Sistem Pemasaran Karet Rakyat Di Provinsi Jambi, Indonesia (Kabupaten Batanghari, Sarolangun And Tebo).

MARKETING SYSTEM OF SMALLHOLDER RUBBER
IN THE JAMBI PROVINCE, INDONESIA
(Batanghari, Sarolangun and Tebo Regency)

RAKHMA MELATI SUJARWO

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

STATEMENT OF THESIS, SOURCE OF INFORMATION
AND COPYRIGHT*
I hereby declare that master thesis entitled “Marketing System of
Smallholder Rubber in the Jambi Province, Indonesia (Batanghari, Sarolangun
and Tebo Regency)” is my work under the direction of the advisory committee
and has not been submitted in any form to any other universities. Sources of
information derived or quoted from works published and unpublished by other
authors have been mentioned in the text and listed in the References at the end of
this master thesis.
I hereby assign the copyright of my master thesis to the Bogor Agricultural

University.
Bogor, August 2015
Rakhma Melati Sujarwo
H451110581

* Copyright transfer due to the collaborative research work with other parties outside the Bogor
Agricultural University should be based on a related agreement.

SUMMARY
RAKHMA MELATI SUJARWO. Marketing System of Smallholder Rubber in
the Jambi Province, Indonesia (Batanghari, Sarolangun and Tebo Regency).
Supervised by RITA NURMALINA and RATNA WINANDI.
Rubber remains an important commodity in international trade, and is the
main raw material for many industries. World rubber production is dominated by
Asian countries, with Indonesia being the second largest producer after Thailand.
With the third largest plantation area, the Jambi province is one of the largest
contributors to Indonesia’s rubber production (10.66 %). In order to develop the
Indonesian rubber industry further, the rubber marketing system needs to be taken
into account which is strongly impacted by the rubber marketing efficiency, the
performance of marketing functions and the choice of the marketing channel.

The aims of this research are: 1) to analyse the role and function of marketing
institutions in rubber market in the Jambi province, 2) to evaluate the rubber
marketing efficiency by observing the marketing margin, farmer share and Li/Ci
ratio in the Jambi province, and 3) to characterize and to analyse factors affecting
the marketing channel choice by rubber farmers in the Jambi province.
In order to analyse those objectives, descriptive and quantitative analysis
were conducted. Marketing efficiency analyses through marketing margin,
farmer’s share and ratio of profit to cost is required. Also, a Multinomial Logistic
Regression Model is employed to determine the factors affecting the channel
choice.
Results show that each marketing institution performs marketing functions
which are necessary affect the marketing performance. Those three functions are
Exchange Function (buying, and selling), Physical Function (storage, processing,
and transportation), and Facilitating Function (sortation, grading, risk, finance,
and information). Auction markets become the most influential institution along
the channel, where they provide support to farmers and buyers in order to find the
most beneficial bidding price. Auction markets reduce constraints faced by
farmers and facilitate a place for buyers and seller to meet where it is hard to be
conducted normally.
There are 6 marketing channels found in the Jambi province. Those

channels consists of marketing institutions including farmers. Later are the
existing channels along with all marketing actors which are mentioned in
accordance with the order from farmers to the intermediate consumers: Channel 1:
Rubber Farmers, Collectors / Small Traders, Big Traders / Warehouse, Factories
(intermediate consumers); Channel 2: Rubber Farmers, Collectors / Small Traders,
Factories (intermediate consumers); Channel 3: Rubber Farmers, Collectors /
Small Traders, Auction Market, Factories (intermediate consumers); Channel 4:
Rubber Farmers, Big Traders / Warehouse, Factories (intermediate consumers);
Channel 5: Rubber Farmers, Auction Market, Factories (intermediate consumers);
and Channel 6: Rubber Farmers, Factories (intermediate consumers).
Considering the analysis of marketing margin, farmer’s share and Li/Ci
ratio, channel 6 is revealed as the most efficient channel in comparison with other
existing rubber marketing channels in the Jambi Province. The result delineates
low percentage of marketing margin (45.60%), high farmer’s share (54.40%) and

high Li/Ci ratio (6.54). Another essential point is that the channel requires the
lowest amount of marketing cost, which is 131.08 IDR/kg. However, even though
based on the quantitative data of marketing efficiency analysis, channel 6
becomes the most efficient, the channel could not be mentioned as the most
efficient in on the field. Yet, channel 5, where auction market taken part, becomes

the more realistic channel to be mentioned as the most efficient one, by
considering marketing functions which are performed by auction market. Thus, by
analyzing the marketing functions and efficiency, channel 5 is the most efficient
channel which is the most possible to be implemented in the field by rubber
farmers
Factors significantly affecting decision of channel choice by farmers are
(1) Location, represented by distance, (2) Information Access, represented by
participation in any related village organization, (3) Profitability Aspect,
represented by quantity total in the log-form and average price, and (4) Traders
Characteristics, represented education. Farmers tend to choose the more beneficial
channel when the distance is farther, the buying price is higher, the quantity of
rubber is higher, and the education is higher, where the comparison channel needs
to be considered by looking to the analysis result.
Keywords: auction market, channel choice, marketing efficiency, marketing
functions, rubber

RINGKASAN
RAKHMA MELATI SUJARWO. Sistem Pemasaran Karet Rakyat di Provinsi
Jambi, Indonesia (Kabupaten Batanghari, Sarolangun and Tebo). Dibimbing oleh
RITA NURMALINA dan RATNA WINANDI.

