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EXCERPT FROM CFE’s

COFFEE AND CASHEW VALUE CHAIN ANALYSIS

Wisnu Caroko Andhika Vega Praputra Andri Santosa

2013


Table Of Contents value chain analysis 1 Objectives 2 CASHEW 3 Sites 3 HKM Gunung Silano , Jeneponto, South Sulawesi. 3 Community Forest of Southwest Praya and Central Sekotong, LoTeng, West Nusa Tenggara 3 Community Forest of Rejosari, Semin, Jogja 3 Grade, Standard and Regulation 3 Grade for Indonesian Cashew in shell 3 Grade For Cashew Kernel 4 Grade for International Cashew kernel and Indonesia national Market 4 Standard on Cashew peeling processes 4 Regulations 5 Actors 5 The Value Chains HKM Gunung Silano, Jeneponto Community Forest in LoTeng Community Forest in Semin, Jogja

6 6 7 8

Gap Analysis

9

Intervention Recommendation

10

COFFEE 11 Sites 11 Village Forest in Labbo and Pattaneteang, Bantaeng District, South Sulawesi 11 Four LMDHs in Cipada (West Bandung District); Pusaka Mulya (Purwakarta District); Cileunyi Wetan, and Giri Mekar (Bandung District). 11 HKM Salut, Santong and Jenggala in North Lombok 11 Grade, Standard and Regulation 11 Local Grade on Parchment Coffee 11 Local Grade on Green Bean 11 National Grade (SNI 01-2907-2008) and International Grade (ICO no.407) on Green Bean 12 Regulations 12 Actors 12 The Value Chains Village Forest in Labbo and Pattaneteang, Bantaeng District, South Sulawesi LMDHs in North Bandung HKM Salut, Santong and Jenggala in North Lombok

14 14 15 16

Gap Analysis

17

Intervention Recommendation

17

REFERENCES 19


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value chain analysis Value chain analysis is a powerful tool to identify the key activities within the enterprise which form the value chain for that organization, and have the potential of a sustainable competitive advantage for an enterprise. Therein, competitive advantage of an organisation lies in its ability to perform crucial activities along the value chain better than its competitors. The value-chain analysis will describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use. It will describe both direct actors in the chain and indirect actors that support the market system. Our task is how we can make the system works better to the targeted community and products, by developing intervention on the system. Value Chain Analysis will help to identify the ways in which we create value for our customers, and then will help to think through how we can maximize this value: whether through superb products, great services, or jobs well done. The figure below will describe the VCA approach”

Objectives VCA objectives are as follow:

1. To systematically map the actors participating in the production, distribution, marketing, and sales of CFE’s Cashew and Coffee

This mapping assesses the characteristics of actors, profit and cost structures, flows of goods throughout the chain, and the destination and volumes of domestic and foreign sales. Such details can be gathered from a combination of primary survey work, focus groups, informal interviews, and secondary data. 2. To identify the function of supporting system to each actor This will describe if there is any opportunity or obstacle created by the supporting system which influence each actor in market system. 3. To examine the role of upgrading within the chain

Upgrading can involve improvements in quality and product design that enable producers to gain highervalue or through diversification in the product lines served. An analysis of the upgrading process includes an information on constraints and opportunities that are currently present.

CASHEW

Site


2   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

Objectives VCA objectives are as follow: 1. To systematically map the actors participating in the production, distribution, marketing, and sales of CFE’s Cashew and Coffee

This mapping assesses the characteristics of actors, profit and cost structures, flows of goods throughout the chain, and the destination and volumes of domestic and foreign sales. Such details can be gathered from a combination of primary survey work, focus groups, informal interviews, and secondary data.

2. To identify the function of supporting system to each actor This will describe if there is any opportunity or obstacle created by the supporting system which influence each actor in market system. 3. To examine the role of upgrading within the chain Upgrading can involve improvements in quality and product design that enable producers to gain higher-value or through diversification in the product lines served. An analysis of the upgrading process includes an information on constraints and opportunities that are currently present.


