Demand and Productivity

The dependency on imported soybeans has become a serious problem in maintaining food security in Indonesia. The specific objectives of this study are: To determine factors that affect the import demand for soybeans; to analyze the effects of import tariff on the soybean industry; to estimate the producers¿ surplus; and to analyze the productivity of soybean farming. In this study, the world market model of soybean industry is estimated by utilizing the two stages least squares method. Total Factor Productivity (TFP) analysis is used to determine productivity growth of the soybean farming. The results of this study show that increases in income and price of corn lead to a rise in import demand. An increase in import tariff will cause import demand to decline. As import demand declines, the price of soybeans will rise, resulting in an increase in domestic production. Moreover, an increase in tariff will increase the producers¿ welfare. There are several evidences of TFP growth in the Indonesian soybean farming, particularly in the non-Java regions. This growth is found to be contributed by technological progress.