Karet rakyat merupakan komoditas penting dalam perdagangan
internasional, dan merupakan bahan baku utama bagi banyak industri. Dunia
produksi karet didominasi oleh negara-negara Asia, dengan Indonesia menjadi
produsen terbesar kedua setelah Thailand. Dengan areal perkebunan terbesar
ketiga, provinsi Jambi adalah salah satu kontributor terbesar untuk produksi karet
di Indonesia (10,66%). Dalam rangka mengembangkan industri karet Indonesia
efisiensi sistem pemasaran karet perlu diperhitungkan yang selannjutnya sangat
dipengaruhi oleh pilihan saluran pemasaran.
Tujuan dari penelitian ini adalah: 1) untuk menganalisis peran dan fungsi
lembaga-lembaga pemasaran di pasar karet di Provinsi Jambi, 2) untuk
mengevaluasi efisiensi pemasaran karet dengan mengamati margin pemasaran,
farmer share dan rasio Li / Ci di provinsi Jambi, dan 3) untuk mengkarakterisasi
faktor-faktor yang mempengaruhi pilihan saluran pemasaran oleh petani karet di
provinsi Jambi.
Untuk menganalisis tujuan tersebut, analisis deskriptif dan kuantitatif
dilakukan. Analisis efisiensi pemasaran melalui marjin pemasaran, farmer share
dan rasio keunntungan terhadap biaya (Li/Ci) diperlukan. Selanjutnnya
Multinomial Logistic Regression Model digunakan untuk menentukan faktor yang
mempengaruhi pilihan saluran.
Hasil penelitian menunjukkan bahwa setiap masing-masing lembaga

pemasaran melakukan fungsi pemasaran yang mempengaruhi kinerja pemasaran,
yaitu ketiga fungsi pertukaran (pembelian, dan penjualan), fisik (penyimpanan,
pengolahan, dan transportasi), dan fasilitas (sortasi, grading, risiko, keuangan, dan
informasi). Pasar lelang menjadi lembaga paling berpengaruh sepanjang saluran,
di mana mereka memberikan dukungan kepada petani dan pembeli untuk
menemukan harga penawaran yang paling menguntungkan. Pasar lelang
mengurangi kendala yang dihadapi petani dan memfasilitasi pembeli dan penjual
untuk bertemu di mana sulit untuk dilakukan secara nyata.
Terdapat 6 saluran pemasaran yang ditemukan di provinsi Jambi. Saluransaluran terdiri dari lembaga-lembaga pemasaran dan termasuk petani. Berikut ini
adalah saluran-saluran yang ada bersama dengan semua aktor-aktor pemasaran
yang disebutkan sesuai dengan alur dari petani ke konsumen menengah: Saluran
1: Petani karet, Kolektor / Pedagang kecil, Pedagang besar / Gudang, Pabrik
(konsumen antara); Saluran 2: Petani karet, Kolektor / Pedagang Kecil, Pabrik
(konsumen antara); Saluran 3: Petani karet, Kolektor / Pedagang kecil, Pasar
Lelang, Pabrik (konsumen antara); Saluran 4: Petani Karet, Pedagang Besar /
Gudang, Pabrik (konsumen antara); Saluran 5: Karet Petani, Pasar Lelang, Pabrik
(konsumen antara); dan Saluran 6: Karet Petani, Pabrik (konsumen antara).
Berdasarkan analisis margin pemasaran, farmer share dan rasio Li/Ci,
saluran 6 (pabrik) merupakan saluran yang paling efisien di mana hasilnya
menggambarkan rendahnya persentase margin pemasaran (45,60%), farmer share

yang tinggi (54,40%) dan rasio Li/Ci yang tinggi (6.54) serta biaya pemasaran,

yang rendah sejumlah 131,08 Rp / kg. Namun, saluran 5, dimana terdapat pasar
lelang, menjadi saluran yang lebih realistis untuk disebutkan sebagai yang paling
efisien, dengan mempertimbangkan fungsi-fungsi pemasaran yang dilakukan oleh
pasar lelang. Dengan demikian, dengan menganalisis fungsi pemasaran dan
efisiensi, saluran 5 menjadi saluran yang paling efisien yang paling mungkin
untuk dilaksanakan di lapangan oleh petani karet
Faktor-faktor yang mempengaruhi secara signifikan keputusan pilihan
saluran pemasaran oleh petani karet adalah (1) Lokasi, diwakili oleh jarak, (2)
Akses Informasi, diwakili oleh partisipasi dalam organisasi desa terkait, (3) Aspek
keuntungan, diwakili oleh kuantitas total dan harga, dan (4) Karakteristik
Pedagang, diwakili pendidikan. Petani cenderung memilih saluran yang lebih
memberikan keuntungan bila jaraknya lebih jauh, harga beli lebih tinggi, kuantitas
karet lebih besar, dan pendidikan yang lebih tinggi, dimana hasil analisis saluran
pemasaran yang satu dengan acuan perlu diperhatikan.
Kata kunci:

channel choice, efisiensi pemasaran, fungsi-fungsi pemasaran,
karet, pasar lelang

© All Rights Reserved by Bogor Agricultural University, 2015
Copyright Reserved by Law
It is prohibited to quote part or all of this paper without including or citing the
source. Quotations are only for purposes of education, research, scientific
writing, preparation of reports, critics, or review an issue; and those are not
detrimental to the interests of the Bogor Agricultural University.
It is prohibited to announce and reproduce part or all of this paper in any form
without the permission of the Bogor Agricultural University.

MARKETING CHANNEL ANALYSIS
OF SMALLHOLDER RUBBER IN THE JAMBI PROVINCE,
INDONESIA
(Batang Hari, Sarolangun and Tebo Regency)

RAKHMA MELATI SUJARWO

Master thesis
as one of the requirements to obtain a degree of
Magister Sains

in an Agribusiness Study Program

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

External Examiner:
Dr Ir Suharno, MADev
Study Program Representative Examiner:
Dr Ir Netti Tinaprilla, MM

Thesis Title

:

Name
Student ID

:

:

Marketing System of Smallholder Rubber in the Jambi Province,
Indonesia (Batanghari, Sarolangun and Tebo Regency)
Rakhma Melati Sujarwo
H451110581

Approved by
Advisory Committee

Prof Dr Ir Rita Nurmalina, MS
Chairman

Dr Ir Ratna Winandi, MS.
Member

Agreed by
Head of Agribusiness Study Program

Prof. Dr. Ir. Rita Nurmalina, MS.

