Abstract
Indonesia's cloves meet higher quality standards than most of her other agricultural commodities. This paper presents the results of research on Ambon, Maluku, whose smallholder clove farming system is representative of the principal system used by Indonesian clove producers, in which cloves form part of a well-diversified agricultural portfolio. The paper examines the clove marketing system, the factors involved in clove quality, and the system of quality premia and penalties applied in the marketing of cloves. The largest buyers of cloves, the major kretek cigarette companies, demand high-quality produce, because of the highly competitive domestic market and their more recent attempts to penetrate the international market. These buyers transmit their preferences along the marketing chain through the well-defined incentive system, while poorer quality cloves are bought by smaller kretek producers. The result is a system in which high quality standards are maintained.