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CASHEW Sites HKM Gunung Silano , Jeneponto, South Sulawesi. The HKM is located in Gunung Silano Jeneponto , South Sulawesi , get permission of HKM in state forest land area of ​​890 ha in 2010 to 33 farmer groups . Cashew is a seed crop grown in the region and outside the region since 1999 and is the main income of local communities. It is estimated there are about 350,000 cashew trees with production of about 6,675 tons of cashew in shells at each harvest season (October to December). Since the beginning marketing is always in the form of cashew in shells sold directly to local traders who come to the village.

Community Forest of Southwest Praya and Central Sekotong, LoTeng, West Nusa Tenggara Cashew farmers in LoTeng averagely have a cashew crop of 0.75 to 1.00 ha where averagely contains 100 to 150 trees depending on the spacing. During cashew harvest season the production obtained by farmers between 1,100 to 1,350 kg per harvest season. Since the beginning marketing of cashew nut farmers in LoTeng is the cashew nuts in shell without processing. Once collected, the cashews sell directly to collectors. During the cashew nut harvest in 2012 , production of cashew nut farmers are absorbed around 800 tons less than the production of cashew nuts in 2010 which was 1,000 tons . From 4 districts. Community Forest of Rejosari, Semin, Jogja Cashew trees planted in yards. In four villages, the average resident has a two to four cashew trees. Some have tens to hundreds of trees on the moor. Cashew trees in this area were planted since 1984. First planting of cashew was originally used to utilize vacant land. No data exactly how many trees of cashew in the village. It can only be estimated to number between 1500-2000 harvest stem with a capacity of 25 to 50 tons at harvest season. Cashew trees need no special treatment. Farmer selling cashew nuts in shell to traders and collectors both to local collectors and collectors who come from Solo, Central Java. There was once a training provided by government to create syrup , butter , and shredded. But there is no continuity due to market difficulties.

Grade, Standard and Regulation Grade for Indonesian Cashew in shell (Saragih and Haryadi 1994) Aspect 1. Quality terms

Criteria Free pest/disease that can interfere the consumer health and can damage the bean during transportation and storage

Free of foul odors, acids, fungi and others caused by careless drying or poor storage

Not contaminated by CNSL and other chemicals such as fertilizers or remnants of fertilizers.

The maximum of moisture contents is 25%.

2. Quality Classes

Explanation

Amount of Beans (Min)

Special (M1) Good(M2)

Minimum 90% of cashew beans >1 Minimum 75% of cashew beans >1

175 beans/kg 176 - 225 beans/kg


4   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

Grade For Cashew Kernel (Indonesian Local Market) 1. 2. 3. 4.

Super (Whole, Clean, Big & medium size, not artificial whole) Standard/KW1 (whole, clean, size : vary) Pieces (one kernel split into two or four pieces) Scorched (very small pieces)

Grade for International Cashew kernel and Indonesia national Market (SNI 01-2906-1992)

Standards on Cashew peeling process Process

• General application standards–FAO introduced HACCP (Hazard Assessment and Critical Control Points) is the international benchmark concerning cashewnut industry– Adopted by FDA • Environmental standards ISO14000 concerning pesticides, shell • Specialist standards and certifications for access to niche/premium markets–Fair trade, eg. Fair trade Labelling Organisations International–Organic standards and certification

Processes are

• Shelled dry cashewnut gathered • Boiling of cashewnut De-shelling cashew Heating & drying • Un-coating • Segregation or grading • Packaging • Marketing


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Regulations Cashew is not include as NTFPs based on Ministry of Forestry regulation No.35/2007, a more serious discussion must be conducted by involving various stakeholders in determining the pros and cons by including the cashew into NTFPs. Along the supply chain there is no regulation which both provide opportunities or creates obstacle to the Cashew Market System. While in farmer’s level, some government program in providing cashew seeds and nursery transplants is felt by the community. But there is only limited program in cashew processing and especially market access which are needed for further farmer development. In industry level, there is a growing concern in issuing out the regulation for cashew nut in shell export ban.

