Title:
Beyond Farmers’ Terms of Trade: Resolving Indonesia’s High-NTP–low-welfare Paradox Through an Integrated Multidimensional Measurement Framework

Authors:
Loso Judijanto, Indonesia

Abstract:

The Farmers’ Terms-of-Trade Index, known in Indonesia as Nilai Tukar Petani (NTP), is frequently interpreted as a direct indicator of farmer welfare. This interpretation is problematic because NTP primarily measures the relative movement of prices received by farmers against prices they pay for household consumption and agricultural production. It does not directly measure production volume, net income, farm size, land tenure, debt, asset accumulation, food security, health, education, subjective well-being, or resilience. This qualitative literature review examines why high or rising NTP values can coexist with persistent deprivation among agricultural households. Recent Indonesian evidence provides an illustrative paradox: NTP may increase because the prices paid by farmers decline faster than the prices they receive, even though producer prices, farm revenue, or profitability do not improve. The review identifies seven interrelated themes: construct mismatch, aggregation bias, the denominator effect, incomplete price transmission, household heterogeneity, multidimensionality, and the importance of farmers’ subjective evaluations. It proposes an integrated four-tier measurement architecture comprising monthly market indicators, agricultural-household economic accounts, a multidimensional Farmer Welfare Index, and distributional and longitudinal statistics. NTP should therefore be retained as a high-frequency indicator of relative-price conditions but should not serve as a stand-alone proxy for achieved welfare. Indonesian agricultural policy needs to distinguish statistical changes in purchasing power from substantive improvements in farmers’ capabilities, economic security, quality of life, and resilience.

DOI: https://doi.org/10.51505/IJEBMR.2026.11007