Econometric analysis of factors affecting sugar supply in Indonesia a simultaneous equations approach

As the primary sweetener, sugar has yet to be fully substituted by alternative sweeteners. Its significance is further reflected in its extensive linkages with various downstream industries, including the food and beverage sector. This study aims to analyze the factors influencing sugar supply in Indonesia and to examine the elasticity of sugar supply. The research utilizes secondary time series data covering the period from 1992 to 2024. A quantitative analysis using a simultaneous equation model estimated through the Two-Stage Least Squares (2SLS) approach. This study employs a quantitative approach within a simultaneous equation modeling framework. The research findings indicate that key factors influencing the supply of sugar in Indonesia include domestic production, imports, exports, and national sugar stock levels. Sugar production plays a central role in determining overall supply. Additionally, domestic sugar consumption has a positive elasticity with respect to sugar imports, meaning that higher consumption leads to increased import volumes. In contrast, the exchange rate and domestic sugar production exhibit negative elasticity, suggesting that an appreciation of the currency or an increase in domestic production tends to reduce the volume of sugar imports. Domestic sugar prices have a negative elasticity in relation to Indonesia’s sugar exports.