Actors The direct actor along the supply chains: 1. CASHEW FARMERS; they are farmers who have their own land, planting and harvesting cashew. At the three study sites all farmers do nothing but sell the raw cashew in Shells directly to local traders. In Jeneponto , cashew is a staple crop , it is grown on a large scale , while in the LoTeng and Jogja , cashew is grown only at the yard and moor edges only. 2. VILLAGE TRADERS; Represents merchants directly interact with farmers to buy cashe , and then sell them to merchants higher . Most traders do this without processing / grading at all only in Jogjakarta,the village merchant process cashew peeling. 3. SUB-DISTRICT TRADERS; getting cashew ( in shell) from village traders then sell them to wholesalers higher without doing any processing ( grading ) . Types of traders like this is found only in LoTeng . 4. PROCESSOR perform sorting cashew in shells, peeling, then do the sorting cashew kernel, and sell them to merchants higher. Processors are found in the three study sites with different levels in the value chain. 5. RAW MATERIAL EXPORTERS; Sell cashew in shells and kernel abroad 6. PROCESSOR AND FINISHED PRODUCT EXPORTER: cashew processing into finished products ready for use mostly in the form of household scale industries . The market is intended mostly for the domestic market and partly also in the international market


6   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

The Value Chains A. HKM Gunung Silano, Jeneponto

Village traders of some 24 people are rent takers in the value chain, without doing any processing and sorting / grading (minimal risk) is able to take the gross profit reached IDR. 5.000/kg with the cost only IDR 200/ kg. Cashew processing occurs at the provincial level (Makassar) and with peeling costs around IDR 5,000 / kg and the depreciation factor of 5:1. Cashew kernel then sorted for inter-island sale, or sold to South Sulawesi (including back to Jeneponto). Opportunities for Cashew Farmers in Jenoponto, both acts as processing at the district level or perform a role as village traders, with a very decent level of profit. Cashew production significantly more than 6,000 tons once the harvest is great potential possessed by farmer group.


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B. Community Forest in LoTeng

Rent makers occur at two levels; at the collector level I and II with values in rents for IDR. 4000-5000 per kg. Similar as in Jeneponto, interventions at the farmer level of both as upstream processing (peeler) and cashew in shell trader will be very strategic. That should be noted here that the rent takers are organized middlemen working for the benefit of local traders II by providing loan (bonded) to farmers. Upgrading for farmers or increase in value added activities can seem promising with such a large value of margin, but the issue of farmer’s cash needs must first be resolved.


8   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

C. Community Forest in Semin, Jogja

In Jogja processors has been around since the level directly above the farmers. Chain in jogja much more efficient than in Jeneponto or in LoTeng. Cashew number which is not too large also resulted in the level of competition being so high. The biggest challenge for farmers is how to improve their position (upgrading) along the value chain with these conditions. The thing that can be done is to build inclusive market through cooperation with third parties. Inclusive market for the product can be cashew nut in shells and kernel, or other derivative products, with a more defined market readiness; the price is more stable and could be a better price. It is the right time for farmers in Jogja, to focus on developing cashew product derivative from waste (cashew apple) with more serious efforts in processing, packaging and marketing. .