Examination Date: August 24, 2015

Dean of Graduate School

Dr. Ir. Dahrul Syah, MScAgr

Submission Date:

ACKNOWLEDGMENT
Praise to Allah the Almighty for all His blessings. Having the opportunity
to study in Bogor Agricultural University, Indonesia and Georg-August
University Göttingen, Germany gave me one of the most precious experiences in
my life. I feel grateful to finally finish my thesis with all the efforts and supports I
received from all parties.
I would like to express my deepest appreciation to my 1st supervisor Prof.
Dr. Ir. Rita Nurmalina, MS. Without her guidance and full support, this thesis
would not have been possible. It also gives me great pleasure in acknowledging
the support and help of Dr. Ir. Ratna Winandi, MS, as my 2nd supervisor. My
gratitude also goes to my supervisors in Georg-August University Göttingen,
Germany, Prof. Dr. Bernhard Brümmer and Jun.-Prof. Dr. M. Wollni. Moreover, I
cannot find words to express my gratitude to Dr. Thomas Kopp for his
continuously advice. I wish to extend special thanks to Prof. Dr. Matin Qaim and
Dr. Vijesh Khrisna for their assistance in my data collection.
I would like to thank both Georg August Universität Göttingen Germany
and Bogor Agricultural University Indonesia which played a big role in assisting
and giving me the opportunity to partake in the joint degree master program in
Agribusiness. The program was initiated and advised by Dr. Ir. Nunung Kusnadi,
MS, Dr. Ir. Suharno, M.ADev, and Dr. Ir. Andriyono Kilat Adhi from Indonesia
and Prof. Dr. Stephan v. Cramon-Taubadel and Grete Thinggaard-ter Meulen,
M.Sc from Germany. My financial support was provided by the Directorate
General of Higher Education Indonesia.
Furthermore, my deepest gratitude goes to my lovely parents who always
support and encourage me with their dedication. Last, but not least, I am indebted
to my many friends and colleagues who supported and gave me invaluable
relationships. They consist of all Indonesians “Göttinger zwölf” year of 2012,
SIA-Uni Gö students 2012, MSA-IPB students 2011, and all my new international
friends in Germany.

Bogor, August 2015
Rakhma Melati Sujarwo

ix

CONTENTS
CONTENTS

ix

LIST OF TABLES

x

LIST OF FIGURES

xi

LIST OF APPENDICES

xi

LIST OF ABBREVIATIONS

xii

1 INTRODUCTION
Background
Problem Statement
Research Objectives
Benefits of the Study
Scope and Limitation of the study

1
1
6
8
8
8

2 LITERATURE REVIEW
Rubber Marketing System in Indonesia
Marketing Functions
Factors Affecting the Choice of Marketing Channels
Analysis of Marketing Efficiency

9
9
10
11
13

3 FRAMEWORK
Theoritical Framework
Marketing System
Marketing Channel
Marketing Channel Choice
The Functional Approach to Marketing
The Institutional Approach to Marketing
Concept of Marketing Efficiency
Marketing Margin
Farmer’s Share
Profit and Cost Ratio
Operational Framework

14
14
14
15
18
18
19
20
22
23
23
24

4 RESEARCH METHOD
Data Collection
Analysis of Role and Function of Marketing Institutions
Analysis of Rubber Marketing Efficiency

26
26
27
28

5 DESCRIPTION OF RUBBER FARMER IN THE JAMBI PROVINCE
Characteristic of Rubber Farming in the Jambi Province
Characteristic of Rubber Farmers in the Jambi Province

33
33
35

6 RESULTS AND DISSCUSSION
Analysis of Role and Function of Marketing Institutions
Analysis of Rubber Marketing Efficiency
Analysis of Factors Influencing Marketing Channel Choices by Rubber
Farmers

39
39
46
53

x

7 CONCLUSIONS AND RECOMMENDATIONS
Conclusions
Recommendations

57
57
58

REFERENCES

59

APPENDICES

62

BIOGRAPHY

67

LIST OF TABLES
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

World rubber production growth ('000 Tons)
2
Rubber production according to the type of plantation, in Indonesia
('000 Tons)
3
Rubber production and area in the Jambi Province
4
Rubber plantation area, production, and productivity in the Jambi
Province by Regency (2011)
5
Marketing functions performed by salt farmers in Sumenep Regency.
10
Review of studies of determinants in choice of marketing channels
12
List of regencies, districts, and villages selected in the Jambi Province,
Indonesia
27
Sample of marketing function summary
28
Variables in This Study
31
Data of area, production and productivity of rubber in the Jambi Province
in 2011 and 2012
34
Descriptive statistics of rubber buying price (000 IDR)
34
Descriptive statistics of rubber buying price
35
Quantity of rubber per year
40
Marketing function of all rubber marketing institutions
41
List of existing auction market in Batanghari, Sarolangun and Tebo
Regency
44
Marketing margin analysis of rubber in the Jambi Province
49
Farmer’s share analysis of rubber marketing channel in the Jambi Province 50
Ratio of profit to cost of rubber marketing channel in the Jambi Province 51
Value of marketing efficiency on each marketing channel in the Jambi
Province
53
Result of analysis of factor affecting channel choice by rubber farmers in the
Jambi Province
56

xi

LIST OF FIGURES
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Trend of world natural rubber (NR) production and consumption
1
Trend of Indonesian rubber trade balance in between 2008 and 2011 2
Shares of rubber production and area in Sumatra in 2011
3
Rubber price fluctuations at farmer and exporter level, 2008-2012
7
Rubber marketing channels in the Jambi Province
10
General industrial marketing channel
16
Marketing channel of distribution
16
Marketing flows in the marketing channel
17
The general flow of the agricultural product distribution
18
The marketing functions
19
Graphic of marketing margin
22
Operational framework
25
Map of the Jambi province
33
Age of rubber farmers in the Jambi Province
36
Experience of rubber farmers in the Jambi Province
36
Education of rubber farmers in the Jambi Province
37
Ethnic of rubber farmers in the Jambi Province
38
Rubber tapping in the Jambi Province
39
Channel chosen by rubber farmers
40
Selling rubber (farmer to collector) in the Jambi Province
41
Age of traders
42
Education of traders
42
Ethnic of trader
43
Auction market in the Jambi province
44
Rubber marketing channels in the Jambi Province
47

