Skip to main navigation menu Skip to main content Skip to site footer

Regular Articles

Vol. 24 No. 1 (2022)

Asymmetric Price Transmission in the Cocoa Supply Chain in Indonesia

November 12, 2021


This study investigates the asymmetric price transmission (APT) of global cocoa beans and cocoa pasta prices to farm prices. The cocoa pasta variable is a proxy for Indonesian processed cocoa industry products. We use monthly time series data from January 2007 to December 2020. The NARDL model was used to estimate the APT response behavior. The dummy variable (export cocoa bean tax) explains fluctuations in farm prices before and after the policy implementation. The results showed asymmetric cointegration between the global cocoa market and cocoa pasta prices moving towards farm cocoa prices in Indonesia. APT occurs in the short and long term with different significant levels for each variable. The increase (decrease) in the global market and cocoa pasta prices were transmitted asymmetrically in the short and long terms, except for the variable (PA-pos), which is not significant in the long term. We observe strong evidence of negative asymmetric price transmission. Negative price shocks (decreases) in global markets and cocoa pasta are more rapidly transmitted to farmer prices than positive price shocks. Adjustment prices occur in magnitude, speed, and sign. The high coefficient of negative asymmetric price transmission indicates the uncompetitive of Indonesia’s supply-demand cocoa chain. At the same time, the cocoa bean export tax harms farm prices. The export tax policy has reduced farm prices by approximately 2.3%.