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Gap Analysis Aspect

Current Practice

Site

benchmark

Caused by

Low Productivity

367 kg/ha/year

A, B, C

2000 kg/ha/year (Vietnam)

Poor seed, no fertilizer input, no canopy management, postproductive (old) tree

Lack of Processing

Sell as Cashew in Shells

A, B, C

Process into cashew kernel, syrup, and others then sell with higher margin

Lack of knowledge and skill, lack of tool

No grading on Cashew in Shell

Sell cashew in Shells without grading

A, B, C

Indonesian Standard Lack of Knowledge, Poor market system on Cashew in Shell Grading system

Poor Processing

Cold Method with C CNSL Contamination

Heat method in Vietnam and India

Lack of appropriate technology

Abundant Cashew Waste (cashew apple)

No processing for cashew apple into derivative products. Cashew apple is a waste

A, B, C

Derivative product of cashew apple in India, Brazil

Lack of knowledge, skill and tool Lack of market readiness

Trapped by traders system

Ijon (cashew bought before harversting with low prices)

B

Ijon free market system in A and B

Fast cash need


10   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

Intervention Recommendation STRENGTHENING THE FARMER GROUP The research looked at the importance of strengthening farmers' organizations in order to improve their bargaining position against the market. Crucial is conducted in LoTeng since Ijon pattern in market system is still quite strong in this area. All three groups need to be strengthened, especially in the context of group management leads to processing and communal trade (both cashew nut shells and kernel). Strengthening of the cashew business management aspects of production, processing, marketing to financial records becomes important. Strengthening the organization for the formation of the ICS farmers group is also framed in the context of certified organic / fair trade / PGS possibilities in the future. BETTER FARMING Maintenance and rejuvenation of cashew plants needs to be done. Especially in Jeneponto where existing plants are reaching the age of 20 years. Although the age of cashew plants can reach 50 years and still in production, but is economically 30 years is the maximum age. In all three sites is necessary to conduct canopy management (pruning unproductive branches). Provision of production inputs (organic fertilizer) can be done on a regular basis. CASHEW PROCESSING Processing to cashew kernel is prospective, it can be done in Jeneponto or LoTeng where not many people doing it and the source of raw materials is still pretty much available. The cold method might be socially better for the early stages, as long as it pays attention to worker safety and hygiene. Increasing the farmer skill in terms of cashew peeling and providing simple tools become mandatory. Increased skill in terms of processing cashew apple can be done in in Jogja . Although advanced training and market analysis and linkage are still required. MARKETING Cut the chain to higher traders to sell cashew in shell in the first step can be done especially in Jeneponto. Communications to the above traders became important to get the order and price agreements. The increase in revenue between USD 2,000 -3000 / kg worthy enough to be able to make the group more passionate to work.

As for cashew kernel, greater opportunities can be obtained through trade in the domestic cashew kernel products. Domestic market prices are also approaching the world market price with the level of complexity on quality and grading that does not matter much.


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COFFEE Sites A. Village Forest in Labbo and Pattaneteang, Bantaeng District, South Sulawesi Farmers growing Arabica coffee in the village forests of some 116 people in Labbo on an area of 87 ha, and in Pattaneteang 98 people on 147 ha. Farmers also who grow coffee outside the village forest area , and there is no separation between the inside and outside forest of the coffee. In Village Forest is still found Dutch coffee tree but only for local consumption. Most farmers cultivate coffee beforehand and sold in the form of Parchment coffee. Some of them sell coffee directly to middlemen in the form of Cherry. In Bantaeng now also being tested to make coffee powder to be marketed to the local market.

B. Four LMDHs in Cipada (West Bandung District); Pusaka Mulya (Purwakarta District); Cileunyi Wetan, and Giri Mekar (Bandung District). Arabica coffee plants ( lini S and Kartika ) a staple crop for people in four villages which located in an altitude of around 1,200 m above sea level using PHBM scheme with Perhutani (Government forestry company). Coffee plants grown under pine stands with manageability average of 1 ha per family. In this region are still found (tillers) from the Dutch coffee tree, though not much. Most farmers sell their coffee in the form of Cherry. Most coffee processed using the Semi - dry method and sold to collectors who come to the village could be in the form of a Parchment Coffee and Green bean. Marketing is the major problem; the last Green bean prices on the local market was dropped from 27,000 / kg to Rp . 9,000 / kg only by collectors who come to the village . C. HKM Salut, Santong and Jenggala in North Lombok Coffee farmers in the districts of the region have coffee plants between 1.00 to 2.00 ha where the farmers averagely have 1000 to 1500 depending on the area of the coffee plant tree crops and plant spacing. Coffee marketing by farmers in North Lombok is sold not through processing. Once collected, the farmers sell directly to collectors in the form of Cherry. The sale price of coffee has an erratic due to erratic weather, each year continues to rise in the level of collectors, but at the farmer tends to decline