LIST OF APPENDICES
1
2
3
4
5
6
7
8

Sum of Average Price
Sum of Dry and Rainy Seasonal Price
Number of Household Member
Position in Any Village Organization
Ethnic of Rubber Farmers
Rubber Quantity per Year Produced by Farmers
Descriptive Statistics of Variables Included in the Model
Result of the MLR model with STATA 11.1

62
63
63
64
64
65
65
66

xii

LIST OF ABBREVIATIONS
CBS

: Badan Pusat Statistik (Centre Board of Statistics)

FAO

: Food and Agriculture Organization of the United Nations

GAPKINDO : Gabungan Perusahaan Karet Indonesia (The Rubber Association of
Indonesia)
IDR

: Indonesian Rupiah

IRSG

: International Rubber Study Group

MLR

: Multinomial Logistic Regression

NR

: Natural Rubber

OLS

: Ordinary Least Square

SIR

: Standard Indonesian Rubber

TR

: Tobit Regression

TSR

: Technically Specified Rubber

1

1 INTRODUCTION
Background
Rubber remains an important commodity in international trade. It gives
high contribution as the main raw material for many industries. Most of rubber
production is processed to produce tyre for many types of vehicles in the world,
while the rest may be processed to be developed into home and industrial
appliances. The increasing demand and production of different types of vehicles
and other processed rubber products lead to the increase in rubber consumption
(Rubber World Magazine, 2012).
Malaysian Rubber Board (2014) reported an upward trend of rubber
production and consumption worldwide. In 2011, the production of natural rubber
reached 11,230 thousand tons, while consumption reached 10,997 thousand tons
(Figure 1). Based on Figure 1 below, it can be identified that rubber producers has
managed production according to consumer demand. It also shows that the rubber
market has interacted dynamically.
12,000
11,000
10,000
'000
tonnes 9,000

NR Production
NR Consumption

8,000
7,000

Year

Figure 1 Trend of world natural rubber (NR) production and consumption
Source: Malaysian Rubber Board (2014)

World rubber production is dominated by countries in the continent of
Asia. Among those countries, Indonesia is the second largest rubber producer after
Thailand. Based on data from FAO (2013), in 2011, Indonesia is responsible for
2,990 thousand tons of rubber production. Indonesia contributes 27.11% to the
world’s rubber production market. Indonesia has a promising potency to be one of
the leading producers to meet the growing demand, considering the increasing
trend in rubber production in the past 10 years (Table 1).
Rubber becomes an important commodity for Indonesian economy. It is
also stated that rubber is the second most valuable plantation crop after palm oil
(Directorate General of Plantation Indonesia, 2013). In 2011, the volume and
value of exported rubber reached 2,556.2 thousand tons and 11,135.8 million
USD (Directorate General of Plantation Indonesia, 2013). Most of the rubber was
exported to several countries in Asia. The USA, China and Japan were the largest
importers of Indonesian rubber (Gapkindo, 2013).

2

Table 1

World rubber production growth ('000 Tons)

2003
Thailand
2,860
Indonesia
1,792
Malaysia
986
VietNam
364
India
712
China,mainland
565
Others
908
Source: FAOSTAT (2013)

2004
3,007
2,066
1,169
419
750
575
957

2005
2,980
2,271
1,126
482
803
514
1,045

2006
3,071
2,637
1,284
555
853
538
1,052

2007
3,024
2,755
1,200
606
825
588
1,143

2008
3,167
2,751
1,072
660
865
548
1,166

2009
3,090
2,440
857
711
831
619
1,209

2010
3,052
2,735
900
752
862
691
1,296

2011
3,349
2,990
926
790
800
751
1,423

Indonesian rubber trade balance had a level growth rate of 52% in 2011. In
the same year, the growth rate of Indonesian rubber export and import were 51%
and 56%, respectively. Rubber import can still be found with regards to consumer
demand of other specific type of rubber that can be produced in Indonesia. These
positive growths might occur due to supporting Indonesian policies, such as
ACFTA (ASEAN China Free Trade Agreement) and other export-import related
policies. Apart from that, decreasing trade balance in 2009 was caused by quota
reduction agreement under Agreed Export Tonnage Scheme/AETS
implementation performed by the three rubber largest producers (Thailand,
Indonesia and Malaysia) in order to address the drop of natural rubber price1. In
the same period of time, those countries performed rubber rejuvenation to sustain
the rubber productivity in the future. Trend of Indonesian rubber trade balance in
between 2008 and 2011 can be seen in Figure 2.

