KPPU Says North Sumatra Rubber Farmers Could Gain Greater Bargaining Power by Forming Cooperatives
Medan, May 19, 2024 — Indonesia's Business Competition Supervisory Commission (KPPU) believes that rubber farmers in North Sumatra could significantly strengthen their bargaining position with buyers by organizing themselves into cooperatives.
According to Ridho Pamungkas, Head of KPPU Regional Office I, cooperatives would enable farmers to negotiate directly with rubber processing companies, giving them greater influence over pricing and marketing.
"Through cooperatives, farmers would have stronger bargaining power when selling their rubber to buyers," Ridho said in Medan on Sunday.
He emphasized that encouraging rubber farmers to unite under cooperative organizations should become a priority.
Besides giving farmers greater control over their production, cooperatives would also allow them to establish direct partnerships with rubber processors and industrial buyers.
"In this way, farmers can sell their rubber directly to processing industries without having to rely on middlemen," Ridho explained.
Middlemen Suspected of Distorting Market Prices
KPPU believes that intermediaries may have contributed to the persistent weakness in rubber prices by influencing market transactions.
According to Ridho, lower prices have forced many farmers to sell their rubber to only a limited number of buyers, reducing competition and preventing other processors from securing adequate raw material supplies.
The commission is currently investigating these market conditions to determine whether anti-competitive practices have played a role.
Factory Closures Raise Industry Concerns
Based on KPPU Regional Office I records, at least 10 rubber processing factories have ceased operations in North Sumatra.
"We are currently investigating the situation," Ridho said.
The closures reflect broader challenges facing Indonesia's natural rubber industry, including declining raw material availability and weakening export performance.
Indonesia's Rubber Exports Continue to Decline
Ridho also referred to data released by the Indonesian Rubber Association (Gapkindo), which showed that Indonesia's natural rubber exports have declined by an average of 10% annually since 2017.
Export volumes fell from approximately 3.3 million metric tons in 2017 to around 2.1 million metric tons five years later. As domestic raw material supplies tightened, Indonesia was even forced to import approximately 100,000 metric tons of natural rubber each year.
North Sumatra Remains One of Indonesia's Largest Producers
Despite current industry challenges, North Sumatra continues to play a vital role in Indonesia's natural rubber sector.
According to supply chain and agribusiness company Gokomodo, North Sumatra ranked as Indonesia's second-largest rubber-producing province in 2022, producing approximately 321,600 metric tons of natural rubber.
The province ranked behind South Sumatra, which produced 913,400 metric tons, while other leading producers included:
Jambi: 317,600 metric tons
Riau: 307,300 metric tons
West Kalimantan: 255,800 metric tons
Industry observers believe that strengthening farmer cooperatives could improve market efficiency, enhance price transparency, and increase farmers' incomes by reducing dependence on intermediaries while creating a more competitive and sustainable natural rubber supply chain.