Red Chili Agribusiness and the Risks Faced by the Farmers

Abstract

Red chili is a commodity with high economic value, yet it has high risks. It can be observed from the price fluctuation as a result of the unstable supply, while it has a high demand from the consumers. In red chili agribusiness, farmers are one of the actors who play a role in the on-farm sub-systems, but their performance is affected by other sub-systems. Therefore, it is important to study the level of the risks, the sources of the risks, and the weakest sub-system in the red chili agribusiness. This research was conducted in Sukalaksana Village, Banyuresmi District, Garut Regency, which is one of the red chili production centers in Indonesia. The research was performed using a survey method with a descriptive analysis technique and a risk analysis. The results showed that the red chili farming possesses high risks, shown by the coefficient of variation (CV) of production risk (CV = 0.69), cost risk (CV = 1.25), and income risk (CV = 2.11). The main source of risks in the red chili farming is weather changes, which make the chilies very prone to pests and diseases. Meanwhile, the weakest sub-system in the red chili agribusiness is marketing sub-system because the farmers have to face a monopsonistic market, namely a middleman, which creates an income risk. Therefore, the farmers need assistances to perform risk mitigation, and there have to be institutional supports to increase their bargaining position.