708 (0.15473) [ 0.15322]
C -1.147802
(18.7755) [-0.06113]
0.553960 (88,3817) [ 0.00627]
5. Conclusion
After conducting a thorough investigation into the chrysanthemum market structure in Tutur Village, it was discovered that there is a completely competitive market structure at the farmer level and a monopoly at the marketing agency level. According to this analysis, farmers are in a poor position and are controlled by monopoly merchants; there are significant market entry barriers; there is product differentiation;
and monopolistic institutions are involved in vertical business integration.
According to the findings of an investigation into the behavior of the chrysanthemum market in Tutur Village, wholesalers and florists are the marketing institutions that conduct the greatest number of marketing duties. Wholesalers and farmers, who act as price takers, and marketing organizations, which act as price makers, have a monopoly on market information. Farmers are restricted in their marketing choices because of the presence
of capital linkages between them and brokers. As a result, farmers sell a large proportion of their crops to brokers. In Tutur Village, there are four different ways via which chrysanthemums may be sold. A market structure is established as a result of the tactics and collusion that are implemented by each marketing agency in the market place.
The performance of the chrysanthemum market in Tutur Village has been examined, and it has been discovered that channel 4 has the largest overall margin. Farmers who sell to channel I have the lowest cost and profit shares, whereas traders have the biggest share of profits and costs. The results of an investigation on market integration between producer prices in Pasuruan Regency and prices in East Java Province show that the two markets are linked in the short run.
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