Transmission of broiler egg prices between surplus and deficit areas: exploring the dynamics

ABSTRACT

Broiler chicken eggs are one of the main and strategic foods for the people of Indonesia and contribute to regional and national inflation. Broiler egg production in Indonesia differs between regions. Areas with a surplus of eggs tend to have lower prices than areas with a deficit. This research is to measure the transmission of broiler egg prices between markets in surplus and deficit areas, using weekly price time series data for the period January 2018-December 2021. Areas of surplus broiler eggs, East Java Province (the highest broiler egg production in Indonesia) which become one of the main suppliers to the Province of East Nusa Tenggara as a deficit area. Using the Johannsen cointegration test it is found that there is no cointegration or there is no relationship between the surplus and deficit regions in the long term but not in the short term. Factors of marketing infrastructure, market information systems, and geographical conditions can be obstacles to the absence of cointegration. The VAR (Vector Auto-Regressive) Vector Error Correction model (VECM) test, found that price transmission occurred between surplus and deficit areas, meaning that between the two regions, there was market integration prior to Covid. The transmission has weakened, and due to the Covid situation, there have been restrictions on the movement of people and goods. The government and other market players need to study the response of the broiler egg market, in the short and long term so that market players can make the right policies.