Price stability of staple food needs is one of the government's policy priorities in
anticipating the negative impact of the global economic crisis. Price instability in the long
term could impact on high inflation, falling of purchasing power and political
manipulation that would interfere the availability of strategic food products. The high
price of staple food needs will certainly disturb the national food security. The aims of ths
study is analyzing the factors that influence the instability of soybean and sugar price and
determine how domestic patterns of integration and the price mechanism, as well as
offering the necessary policy formulation related to the stabilization effort on imported
base of staple food needs. Analysis using descriptive qualitative and quantitative dynamic
econometric model that is structural vector autoregression (sVAR) and error correction
model (ECM) using monthly time series data in 2000-2009. There is a strong integration
between the world market commodity prices with price stability of soybean and sugar
prices where transmission occurs in about 2-14 months. World price shocks and the
impact of imports on price increases and reaches equilibrium at a higher price level. The
mechanism of the international market is still strong enough to affect soybean and sugar
domestic market. The implication show that price on imported base product such as sugar
and soybeans still necessary to be implemented.
Buletin Ilmiah Perdagangan, Vol. 4 No. 2, Nopember 2010