Transaction Cost and Market Development of Cassava Production in Jember Regency, East Java, Indonesia

^* Faculty of Economics and Busines – University of Jember
¹ Faculty of Economics and Busines – University of Jember

^* Corresponding author: abd.nasir@unej.ac.id

Abstract

Rapidly growing food needs require a strategy to achieve self-sufficiency based on a diversity of local food resources. One source of carbohydrates based on local ingredients, namely cassava, which occupies a quite important role in the food structure of Indonesian society, after rice and corn. Institutional arrangement and transaction costs in managing cassava production in Jember Regency, East Java, Indonesia have strong implications in relation to specifications and estimates of production function responses. If transaction costs are fixed costs, discontinuities will occur in response to incentives that occur in the market. The purpose of this study is to determine the amount of transaction costs and the development of cassava markets that occur in the business of managing cassava production in Jember Regency. The method used in answering the purpose of the study is value chain analysis. Based on the results of the analysis it was found that the largest transaction costs were at the level of sellers and industry compared between farmers and sellers. At the farmer level, social capital is one of the strengths for cassava marketing sustainability. The social capital is in the form of guarantees for the certainty of the sale of crops by buyers who already have a cooperative relationship. The policy recommendations that can be given are the optimization of the role of farmer groups for the sustainability of cassava production and the implementation of cassava-based processed product development programs and the provision of marketing.