Grade, Standard and Regulation Local Grade on Parchment Coffee A. Super: from red cherry, whole and not black B. Standard : from green/yellow cherry, whole and not black C. Rejected : split and black bean

Local Grade on Green Bean A. Super : Whole and not Black B. Rejected : Split and black


12   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

The super then classified into its size: 1. Big> 6,5 mm 2. Medium5,5 mm<d<6,5mm 3. Small[< 5,5 mm

National Grade (SNI 01-2907-2008) and International Grade (ICO no.407) on Green Bean Coffee Quality is categorized as follows : • • • • • • •

Quality 1 Quality 2 Quality 3 Quality 4a Quality 4b Quality 5 Quality 6

with a total of defect value maximum 11 with a total of defect value maximum 12 to 25 with a total of defect value maximum 26 to 44 with a total of defect value maximum 45 to 60 with a total of defect value maximum 61 to 80 with a total of defect value maximum 81 to 150 with a total of defect value maximum 151 to 225

Note: Arabica coffee quality 4 is not divided into sub quality 4a and 4b. In general, Indonesian Arabica coffee is exported in quality 1, whereas Robusta coffee is exported in quality 4 (60%), quality 5 & 6 (30%), and quality 1 & 2 (10%).

Regulations Coffee is not include as NTFPs based on Ministry of Forestry regulation No.35/2007, a more serious discussion must be conducted by involving various stakeholders in determining the pros and cons by including the coffee into NTFPs. Along the supply chain there is no regulation which both provide opportunities or creates obstacle to the Coffee Market System. While in farmer’s level, some government program in providing coffee seeds and nursery transplants is felt by the community. Other program which is available and useful is the provision of coffee processing machinery. But there is lack of program in coffee plantation productivity.

Actors 1 . Coffee farmers Farm the coffee garden to produce coffee fruit, selling the coffee is usually in the form of Coffee Cherry (CC) . 2 . Farmers and Processors In addition to plant and produce coffee , there are also farmers who cultivate coffee and sell it in the form that has been processed ( primary ) , including DCC ( dried coffee cherries ) , Parchment Coffee (PC) , or coffee/green beans ( GB ) . 3 . Coffee collectors Collectors only collect the coffee fruit (CC) or primary processed coffee primary (DCC, PC or GB) without processing and selling them to merchants who earn higher margins 4 . Collectors and processors Collectors not only collected primary processed coffee but also process it into refined products (coffee powder) usually sold to local market and exporter GB


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5 . Collectors and exporters Exporter collects GB, some are collecting PC and perform sorting and processing into GB and sell both to local markets (industrial coffee) or export out of the country. 6 . Small processed coffee industry (Home Industry) Industries that fall within this group is the industry of domestic nature (home industry) where the workforce is a member of the family by involving one or several employees. Its products are sold in stalls or markets are nearby with brand name or without brand name. Industries that belong to this group are generally not listed in the Department of Industry and POM. Industries in this group spread across the coffee -producing areas. 7 . Middle-class processed coffee industry Coffee industries that belong to this group is the coffee processing industry that produces coffee powder or other processed products such as coffee drinks products and marketed in the subdistrict or district level. End products using simple packaging in general have gained permission from the Department of Industry as household products. 8 . Big class of processed coffee industry The coffee industry is an industry group that produces coffee powder, instant coffee or coffee mix and other processed products are marketed in a variety of areas within the country or exported . End products using advanced packaging and have gained numbers or labels Trademarks and other coffee label. 9 . Coffee-house and Coffee-shop Coffee-house and coffee-shop developed rapidly in Indonesia, using both mainstream and specialty coffee types.


