Effect of Food Inflation on Farmers’ Terms of Trade in Indonesia During 2025
DOI:
https://doi.org/10.37638/bima.7.1.1095–1105Keywords:
agricultural prices, farmer welfare, food prices, inflation, purchasing powerAbstract
Purpose: This study aims to examine the development of food inflation and Farmers’ Terms of Trade (FTT) in Indonesia and to analyze the effect of food inflation on FTT during the 2024–2025 period. Methodology: This study employed a quantitative approach using secondary monthly time-series data obtained from official publications of Statistics Indonesia (BPS) and the Ministry of Agriculture. Descriptive analysis was used to examine the development of food inflation and FTT, while simple linear regression was applied to assess the effect of food inflation on FTT during the observation period. Results: The results show that food inflation fluctuated throughout the observation period and tended to decline toward the end of 2025. Meanwhile, national FTT remained above 100 and increased from 123.67 in January 2025 to 125.35 in December 2025. The regression analysis produced a positive coefficient of 0.048, indicating a positive relationship between food inflation and FTT. However, the effect was not statistically significant, as indicated by a significance value of 0.915. Findings: The findings indicate that food inflation alone was insufficient to explain changes in Farmers’ Terms of Trade during the observation period. Although food inflation showed a positive relationship with FTT, its effect was statistically insignificant. This suggests that other economic, agricultural, and structural factors may have played a more important role in determining farmers’ economic conditions. Novelty & Originality: The novelty of this study lies in its empirical examination of the relationship between food inflation and Farmers’ Terms of Trade in Indonesia using monthly time-series data covering the 2024–2025 period. Its originality derives from linking changes in food price inflation to farmers’ relative economic welfare as reflected by FTT at the national level, providing recent empirical evidence on the extent to which food price dynamics are associated with farmers’ economic conditions. Conclusions: The study concludes that food inflation had a positive but statistically insignificant relationship with Farmers’ Terms of Trade during the observation period. Therefore, policies aimed at improving farmers’ economic welfare should not focus solely on food inflation but should also consider agricultu ral commodity prices, production costs, weather conditions, distribution systems, and agricultural policies. Type of Paper: This paper is an empirical research paper.
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