  1. Acharya, R.N., Kinnucan, H.W., & Caudill, S.B. (2011). Asymmetric farm-retail price transmission and market power: a new test. Applied Economics, 43(30), 4759-4768. doi: 10.1080/00036846.2010.498355.
  2. Alam, M.J., & Begum, I.A. (2012). World and Bangladesh rice market integration: An application of threshold cointegration and threshold vector error correction model (TVECM). 86th Annual Conference of the Agricultural Economics Society, University of Warwick, United Kingdom, 16-18 April 2012.
  3. Alam, M.J., McKenzie, A.M., Begum, I., Buysse, J., Wailes, E.J., & Van Huylenbroeck, G. (2016). Asymmetry price transmission in the deregulated rice markets in Bangladesh: Asymmetric Error Correction model. Agribusiness, 32(4), 498-511. doi: 10.1002/agr.21461.
  4. Ariningsih, E., Purba, H.J., Sinuraya, J.F., Suharyono, S., & Septanti, K.S. (2019). Indonesia’s Cocoa Industry Performance. Forum Penelitian Agro Ekonomi, 37(1), 1-23. doi: 10.21082/fae.v37n1.2019.1-23.
  5. Arnade, C., Cooke, B., & Gale, F. (2017). Agricultural price transmission: China relationships with world commodity markets. Journal of Commodity Markets, 7, 28-40. doi: 10.1016/j.jcomm.2017.07.001.
  6. Baffes, J., & Gardner, B. (2003). The transmission of world commodity prices to domestic markets under policy reforms in developing countries. The Journal of Policy Reform, 6(3), 159-180. doi: 10.1080/0951274032000175770.
  7. Bekkers, E., Brockmeier, M., Francois, J., & Yang, F. (2017). Local food prices and international price transmission. World Development, 96, 216-230. doi: 10.1016/j.worlddev.2017.03.008.
  8. Boer, D. De, Limpens, G., Rifin, A., & Kusnadi, N. (2019). Inclusive productive value chains, an overview of Indonesia’s cocoa industry. Journal of Agribusiness in Developing and Emerging Economies, 9(5), 439-456. doi: 10.1108/JADEE-09-2018-0131.
  9. Bonjean, C.A., & Brun, J. (2011). Price transmission in the cocoa-chocolate chain. Halshs-00552997.
  10. BPS-Statistics Indonesia (2021). Agricultural producer pricer statistics. BPSStatistics Indonesia.
  11. Chaudhry, M.I., & Miranda, M.J. (2020). Price transmission in Pakistan’s poultry supply chain. Journal of Agricultural and Resource Economics, 45(2), 282-298. doi: 10.22004/ag.econ.302455.
  12. Cutts, M., & Kirsten, J. (2006). Asymmetric price transmission and market concentration: An investigation into four South African agro-food industries. South African Journal of Economics, 74(2), 323-333. doi: 10.1111/j.1813-6982.2006.00064.x.
  13. Fafchamps, M., & Hill, R.V. (2008). Price transmission and trader entry in domestic commodity markets. Economic Development and Cultural Change, 56(4), 729-766. doi: 10.1086/588155.
  14. Frey, G., & Manera, M. (2007). Econometric models of asymmetric price transmission. Journal of Economic Survey, 21(2), 349-415. doi: 10.1111/j.1467-6419.2007.00507.x.
  15. Gizaw, D., Myrland, Ø., & Xie, J. (2020). Asymmetric price transmission in a changing food supply chain. Aquaculture Economics & Management, 25(1), 89-105. doi: 10.1080/13657305.2020.1810172.
  16. Hasibuan, A.M., & Sayekti, A.L. (2018). Export tax policy in Indonesia: The impacts on competitiveness and price integration of cocoa products. Pertanika Journal of Social Sciences and Humanities, 26(1), 535-552.
  17. Hasnah, Fleming, E., Villano, R., & Patrick, I. (2011). The potential of cacao agribusiness for poverty alleviation in West Sumatra. 55th National Conference of the Australian Agricultural and Resource Economics Society, August, 1-20.
  18. Hassouneh, I., Serra, T., & Bojnec, Š. (2015). Nonlinearities in the Slovenian apple price transmission. British Food Journal, 117(1), 461-478. doi: 10.1108/BFJ-03-2014-0109.
  19. Ibrahim, M.H. (2015). Oil and food prices in Malaysia: A nonlinear ARDL analysis. Agricultural and Food Economics, 3(1), 1-14. doi: 10.1186/s40100-014-0020-3.
  20. Jambor, A., Toth, A.T., & Koroshegyi, D. (2017). The Export Competitiveness of Global Cocoa Traders Atilla. Agris On-Line Papers in Economics and Informatics, 9(3), 27-37. doi: 10.7160/aol.2017.090303.
  21. Kamaruddin, Masbar, R., Syahnur, S., & Majid, S.A. (2021). Asymmetric price transmission of Indonesian coffee. Cogent Economics and Finance, 9(1), 1-15. doi: 10.1080/23322039.2021.1971354.
  22. Klasen, S., Priebe, J., & Rudolf, R. (2013). Cash crop choice and income dynamics in rural areas: Evidence for post-crisis Indonesia. Agricultural Economics, 44(3), 349-364. doi: 10.1111/agec.12015.
  23. Korale, G.P.M., Ratnasiri, S., & Bandara, J.S. (2016). Does asymmetry in price transmission exist in the rice market in Sri Lanka? Applied Economics, 48(27), 2491-2505. doi: 10.1080/00036846.2015.1125427.
  24. Liefert, W.M., & Westcott, P.C. (2016). Modifying agricultural export taxes to make them less market-distorting. Food Policy, 62, 65-77. doi: 10.1016/j.foodpol.2016.04.001.
  25. McCawley, P. (2015). Infrastructure policy in Indonesia, 1965-2015: A survey. Bulletin of Indonesian Economic Studies, 51(2), 263-285. doi: 10.1080/00074918.2015.1061916.
  26. Mclaren, A. (2015). Asymmetry in price transmission in agricultural markets. Review of Development Economics, 19(2), 415-433. doi: 10.1111/rode.12151.
