Purchasing Power of Fruit and Vegetable Farmers Declines, Minister of Agriculture Reveals the Cause

Jakarta, CNBC Indonesia - The Minister of Agriculture, Amran Sulaiman, has revealed the causes behind the decline in the Farmer Terms of Trade (NTP) for the horticulture subsector—comprising vegetable and fruit growers—which was the only subsector to experience a decrease in August 2026.

As is well known, the NTP serves as an indicator to assess the level of purchasing power among rural farmers. Amran suspects that the decline in horticultural NTP is partly influenced by dry season conditions affecting horticultural commodities. However, he noted that there are other issues that require government attention.

“All other (NTP) indices have risen. This one might be caused by the influence of the dry season, or there could be other factors. Our focus recently has been on plantations, livestock, and food crops, all of which are showing positive trends. We cannot address everything simultaneously,” said Amran, when met following a Working Meeting with Commission IV of the Indonesian House of Representatives (DPR RI) at the Parliament Complex, Jakarta, on Tuesday (1/9/2026).

Amran stated that the government will increase the budget for the horticulture subsector in 2027. This policy will be implemented gradually, following the government’s previous focus on the food, livestock, and plantation subsectors.

“This year, we are budgeting almost twice as much for horticulture in 2027. We are tackling these issues one by one; we cannot do it all at once. This is the remaining task on our agenda, so God willing, it will be resolved sequentially,” he added.

According to data from the Central Bureau of Statistics (BPS), the national NTP in August 202_6 reached 129.19, an increase of 1.05% compared to July 2026. This increase occurred because the index of prices received by farmers (It) rose by 1.14%, which was higher than the index of prices paid by farmers (Ib), which only rose by 0.09%.

However, a different situation occurred in the horticulture subsector. The horticultural NTP recorded a 2.84% decrease in August 2026. BPS noted that this decline was primarily caused by the price index received by horticultural farmers falling by 2.81%, while the price index paid by farmers actually rose by 0.03%.

So, what is the cause?

Amran assessed that one problem that can depress horticultural NTP is when the production of certain commodities becomes excessive, causing prices at the farmer level to crash. He cited shallots, which have experienced a production surplus, as an example. Such conditions lead to falling prices, which ultimately impacts farmer welfare as reflected in the NTP.

“My estimation is that chillies often struggle during the dry season. During a drought, prices tend to drop, but they also drop during the rainy season. A permanent solution is needed, which is cold storage,” Amran explained.

“For vegetables, chillies, shallots, and various others—for instance, shallots are currently in surplus, which causes prices to fall. That is correct. One of the reasons for recent complaints regarding shallots was that production was high enough to cause a drop, which in turn caused the NTP to decline,” he concluded.