11,077.1

15,000.0
5,999.1
10,000.0
millions
USD 5,000.0

7,289.0
3,222.6

6,023.3

11,135.8

7,326.6

3,241.5
24.2

18.9

2008

2009

2010

37.6

58.8

export
import
trade balance

2011

Year

Figure 2 Trend of Indonesian rubber trade balance in between 2008 and 2011
Source: Directorate General of Plantation Indonesia (2013)

Rubber agribusiness development is inseparable from the support of
government policies. Rubber agribusiness development does not only contribute
to the farming sector and export but also encourage the development of the region
and agro-industry in Indonesia. Even though Indonesia has high contribution in
rubber world production, rubber productivity in Indonesia is still considered low.
In the future, development of rubber agribusiness will be prioritized in rubber
1

http://www.antaranews.com/berita/127320/indonesia-tahun-2009-kurangi-kuota-ekspor-karet116-ribu-ton

3

rehabilitation and rejuvenation in order to improve the productivity and to expand
the rubber plantation2.
Apart from that, most of rubber production in Indonesia is dominated by
smallholder plantation (Table 2). Estates or larger types of plantation production
contribute only about a quarter of the smallholder plantation production. That is
also positively correlated with the total area of both plantation types. Smallholder
plantations and estates had 2,913.80 and 524.3 thousand Ha of total area
respectively in 2011 (CBS, 2013). Both production and total area of rubber
plantation show an upward trend, which indicates a positive growth of rubber
production in Indonesia.
Table 2

Rubber production according to the type of plantation, in Indonesia
('000 Tons)
2007
2008
2009
2010
2011
2176.7
Smallholder
2,148.7
1,918.0
2,193.4
2,359.8
578.5
Estates
586.1
522.3
541.5
630.40
*) provisional figure; Source: CBS (2013)

There are several provinces in Indonesia that have greater contribution in
rubber production than the rest of the country. Sumatra island, consisting of 10
provinces, had the largest contribution of 66% to the total Indonesian rubber
production in 2011 (Ministry of Agriculture Indonesia, 2014). Among those
provinces, the Jambi province is one of the largest contributors in rubber
production. It has the third largest rubber plantation area among others, after
South Sumatra and North Sumatra in 2011 (Ministry of Agriculture Indonesia,
2014).

Figure 3 Shares of rubber production and area in Sumatra in 2011
Source: Ministry of Agriculture Indonesia (2014

Rubber plantation is expected to be the most important commodity. In the
Jambi province, rubber has the largest plantation exceeding palm oil (CBS - the
Jambi Province, 2011). The growth of rubber production and its plantation in the
Jambi province can be seen in Table 3. In addition, CBS - Jambi (2011) stated that
the volume and value of exported rubber and its products in the Jambi province
2

http://www.mediaperkebunan.net/index.php?option=com_content&view=article&id=94:industrihilir-karet-harus-ditangani-serius&catid=9:opini&Itemid=5

4

reached 242,818.80 tons and 1,129,142.81 USD in 2011. The value of exported
rubber was 47% of the total value of all exported products in the Jambi province
(Table 3).
Table 3

Rubber production and area in the Jambi Province
2008
2009
2010
Production (tons)
305,828
273,173
306,313
Area (Ha)
442,341
440,866
444,170

2011
319,948
444,533

Source: Ministry of Agriculture Indonesia (2014)

Explanation above has obviously explained that in the Jambi province,
rubber is considered as a strategic commodity which is able to give a boost to the
rubber farmers’ income and to the regional economic growth. Rubber in the Jambi
province has a great development supported by the government policies. With
bright prospect in the free market, rubber is noted as one of the leading
commodity in the Jambi province.
Currently, almost 100% of Indonesian exported rubber is in the form of
upstream industrial products (semi-finished) such as rubber sheet (Ribbed
Smoked Sheet, RSS), rubber crumb (Standard Indonesian Rubber, SIR), and
concentrated latex, while the downstream industry products are still very limited3.
Rubber factories, mostly the exporters, in the Jambi province, mainly produce
rubber in the form of rubber crumb (SIR 20). Nonetheless, most of Indonesian
rubber farmers, especially Jambi rubber farmers, produce nothing else but rubber
in the form of lump or bokar (rubber lump compound)4. Rubber latex still can be
found sold by farmers with very low price which then will be distributed to the
bigger factory in order to upturn its quality, while rubber sheet still also can be
discovered produced by farmers with high technology.
Several regencies in the Jambi provinces have been known as the major
production areas for rubber plantation in Indonesia. As presented in Table 4
below, research location areas, those are Sarolangun, Batanghari, and Tebo
Regency, contributed for 18.25%, 17.20%, and 17,20%, respectively, of total
rubber plantation area in the Jambi province in 2011. However, low productivity
was also discovered in all regencies with average value of 0.42 Ton/Ha or 420
kg/Ha. The low productivity resulted from the low quality of rubber seed used in
the plantation. Moreover, Masduki (1996) and Amelia (2013) mentioned that
problems faced by rubber farmer in Tebo, one of regencies in the Jambi province,
are low quality of rubber due to its high water content, rubber cleanliness level,
and rubber composition in lump.

3

http://balittri.litbang.pertanian.go.id/index.php/component/content/article/49-infotekno/182keunggulan-karet-alam-dibanding-karet-sintetis
4
http://jambiprov.go.id/index.php?karet

5

Table 4

Rubber plantation area, production, and productivity in the Jambi
Province by Regency (2011)
Regency

Merangin
Sarolangun
Tebo
Batanghari
Bungo
Muaro Jambi
Tanjab Barat
Tanjab Timur
Kerinci
Kota Jambi
Kota Sungai Penuh

Area (Ha)
129,687
119,221
112,348
112,093
96,867
57,985
16,019
7,712
1,228
-

Production
(Ton)
56,514
54,305
49,122
66,700
32,008
29,690
7,793
2,384
270
-

Productivity
(Ton/Ha)
0.4358
0.4555
0.4372
0.5950
0.3304
0.5120
0.4865
0.3091
0.2199
-

Source: Central Business of Statistics (2013)

