Impact of Maize Production Decrease in the United States on the Maize Industry in Indonesia

Abstract

The United States is a major producer and exporter of maize in the world.  The volume of corn trade in the world is relatively small (thin market), where only 21 percent is traded from total world production. The decline in US maize production can affect the performance of Indonesia's industry as a maize importer country. The research objective is to determine the impact of the decline in US maize production in the maize Industry in Indonesia. Using the econometrics approach with a simultaneous equation system model. The estimation technique used is the two stages least squares, the data series range from 1985 to 2017. The results of the analysis show that the decline in American maize production has an impact on the decline in trade performance and welfare, where revenues from food and food exports have increased but spending on maize imports has also increased more large so that the trade balance deficit increases. Surplus of producers of maize farmers and feed consumers increased, while the surplus of corn consumers households, independent breeders, feed industry, food industry and food consumers decreased, so that people's welfare declined. To reduce the trade balance deficit and improve public welfare in conditions of reduced US maize production, it is recommended that the government adopt a policy of reducing corn import tariffs and setting reference prices for government purchases at the farm level.