From 2009 to 2017, Indonesia produced an average of 18.8 million tons of maize per year. This failed to meet the domestic demand by an average of 2.4 million tons per year during the same period. Since imports have been severely restricted in recent years, domestic maize prices have become much higher than international prices and also caused domestic price increases for other food commodities. Since 2015, the government’s UPSUS program addresses the shortage by attempting to increase domestic maize production. Farmers are being provided with hybrid maize seeds free of charge.
To improve the overall effectiveness of the UPSUS hybrid maize seed subsidies, local maize markets need to be categorized by their particular strength. Thin maize markets produce little maize because farmers opt for other crops such as vegetables and fruits as their primary source of income; in semi-strong maize markets most farmers plant traditional types of maize and there are two to four private seed companies plus one off-taker; in strong maize markets all farmers plant hybrid maize, with five or more private seed companies and at least two off-takers. Moreover, the maize market types also differ by the dominance of maize and dry land agriculture in the local markets, as well as the local adoption of Good Agricultural Practices (GAP).
The UPSUS hybrid seed subsidy program is most effective in areas with semi-strong maize markets because here it supports the transition from traditional to hybrid maize types with positive effects on production levels. Since absorption rates of UPSUS seeds in thin and strong maize markets are lower, distributing seeds in these markets appears to contribute to the emergence of black-markets where farmers illegally sell their UPSUS seeds to finance other needs.
The current quota system of the 2018 Technical Implementation Guideline of Maize Cultivation mandates that 65% of all UPSUS seeds must come from the Research and Development Agency of the Ministry of Agriculture (Balitbangtan) and licensed domestic producers. Since these seeds are of lower quality than the 35% of seeds that originate from the private sector, this quota system hinders the farmers from receiving the quality best suited to increase production levels. We propose three policy reforms for the UPSUS seed subsidy program to improve its effectiveness: Firstly, Ministry of Agriculture (MOA) regulation 03/2015 section III(B) must add a classification matrix to assess the strength of local maize markets and then reduce the distribution of UPSUS seeds to mainly districts with semi-strong markets. The development of local maize markets should be periodically assessed and the distribution of seeds should be terminated if markets have become strong enough to end the subsidy in favor of market mechanisms. Intensive capacity-building programs should facilitate this development of markets. Local governments need to create partnerships with the private sector and develop functioning seed markets for a sustainable agriculture once the UPSUS program has ended in their district. Secondly, the current quota of 65% maize seeds from Balitbangtan and other licensed producers as stipulated in the 2018 Technical Implementation Guideline of Maize Cultivation should be abolished. Farmers should receive seeds of the quality they request.