Farmer Performance under Competitive Pressure in Agro-cluster Regions

Agro-clusters would allow farmers to acquire positive and negative externalities. On one hand, smallholder farmers in spatial proximity are likely to benefit from this concentration; on the other hand, they incur high competitive pressure from other neighboring farmers. We examine the link between this pressure and agro-clusters by controlling for farmers’ attitudes. We also assess the relationship between economic pressure and farmer’s profit by accounting for the varying of agro-cluster density. We carry out interview to 1,151 farmer respondents in West Java, Indonesia. Competitive pressure is associated with reduced agro-cluster density. The results also reveal that an increase in competitive pressure corresponds to the higher willingness of farmers to share their knowledge, yet the increased dependency degree on other farmers and reduced decision power. They also receive unethical conduct from other farmers as the density of agro-clusters rises. Finally, we observe from the results that adjacent farmers are likely to earn more profit if they feel that the pressure from other farmers is declining. The findings imply that enabling policies toward strengthening farmer cooperation could be an option to reduce competitive pressure on smallholder farmers.