ABSTRACT
Since the mid-1980s, the Indonesian economy has been progressively liberalized, following a self-adjustment process after the drop in oil prices. Hence it is interesting to attempt an assessment of the consequence of a free trade environment for food crops and inputs at both regional and farm level. Agricultural production is clearly a risky activity since the production level is random and geographic correlation of risks and moral hazard make insurance difficult, while the simultaneity of borrowing and depositing lead to difficulties for the banking system. The decrease in agricultural income after liberalization of the whole food crops sub-sector is sharp for each farm type, but the situation is much better if rice is excluded from the liberalization process. Rice production is very stable with liberalization, while soybean production decreases sharply and maize production increases. The presence of small streams allows rice cultivation during the other seasons.