  27. Meyer, J., & von-Cramon-Taubadel, S. (2004). Asymmetric price transmission: A survey. Journal of Agricultural Economics, 55(3), 581-611.
  28. Ministry of Agriculture (2015). Directorate general of estate crops. Jakarta, Indonesia.
  29. Mofya-mukuka, R., & Abdulai, A. (2013). Policy reforms and asymmetric price transmission in the Zambian and Tanzanian coffee markets. Economic Modelling, 35, 786-795. doi: 10.1016/j.econmod.2013.08.040.
  30. Mukhlis, M., Masbar, R., Syahnur, S., & Majid, M.A.S. (2020). Dynamic causalities between world oil price and Indonesia’s Cocoa market: Evidence from the 2008 global financial crisis and the 2011 European debt crisis. Regional Science Inquiry, 12(2), 217-233.
  31. Nabhani, I., Daryanto, A., Yassin, M., & Rifin, A. (2015). Can Indonesia cocoa farmers get benefit on global value chain inclusion? A literature review. Asian Social Science, 11(18), 288-294. doi: 10.5539/ass.v11n18p288.
  32. Neilson, J., Fauziah, K., & Meekin, A. (2013). Effects of an export tax on the farmgate price of Indonesian cocoa beans. Malaysian International Cocoa Conference (MICC) 2013, December.
  33. Niemi, J., & Liu, X. (2016). Empirical “first-filter” test for the existence of buyer power in the finnish food supply chain. Agricultural and Food Science, 25(3), 177-186. doi: 10.23986/afsci.53275.
  34. Panagiotou, D. (2021). Asymmetric price responses of the US pork retail prices to farm and wholesale price shocks: A nonlinear ARDL approach. Journal of Economic Asymmetries, 23, e00185. doi: 10.1016/j.jeca.2020.e00185.
  35. Pesaran, M., Shin, Y., & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326. doi: 10.1002/jae.616.
  36. Pratama, M., Rauf, R., Antara, M., & Basir-Cyio, M. (2019). Factors influencing the efficiency of cocoa farms: A study to increase income in rural Indonesia. PLoS ONE, 14(4), 1-15. doi: 10.1371/journal.pone.0214569.
  37. Rezitis, A.N. (2018). Investigating price transmission in the Finnish dairy sector: an asymmetric NARDL approach. Empirical Economics, 57(3), 861-900. doi: 10.1007/s00181-018-1482-z.
  38. Rezitis, A.N., & Tsionas, M. (2019). Modeling asymmetric price transmission in the European food market. Economic Modelling, 76, 216-230. doi: 10.1016/j.econmod.2018.08.004.
  39. Rifin, A. (2015). The impact of export tax policy on cocoa farmers and supply chain. The International Trade Journal, 29(1), 39-62. doi: 10.1080/08853908.2014.941048.
  40. Rumánková, L. (2014). Asymmetry in price transmission of the Czech wheat agrifood chain. Agris On-Line Papers in Economics and Informatics, VI(1), 63-71.
  41. Sandee, H. (2016). Improving connectivity in Indonesia: The challenges of better infrastructure, better regulations, and better coordination. Asian Economic Policy Review, 11(2), 222-238. doi: 10.1111/aepr.12138.
  42. Shin, Y., Yu, B., & Greenwood-nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In Festschrift in Honor of Peter Schmidt. Springer. doi: 10.1007/978-1-4899-8008-3.
  43. Sianipar, C.P.M., & Widaretna, K. (2012). NGO as triple-helix axis: Some lessons from Nias community empowerment on cocoa production. Procedia - Social and Behavioral Sciences, 52, 197-206. doi: 10.1016/j.sbspro.2012.09.456.
  44. Subervie, J. (2011). Producer price adjustment to commodity price shocks: An application of threshold cointegration. Economic Modelling, 28(5), 2239-2246. doi: 10.1016/j.econmod.2011.06.010.
  45. Trestini, S., & Penone, C. (2018). Transmission of futures prices to the Italian spot market: Are there opportunities to hedge corn price risk? Economia agro-alimentare, 20(2), 193-204. doi: 10.3280/ECAG2018-002005.
  46. Tsowou, K., & Gayi, S.K. (2019). Trade reforms and integration of cocoa farmers into world markets: evidence from african and non-african countries. Journal of African Trade, 6(1-2), 16-29. doi: 10.2991/jat.k.190916.001.
  47. Usman, M.A., & Haile, M.G. (2017). Producer to retailer price transmission in cereal markets of Ethiopia. Food Security, 9(4), 815-829. doi: 10.1007/s12571-017-0692-0.
  48. Vavra, P., & Goodwin, B.K. (2005). Analysis of price transmission along the food chain. OECD Food, Agriculture & Fisheries Papers, No. 3, Paris: OECD Publishing.
  49. Walters, F.E. (1975). Impact of changing structure of the food industries on food supply and price. American Journal of Agricultural Economics, 57(2), 188-195. doi: 10.2307/1238492.
  50. World Bank. (2020). World Development Indicators. Washington, DC: World Bank. --
  51. Yilmaz, K. (2006). How much should primary commodity exports be taxed? Nash and Stackelberg equilibria in the global cocoa market. Journal of International Trade and Economic Development, 15(1), 1-26. doi: 10.1080/09638190500523360.
  52. Yudyanto, H., & Hastiadi, F. (2019). Analysis of the imposition of export tax on Indonesian cocoa beans: Impact on the processed cocoa export in Indonesia and Malaysia. In Globalization, Productivity and Production Networks in ASEAN, 169-189. Palgrave Macmillan, Cham. doi: 10.1007/978-3-030-16510-9_7.


Metrics Loading ...