Directorate General of Plantation Indonesia (2013) recorded that in 2011,
the average national price of rubber sheet was 16,793 IDR/kg and rubber lump
was 12,814 IDR/kg. Those are considerably high in comparison with the average
price of rubber latex which was 8,406 IDR/kg (Ministry of Agriculture, 2013).
However, even though there were an increase in those prices over the previous
year, the average export value of processed rubber was extremely high at 4.35
USD/kg or approximately 39,207 IDR/kg (1 USD = 9,000 IDR, year 2011 5)
Directorate General of Plantation Indonesia (2013). CBS - Jambi (2011) stated
that rubber crumb (SIR 20) in the Jambi province was exported in the price level
of 3.83 USD/kg or approximately 34,470 IDR/kg (1 USD = 9,000 IDR, year
2011).
According to the data, it can be recognized that the price received by the
farmer was relatively low in comparison with price in exporter market. Most of
rubber price information flows from the exporters to several intermediaries before
it reaches the rubber farmers, which may become one of the reason why there is a
big difference between those prices. Other factors are also plausible to affect this
disadvantage position. Furthermore, previous studies showed that less access of
price and market information, farmer dependence on village trader (collector), and
also ill-functioning auction market, facilities and infrastructures were responsible
for farmers in the Jambi province to be unable in controlling the rubber price
development continuously (Masduki, 1996; Amalia, 2013). Thus, the role and
function of each marketing institution need to be addressed further.
The efficiency of marketing system can be observed by analysing the price
levels and stability (Amstrong and Kotler, 2013, p. 285ff). Incentive towards
rubber production or trading activities is improved when rubber price is stable or
better yet goes up. The higher the selling price of rubber, the more motivated
farmers will be to increase the production. Price level and its stability indicate the
efficiency of marketing system (Amstrong and Kotler, 2013, p. 285ff).
5

http://www.bi.go.id/en/moneter/informasi-kurs/transaksi-bi/Default.aspx

6

Improvements in the rubber marketing system are required to be intended to
enhance the marketing efficiency by increasing the value received by farmers,
decreasing the marketing cost and creating a relevant selling price to the consumer
purchasing power. Hence, the rubber marketing efficiency is evaluated in this
study by examining the marketing margin, farmer share and Li/Ci ratio.
Additionally, marketing efficiency is affected by decision in choice of
marketing channels. Amstrong and Kotler (2013, p. 321) mentions that channel
choice plays a big role in the marketing decision of marketing system.
Considering choice in marketing channels will also lead to the enhancement of
marketing efficiency. As mentioned earlier, marketing channel in rubber
marketing system consists of several intermediaries between farmers and
exporters. Those are village traders, district traders, warehouse (big traders),
auction market, and factories (exporters) (Kopp et al., 2014).
Each intermediary performs different marketing function and behaviour
which influence the rubber farmers’ channel choice. Obviously, farmers will
choose the most profitable channel. Nonetheless, farmers are still found choosing
unsuitable channel which possibly cause inefficiency in rubber marketing. To
overcome the hurdle, it is required a marketing channel analysis of rubber farmer
in the Jambi province, which is performed in this study.
Problem Statement
The tendency of global trade, which is increasingly open and competitive,
becomes opportunities and challenges to all business players, including
institutions/actors in the rubber market. Marketing of Indonesian rubber has
emerged towards international market. Moreover, the development of Indonesian
rubber has relatively showed an enhancement from year to year, which then
become a prospective opportunity for Indonesia in obtaining high foreign
exchange income from this commodity. Encountering these liberalisation and free
market, marketing obviously plays an important role in furtherance of escalating
rubber competitiveness. Weakness in rubber competitiveness will diminish the
income of business players, as well as farmers.
The development of rubber in the Jambi province, as one of the biggest
rubber producers in Indonesia, is not spared from many issues both of production
and marketing aspects, where those are able to affect the farmers’ welfare.
Researched conducted by Balitbangda of the Jambi Province (2009) revealed
problems occurring in rubber plantation, those are: 1) low implementation level of
new high quality (prima) rubber seed use, 2) low productivity, 3) collectors which
have tendency to press the rubber price, and 4) production technique which
applied out of the rubber production rules. Also, low quality of rubber due to its
high water content lengthens production issues within rubber plantation in the
Jambi province.
Rubber price fluctuation in the international market results in pricing
uncertainty at farmer level since the world price is determined by supply and
demand in the importing countries. Moreover, apart from the possibility that
farmer will also enjoy the high exporter price, rubber price at farmer level remain
low due to inefficiency in rubber marketing (Figure 4).

Price (IDR/Kg)

7

Figure 4 Rubber price fluctuations at farmer and exporter level, 2008-2012
Source: Herdiyansyah (2014)

The pair of rubber productivity and quality becomes the main issues in
production aspect. On the other hand, the big difference between Indonesian
rubber export price and farmer price may lead to a concern in marketing aspect.
Both production and marketing aspect are related to each other. Farmers are
possibly not interested to increase the productivity, especially the quality because
of the low price. Thus, rubber marketing system is required to be taken into
account.
Farmers’ lack of information, and financial and education constrain are
plausible to be the reason behind this issue. Most rubber farmers in the Jambi
province acquire less information regarding current price and bokar quality
required by market. Those give farmers a low bargaining power on price
determination which is then determined by collectors as intermediaries. In other
words, rubber farmers become a price taker. Explanation above becomes the
illustration of the issue occurred in the rubber marketing system in the Jambi
province, which leads to a research question; how is the overview of the
marketing institutions which are available in the Jambi province and also their
role in escalating farmers’ welfare?
In addition, all rubber marketing actors in rubber marketing channel have
each own role many marketing channel are available where some of channels are
considered inefficient. This may lead to uncompetitive rubber market. Thus,
another question is raised; how is the rubber marketing efficiency in the Jambi
province?
Moreover, in the rubber marketing channels, all marketing actors become
crucial in causing price difference in each marketing institution which may cause
inefficiency in rubber marketing system. Coughlan et al. (2006, p. 16-19)
explained that the right channel can be constructed in several methods to build an
effective and efficient marketing channel. Farmers need to choose the most
beneficial buyer to optimize their trading activity. It is expected that the farmer
will get more benefit by trading rubber directly to the exporters. However, there
are still rubber farmers who prefer to select improper channel, which can create
inefficiency towards the marketing channel. Thus, one that becomes the question
is: what factors affect the marketing channel choice by rubber farmers in the
Jambi province?

