Governing Market Risk in Organic Agriculture: Institutional Resilience and Collective Action in Rural Indonesia

Abstract

Why do some organic farming systems persist while others collapse despite similar histories of collective action, policy support, and social legitimacy? This study examines how institutional design shapes the resilience of organic rice systems under conditions of market volatility and buyer power. Drawing on a qualitative comparative analysis of two subnational cases in rural Indonesia—Magelang and Tasikmalaya—Magelang experienced only 6–8% reversion to conventional rice (≈4.2 ha lost), while Tasikmalaya saw 32–38% reversion (≈13–17 ha). The study applies and extends the Institutional Analysis and Development (IAD) framework to foreground market risk governance as a central explanatory variable. The findings show that sustainability depends less on collective organisation than on whether producer institutions function as risk-bearing actors. In Magelang, a farmer cooperative governed market relations through internal monopsony and buyer diversification, shifting market risk from individual households to the organisational level. In Tasikmalaya, reliance on an external monopsony concentrated risk outside producer control; when buyer demand weakened, risk was rapidly transferred to farmers, triggering institutional fragmentation and exit from organic production. By distinguishing internal from external monopsony, the study advances an institutional explanation of resilience in market-mediated sustainability transitions and suggests that policies should prioritise institutional capacity for market risk governance over certification or production technologies.

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