14   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

A.

The Value Chains Village Forest in Labbo and Pattaneteang, Bantaeng District, South Sulawesi

Arabica coffee production in the village Forest of Bantaeng averagely of 4 tons of CC / ha / year, equivalent to about 600 kg of green bean. Farmers always try picking red cherry since 2010 is due to the many that have their own coffee processing equipment. For farmers who sell in the form of CC there was an agreement between farmers and collectors are facilitated by local governments to just sell red cherry only. The value chain shows that the processing occur in all level of actors. From farmers, traders level I , II and III perform the process of adding value . Most sales at farmer level is still done in the form of Coffee cherry (CC ) with the price of IDR 1,300 / kg . This a relatively low price rather than in other parts of Indonesia for Arabica. As for parchment coffee (PC) is valued around IDR 4.000/kg farmers who are also relatively low. Conversion of CC to PC ranges most 40 %, so the cost of raw materials for making PC requires about 2.5 kg of CC which is around IDR . 3,250 / kg. There is a margin of IDR 750/kg when selling coffee in PCC. Trader level I (village) buy CC from farmers (and PC) and then process it into PC and sell it for Rp.5.000/ kg. Profit rate IDR 1.000/kg and it is quite rational, because this traders are also conduct sorting. Trader level II ( District ) , process the PC into the Green Bean ( GC ) , perform sorting and sell it for IDR 20,000 ( class A ) and 17.000 ( Class B ) . When the conversion factor from PC to GC is 0.8 at this level then traders take significant margin. GB processor sells to traders (exporters) in Makassar. It is not known what price the Makasar traders when sold to the local market and export.


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B.

LMDHs in North Bandung

Coffee productivity in Bandung is very low is only about 50 kg/ ha per year GC. According to the farmer, it is only a quarter of his coffee plants produce. However, the results of interviews with farmers stated that one of his coffee trees can only produce 4 kg of red cherry annually. A very small amount of production. Similar to that occurring in Bantaeng , coffee value chain in Bandung also seen processing occurs at every level actors . Even in Bandung coffee farmers have been able to produce Green Coffee. However there are farmers who sell in the form of CC since it is relatively easy to sell because while there's no market guarantee for selling the coffee in the form of PC or GB. Principally by selling the coffee in the form of PC and GB will provide significant benefits to the farmers as long as the market receives it. The problem is that often the price is down so low. PC could fall from IDR 13,000 to IDR 3,000 / kg as well as the GC can go down to IDR 9.000 - 10.000 / kg. Besides, there are often no buyers coming to buy PC and GB, so that farmers will inevitably sell it as CC.


16   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

C.

HKM Salut, Santong and Jenggala in North Lombok

The farmers North Lombok sell all coffee in the form of CC to Level I Traders (village) or to Level II Collector. There is no record of how the productivity of coffee the region. The price for CC is IDR 4.000/kg. Traders in level I and II not conduct any processing at all (rent takers) with a margin of around IDR 500 - 1.000/ kg . Processing occurs at the level III traders and it is only limited to the drying, turning the CC into DCC (Dry Coffee Cherry). Conversion from CC to DCC is estimated at 0.5. This means that with a capital of IDR 9000-12000 will generate IDR 18,500 after sorting. Trader level IV as a liaison between the market and the production function as financiers for the operation of this supply system. This trader provide down payment to the farmers through the Traders level I , II , III so when the harvesting season, the farmer is obliged to sell his coffee to this network of traders.