8

Research Objectives
The objectives of the study conducted in the Jambi province (Batanghari,
Sarolangun, and Tebo regency) are:
1. To analyse the role and function of marketing institutions in rubber market in
the Jambi province.
2. To evaluate the rubber marketing efficiency by observing the marketing
margin, farmer share and Li/Ci ratio in the Jambi province.
3. To characterize and to analyse factors affecting the marketing channel choice
by rubber farmers in the Jambi province.
Benefits of the Study
This study provides information about the situation in the rubber
marketing system in the Jambi province, Indonesia. It is expected that this study
will identify problems occurring in the rubber marketing channel system. Broadly,
this information will be beneficial for students, researchers, farmers, expertise,
and policy maker who are concerned to the rubber market. This information will
be useful as a reference for those who will conduct research related to the supply
chain, marketing efficiency and marketing channel choice.
The result is peculiarly expected to provide policy recommendations to
support the development of rubber agribusiness to improve the welfare of
Indonesian rubber farmers. Results from this study will contribute in the
development of the Indonesian rubber industry that indirectly leads to the
sustainability of economic growth in Indonesian agriculture. Moreover, it will
raise the competitiveness level of rubber both nationally and internationally.
Scope and Limitation of the study
This study analyses the rubber marketing system in the Jambi province,
Indonesia. Three regencies, Batanghari, Sarolangun and Tebo regency, were
chosen to be observed as they are considered as influential rubber producers.
Specifically, this study focuses on the role of marketing institutions in rubber
marketing, the rubber marketing efficiency and the marketing channel choice by
rubber farmers. Rubber produced by Jambi rubber farmers is natural rubber,
which then processed to be exported outside the country as semi-finished product
(rubber crumb) or to be processed inside the country as a mixture of finished
rubber product.
Qualitative approach is accounted as the appropriate tool to be applied for
analysing the role of rubber marketing institutions in rubber industry. Marketing
efficiency is further observed by calculating rubber marketing margin, farmer’s
share and ratio of benefit and cost. Interconnection between all rubber marketing
actors in rubber marketing, which are rubber farmers to rubber crumb exporters in
the Jambi province, is reckoned in this analysis.
Apart from that, the marketing channel choice analysis is conducted to
understan factors affecting the decision of rubber farmers in determining the

9

choice of marketing channels. Some of those factors are farmer’s characteristics,
size of business, profitability aspects and location.
At last, explanation above describes the scope of this research. Other
assessments on rubber marketing performance, which are not stated above, are not
included in this study.

2 LITERATURE REVIEW
In this chapter, the previous studies related to this study will be depicted.
Those will be further employed as references in the methodology and result of this
study. The recent condition of market and marketing channel of rubber in
Indonesia, factors affecting the choice of farmer marketing channels, and
marketing efficiencies will be discussed here.
Rubber Marketing System in Indonesia
There are numerous studies discussing the condition of the rubber market
in Indonesia (Arifin, 2005, USAID, 2007, Fathoni, 2009, Arifin, 2013, and Kopp
et al., 2014). Those studies explain the bigger picture about the roles of each
marketing institutions/actors in the distribution of rubber. The latest rubber market
condition is also being reported.
Arifin (2005& 2013) and Fathoni (2009) concluded that the rubber market
is not yet efficient. Changes in the world market price are not well transmitted
towards the domestic price (Fathoni, 2009). Even more, this price information
may not well informed through the rubber marketing channel down to the farmer.
Thus, the motivation of farmer to produce more and better rubber may change.
Arifin (2013) further explained that rubber quality needed to be achieved
in order to fulfil factory demands. When all criteria of rubber are accomplished,
the competitiveness level of rubber would increase, thus increasing the efficiency
of the rubber market (Arifin, 2013). This indicates that the role of the marketing
channel actors, in fulfilling factory demands leads to the efficiency of the rubber
market.
Farmers are the major concern in achieving more equal market share
among other marketing actors, considering their low bargaining power. With
respect to that, some rubber farmers have conducted joint marketing in order to
acquire higher prices of their products (USAID, 2007). For instance, some rubber
producers organize farmer groups and start to sell their product directly to
factories. On the other hand, the infrastructure to support rubber distribution is
possibly an obstacle in the distribution of rubber to final buyers. Rubber producers
that are close to the central area receive higher prices than others (USAID, 2007).
Moreover, quantity requirements can cause another obstacle. Traders, known as
collectors, are expected to be the solution for the producers (USAID, 2007). Apart
from that, the factories, considered as well as exporters, have specific
intermediaries in Singapore to facilitate the rubber shipment worldwide (USAID,
2007, and Kopp et al., 2014).

10

Based on the description above, the rubber marketing channel becomes an
essential part in the marketing system. Particularly in the Jambi province, Fathoni
(2009) described several channels which can be chosen by farmers, namely
traders, auction markets and exporters (Fathoni, 2009).
There are several factors that may affect the decision of farmers or
producers to sell their products, including the quality of rubber, the price offered,
location, capital and access to information (Fathoni, 2009 and Kopp et al.,
2014).There are around 251,000 rubber farmers in the Jambi province, whereby
61% of them sell their products to the village traders (Kopp et al., 2014).The
current rubber marketing channels in the Jambi province can be seen in Figure 5.
In addition, Kopp et al. (2014) recorded that most of rubber quality produced in
the Jambi province is SIR20, known internationally as Technically Specified
Rubber (TSR).

Farmers

Village
Traders

District
Traders

Jambi-City
Warehouse

Factories

Figure 5 Rubber marketing channels in the Jambi Province
Source: Kopp et al. (2014)

Marketing Functions
Alham (2013) mentioned in her thesis of the Analysis of Salt Marketing in
Sumenep Regency East Java that salt farmers performed three marketing
functions, which are exchange, physical, and facilitating function. Her thesis was
about analysing the structure, conduct and performance of salt marketing in
Sumenep Regency, where those function analysis was described to support her
observation. Those marketing functions are described in Table 5.
Table 5

Marketing functions performed by salt farmers in Sumenep Regency.

