Analyzing Factors Influencing Farmer Term of Trade for Food Crops: A Case Study of South Sulawesi, Indonesia

Abstract

Farmer Terms of Trade (FToT) is the ratio of agricultural produce prices to the goods and services needed to produce it. It is a pivotal indicator for assessing farmer welfare. Yet, the FToT of food crops consistently lags other subsectors despite being the primary income source for most farmers. This research explores the determinants influencing the FToT of food crops, utilizing a monthly data series from 2019 to 2022. Multiple linear regression analysis with various time lags is explored to derive an optimal estimation model. Among the six estimations with distinct time lags, time lag-4 emerges as the most promising, offering insights into the factors shaping FToT dynamics. Of the seven variables examined, six independent variables exhibit significance at a confidence level of 0.01, except the Price of Corn variable, which appears to have a negligible impact. The prominence of time lag 4 underscores its alignment with the typical age or harvest period of food crops, highlighting the importance of considering temporal dynamics when analyzing economic variables within the agricultural sector. This underscores the necessity of accounting for time lags in estimating influential factors within the agricultural domain, facilitating a more nuanced understanding of the sector's economic intricacies.

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