Seizing Agro-commodities competitiveness through Local Auction Markets

What are Agribusiness Auction Markets?

Auction market is a place where buyers and sellers enter competitive bids and offers respectively at the same time. Meanwhile, the agribusiness auction market matches bids and offers of respective customers and farmers who deal deal with agro-commodities. The agro-products are such as: cucumber, soybean, rice, chili, garlic, pepper, cattles, vegetable and essential oil, etc.

According to UKM DIY (2014), there are two kinds of markets based on the following characteristics:

a. Spot auction market: where farmers directly bring their agro-commodities which will be sold to the markets afterwards.

b. Forward auction market: in which farmers sufficiently bring the examples of commodities with agro-products' specification to consumers. It's also known as 'physical market' due to an obligation to give the products in the line of a fixed price, quality, quantity and time.

An auction market is intended redundantly to help farmers outing of unfair prices accepted by initial farmers and paid by consumers. In addition, auction markets have been proven able to: create better trading systems via transparency of price determination; enhance efficiency and effectiveness of trading system; and to embody incentive for increasing the productivity and quality as well as the farmers' incomes.

Damona et al. (2013), the institutional concept of auction market is: organizer of agro-commodities trading in which price discovery efforts will be open, transparent and the best in order to provide value protection and increase the efficiency of trade. Thus, auction market is institutionally and technically able to seize the competitiveness of agro-commodities in countries like Indonesia.

In this Asiatic country, there are some young energic agriculturists who have started to implement the market as integral ways of their agribussineses. Markets considerably have assisted Indonesia’s youth on agricultural development to expand their entrepreneurship ideas by defining prices. This way, young people sell out their agro-commodities directly to consumers without being interupted by any discrepancy.

Why are markets expanding in Indonesia?

Nowadays, auction markets have been implemented in Indonesia’s agricultural sector. They ensue from the gap between unfair prices accepted by producer farmers and prices paid by the final consumers. Furthermore, markets have been extended and expanded locally to other cities due to the positive effects gained.

Auction markets have developed and increased in certain regions of Indonesia because they facilitate the shortening of the trading stream; they provide with a certainty of price, quality, quantity and time; and it's turning out to be the best and cheapest way to store agribusiness commodities.

For instance, some markets have been implemented permanently in Bali and Yogyakarta, Surabaya, and interimly in several cities of Indonesia, like Kediri and Medan. According to Pemuda Wirausaha (2014), there are 13 provinces of Indonesia which harbor auction markets which are: Sumatera Barat, Jambi, Lampung, Jawa Barat, Jawa Tengah, DI Yogyakarta, Jawa Timur, Bali, Sulawesi Utara, Gorontalo, Sulawesi Selatan, Sulawesi Tenggara, and Nusa Tenggara Barat.

The regions which implement the market permanently are close to Indonesia’s traditional culture. Therefore, cities like Bali and Yogyakarta which harbor rich traditions, tend to link more on economic, social and ecological aspects.

Due to countless benefits, Indonesian young agriculturists are the ones who are making the most out of auction markets. These benefits contribute to define prices wisely, avoiding the price gap between consumers and young agriculturists, as well as increasing the competitiveness.

The latest in E-Auction Markets!

With the increase of the use of ICTs, Indonesia’s government has provided with an online mechanism for selling agro-commodities to farmers. The online system, applied by the Department of Trade of West Java and Bali, is known as E-auction market (E-pasar Lelang) and it’s available both on the website and social media. 

It’s incredibly useful to assist producers or farmers in looking for better and more efficient markets. In addition, the online system helps enhance the demand of consumers towards agro-commodities.

Post written by Muhammad Iqbal Firdausi and Achmad Solikhin (IGAF – Indonesian Green Action Forum)