Marketing Institution
Farmers

Marketing Functions

Description

Exchange Function

Selling

Physical Function

Storage

Facilitating Function

Risk
Financing

Herdiyansyah (2014) has explained similar description about marketing
functions performed by rubber farmers as well as other marketing institutions
along the existing rubber marketing channels in Tebo regency, Jambi, Indonesia.
Those functions are also divided into three functions, which are exchange

11

function, physical function, and facilitating function. His thesis was about the
Marketing System of Smallhoder Farmer in Tebo Regency, in the Jambi Province
by Supply Chain Approach.
Factors Affecting the Choice of Marketing Channels
The decision to choose certain marketing channels describes the behaviour
of marketing actors. Further recommendation and policy to increase marketing
efficiency could use this information as reference. Related to that, there are
studies discussing the choices of marketing channels of different commodities
(FertőandSzabó, 2002; Zúñiga-Arias, 2007; Bignebatet al., 2009; Chirwa, 2009;
Xaba and Masuku, 2013). Most studies analyzed the choice of marketing channels
on the producer’s level. Many determinants were found to significantly influence
the decision of channel choice. The review of studies of determinants in Choice of
Marketing Channel can be seen in Table 6.
Fertő and Szabó (2002) discussed the effect of transaction cost, described
by the information, monitoring and negotiation costs, on the choice of marketing
channels by the Hungarian vegetable farmers. The characteristics of farmers are
also taken into account by observing their age, education and investment
background (Fertő and Szabó, 2002). The result of the study suggested that
determinants effects of channel choice vary between channels.
Another study found that the effect of experience, production, location and
distance are significant influences in the producers’ choice to sell mangos in Costa
Rica (Zúñiga-Arias, 2007). Moreover, Chirwa (2009) divided the determinants
into the characteristics of farmer, crop and market. Contracts or agreements and
participation in a certain organization are also being considered as farmers’
channel choice decision (Xaba and Masuku 2012). Bignebat et al., 2009 also
explained that car ownership and technical assistance are also influential.

12

Table 6 Review of studies of determinants in choice of marketing channels
Author
Title
Data
Method
Finding
Fertő and
Szabó(2002)

The Choice of Supply
Channels in
Hungarian Fruit and
Vegetable Sector

ZúñigaArias(2007)

Quality management
and strategic alliances
in the mango supply
chain from Costa Rica

Bignebatet al.,
(2009)

Questionnaire
on 66 farmers,
postal survey,
not random
and market
oriented
farmers.
Questionnaire
on 94 farmers,
and random.

MLR

Small Producers,
Supermarkets, and
The Role of
Intermediaries in
Turkey’s Fresh Fruit
and Vegetable Market

Interviews and
questionnaire
on 183
farmers, and
198 market
agents,
random.

TR

Glasshouses, experience,
technical assistance, car
ownership, distance,
experience with the traders,
and price are significant in
choosing marketing
channel.

Chirwa
(2009)

Determinants of
Marketing Channels
among Smallholder
Maize Farmers in
Malawi

Questionnaire
on 1,006
households,
random.

MLR

Education, trust (repeated
transaction), location,
distance, transaction cost
and information access are
significant in choosing
marketing channel.

Xaba and
Masuku(2013)

Factors Affecting the
Choice of Marketing
Channel by Vegetable
Farmers in Swaziland

Personal
interviews and
questionnaire
on 100
farmers,
random.

MLR

Age, market distance,
membership in
organization and marketing
agreement are significant
in choosing marketing
channel.

Multinomial
Logistic
Regression

TR
Tobit
Regression

Age, information cost,
bargaining power,
monitoring cost, and
physical asset specificity
are significant in choosing
marketing channel.
Experience, risk attitude,
production area, scale of
production,location, and
distance are significant in
choosing marketing
channel.

Another study found that the effect of experience, production, location and
distance are significant influences in the producers’ choice to sell mangos in Costa
Rica (Zúñiga-Arias, 2007). Moreover, Chirwa (2009) divided the determinants
into the characteristics of farmer, crop and market. Contracts or agreements and
participation in a certain organization are also being considered as farmers’
channel choice decision (Xaba and Masuku 2012). Bignebat et al., 2009 also
explained that car ownership and technical assistance are also influential.
Another study found that the effect of experience, production, location and
distance are significant influences in the producers’ choice to sell mangos in Costa
Rica (Zúñiga-Arias, 2007). Moreover, Chirwa (2009) divided the determinants
into the characteristics of farmer, crop and market. Contracts or agreements and
participation in a certain organization are also being considered as farmers’
channel choice decision (Xaba and Masuku 2012). Bignebat et al., 2009 also
explained that car ownership and technical assistance are also influential.
Determinants in choice of marketing channels can be analyzed by the
Tobit model, considering the continuous dependent variable (Zúñiga-Arias, 2007,

13

and Bignebat et al., 2009). On the other hand, Logistic Regression Model will be
used if the dependent variable is discrete. There are two types of logistic
regression models depending on the number of channel options. When there are
two channels to be selected, Binary Logistic Regression will be used, and when
there are more than two channels to be selected, the Multinomial Logistic
Regression will be used (Cameron and Trivedi, 2005, p. 463, Fertő and Szabó,
2002, Chirwa, 2009, and Xaba and Masuku, 2013).
Based on those studies, there are groups of explanatory variables that need
to be taken into account. First is the producers’ characteristics, including age,
education and experience. Second is the scale of business, described by the car
ownership, and production area. Third is profitability aspect, illustrated by price.
Fourth is information access. Fifth is negotiation aspect, described by the
existence of agreement. The last is location, explained by distance and location.
Analysis of Marketing Efficiency
Narulita (2008) performed a Marketing Efficiency Analysis research on
Star fruit in P