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Gap Analysis

Aspect Low Productivity

Current Practice 800 kg/ha/year

Low quality on Coffee Cherry

Rough harvesting (Green, yellow and Red Cherry at once) Sell as CC

Lack of Processing

Trapped by traders system

Site

A, B, C

B, C

A, B, C

Ijon (coffee bought C before harvesting with low prices)

Benchmark 1500 kg /ha/year (Vietnam)

Caused by Poor seed, no fertilizer input, no canopy management, low farmer income Selective harvesting Poor market system in A (no different prices on red and green cherries) Process into Green Lack of knowledge and skill (C), lack Bean or Coffee of tool (C), Lack of Powder then sell with higher margin market access (A,B and C) Ijon free market Fast cash need system in A and B

Intervention Recommendation The low income of farmers cannot be separated from the role of other actors along the coffee supply chain. There is a loop that forces farmers should produce lower quality coffee, selling Coffee Cherry and get the money that is also low. Farmers' awareness of the importance of maintaining the quality of basic quality is also a problem. Quality improvement should be accompanied by changes in the pattern of the coffee value chain. If only the quality of the coffee at the farm level in the upgrade but still rely on the current supply line, it will not change anything. Opportunities of sustainable coffee or specialty coffee, natural Arabica and geographically identified coffee which is currently writhing have high demand in local and international markets may be an opportunity for farmers to improve their quality as well as earn more income from the coffee plantation. Bandung is a well known area as producer of "priangeur java coffee”, while there is an initiative in Bantaeng to branded the " Bawakaraeng Coffee ". Lombok should also conduct the same. Enter to specialty coffee market means necessary major changes from the production process, how to harvest, how to cultivate, how to storage, how to distribute, how to roast and how to brew the coffee. Managing relationship coffee means finding a partner who would work together producing quality coffee from upstream to downstream is a necessity because many of the things that are outside the domain of farmer work. Partners who want to work in a transparent manner with the farmers for both entry into the promising market of specialty coffee . For Bandung area, the Morning Glory Coffee was heartened to cooperate with coffee farmers to develop this market segment. In two other locations, need to explore similar possibilities. Bantaeng will be easier because they can join the initiative of Bawakaraeng .


18   Excerpt from CFE’s Coffee and Cashew Value Chain Analysis

Preparation at the farm level should be made to conduct a "revolution” in the management of coffee plantations in order to produce quality coffee , no chemicals , managed socially friendly and can be guaranteed its tracebility. Given rooted long tradition of coffee plantation at the three locations , the revolution cannot be done simultaneously . Need a demo plot that could produce coffee with the criteria of " specialty " , with a production that is not too big in advance . Not too big also means must be economical in production calculations. Production is limited to the language of the market means " limited edition " which could mean it will have an impact on prices , " limited edition " will be highly valued in the specialty coffee market . In general the proposed interventions are as follows: STRENGTHENING THE FARMER ORGANIZAITON AND QUALITY IMPROVEMENT

The research looked at the importance of strengthening farmers' organizations in order to improve their bargaining position against the market . Crucial conducted in Lombok since the bonded (ijon) pattern is still quite strong in this area. All three groups need to be strengthened in group management especially framed for the establishment of ' Internal Control System ' in order to improve the quality of coffee production and or the possibility of certification ; organic / fair trade / PGS in the future . BETTER PRODUCTION AND QUALITY IMPROVEMENT

Making demo plot for the improvement of coffee quality must be accompanied by its preparation especially when about to go into alternative markets (specialty). For the mainstream market is not too much that can be done when talking about quality. Mainstream market is not too concerned with quality. Increased productivity is the answer if they still want to maintain the mainstream market. Plantation treatment to increase the production quantity is a must, but with so small income of farmers, plantation treatment becomes difficult thing to do with the low market prices. Need to find alternative activities that can be conducted to be able to perform coffee plant treatments. Find government programs to subsidize plantation treatment can be a solution. PROCESSING

