![](bg6.png)
in this case the milling owner, where the price set
tends to be below the government decree price.
Although the prices in the rural market are below the
government decree, farmers are forced to sell their
crops to the milling owners in the rural level, this
condition gives a strong indication that the structure
of the rice market in rural level tends to be
monopsony and or oligopsony which agreed.
Meanwhile, the insignificance of the input cost
variable (InCI) in influencing the rice price in the
rural level is caused by the relatively fixed and
unvaried input costs in the rice farming process. As
the result of the relatively fixed and varying input
costs, the rice price elasticity on input costs is very in-
elastic, this is indicated by the coefficient of rice price
elasticity to the input cost is -0.007 (Table 6).
5 CONCLUSIONS
The pattern of price fixing at the rural level is
relatively biased to buyers (milling owners), buyers
have greater power in determining prices than
farmers. Price agreements between buyers and sellers
at the rural level are dominated by buyers (milling
owners). The more dominant milling owners in
determining the price level are due to: (1) the high
dependence of farmers on milling plants to process
paddy into rice, (2) most farmers already have debts
to the mill owners, (3) there is behaviour monopsony
and or oligopsony behaviour which agreed among
buyers at the rural level.
Meanwhile, the pattern of rice price setting in the
sub-district level of the relative is controlled by large
traders, most of whom have cooperated with milling
owners in the rural level. The price formed at the sub-
district level is the sum of the purchase prices at the
rural level plus the profit margins agreed upon by the
wholesalers at the sub-district level with the milling
owners in the rural level. We found of this study that
the defined profit margins ranged from 16-36%.
The conclusion from the model estimation result
indicated that jointly the independent i.e. rice
production, input cost, labor cost, and dummy
variable significantly affect the rice price at the rural
level. Meanwhile, partially the variables that
significantly affect the rice price at the rural level are
labor costs and districts dummy variable (D1 and D2),
while the rice production and input costs insignificant
affect the rice price in the local farm level (rural
market).
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