For specialty coffee, processing can be submitted to partner (expert) considering the processing of coffee can vary according to the characteristics of the coffee itself. When you have found the right formula of coffee processing, it can be transferred to farmers for processing the coffee to PC of GB. Let the farmers become “true farmers” , who can produce quality coffee cherry according to the criteria of specialty Farmers to mainstream markets already possess the ability to process the coffee to GB with quality needs to be tested further. Taking into local-level standards of quality coffee is very different from the national quality standard. Exception in Lombok, there is no record of how much coffee processing capability at the farmer level. The market needs to absorb the coffee in the form of DCC is not really hard to do, and can be done at the farmer level. MARKETING

When the option to maintain the existing market chains (by continuing to build the specialty coffee market through the demo plot) then communication with the higher trader can be done. For Bandung farmers, they can supply to GB traders by cutting off 2 actors. Similar in Bantaeng, by selling GB to the traders in Makasar, they have earning potential income up to 5 x folding. Communication with the higher traders is important. For Lombok, in principle the processing from CC to DCC (in accordance with the supplier specifications) can be conducted in farmer level, just need drying for 2 weeks and have the potential to increase income 2X. The problem is the farmers are already bonded by Ijon system applied by traders. Freeing farmers from bonded pattern is the first step that must be conducted before further intervention in coffee marketing.


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REFERENCES Anon. 1992, SNI 01-2906-1992 tentang Biji Mete Kupas (Cashew Kernels), Badan Standardisasi Nasional Anon. 2011, Statistik Perkebunan Indonesia, Dirjen Perkebunan, Kementrian Pertanian Anon. 2012a, Pedoman Teknis Pelaksanaan Indikasi Geografis tahun 2012, Direktorat Pengembangan Usaha dan Investasi, Dirjen Pengolahan dan Pemasaran Hasil Pertanian, Kementrian Pertanian Anon. 2012b, Roadmap Diversifikasi Pangan 2011-2015, Badan Ketahanan Pangan, Kementrian Pertanian RI Anon. 2012c, Fair Trade and Coffe, May 2012, Fair Trade Foundation Arifin and Ogtasari, 2011, The roles of Global Coffee Initiatives for The Eficiency of Coffee Value Chain in Indonesia, Presented at the 7th ASAE Conference, Meeting the Challenges Facing Asian Agriculture and Agricultural Economics toward a Sustainable Future on 13-15 October 2011 in Hanoi, Vietnam Donnet, Weatherspoon, and Hoen 2010, What Adds Value in Specialty Coffee? Managerial Implication from hedonic price analysis of Central and South American E-Auctions, Michigan State University Hall et.all, 2007, Benchmarking the Global Cashew Industry, DAI http://market.worldcashew.com, accessed during September 2013 Salam, Abdul and Peter, KV, 2010, Cashew; a Monograph, Studium Press PVt, Ltd Saragih, YP and Haryadi,Y 1994, “METE” Budidaya Jambu Mete dan Pengupasan Glondong, Penebar Swadaya, Jakarta USAID 2007, A Rapid Assessment of the Specialty Coffee Value Chain in Indonesia, USAID and COMPETE 2010, A regional Strategy for the Specialty Coffee Value Chain in Eastern Africa; a practical approach to driving greater value capture in the region, USAID, USA


FKKM (Indonesian Communication Forum on Community Forestry), is a multi-stakeholders organization that acts as a spur to the movement towards the perspective of community forestry in Indonesia. FKKM support processes of institutional development of community forestry through the dissemination of information, concept development, capacity building and policy formulation. FKKM open to all interested parties to participate in strengthening community forestry and forest policy reform in Indonesia. National Secretariat: Kusnoto Building 1st floor, Jl. Ir. H. Juanda No.18, Bogor 16002. Telp/Fax. (0251)831 0396 Email: seknas-fkkm@indo.id; Website: http://www.fkkm.org

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Excerpts from CFE's Coffee and Cashew Value Chain Analysis