In Indonesia the demand for rice is increasingly growing, while the production area is decreasing. With 240 million people and a population growth rate of 1.7%, food security and agricultural development are main issues for the country. Shortage of rice drives the prices up in the market. Many Indonesian farmers produce rice of low quality. Free trade in the ASEAN region is threatening local rice farmers, since rice from e.g. Thailand and Vietnam is often of better quality for a lower price. Their position in the supply chain is weak, and therefore they face difficulties to get into new markets. The existing business organisations of rice farmers, are not functioning well, since they lack financial and marketing capabilities. Moreover, women’s work in harvesting and post-harvesting is all heavy hand-labour and largely unpaid.
In order to address these challenges in Central Java, a number of organisations have joined hands. In a partnership they will motivate, train and coach 10,000 farmers in Central Java to produce high premium rice for the Indonesian market, use certified seeds and organic fertilizers and pesticides. PPPLab’s Marleen Brouwer spoke with Priyo Budi Asmoro (project manager) of ICCO Cooperation South East Asia (ICCO Cooperation SEA) about this PPP which received funding under the second call of FDOV.
Can you tell us a bit more about rice production in Central Java?
In Indonesia rice consumption continues to increase. For over 90% of our population it is the main food source. Rice accounts for 50% of the caloric and protein needs for almost 50% of the population. Rice production is a source of income for more than 14 million households. Central Java is one of Indonesia’s biggest rice production areas; the province is responsible for 15-17% of the national rice production. However, the rice farmers in Central Java have a small amount of land (approximately 0,35 hectares per farmer). This causes problems in terms of scalability, which might lead to a shortage of rice in our country. Moreover, the local food security of Central Java’s rural farmers might come at stake.
In the past, the high premium rice which was locally produced, was eaten by the farmers themselves. What was left was stored for later use. Farmers were only selling a relative small proportion of their harvests. But there has been a number of developments which are changing this picture. The size of land per farmer is going down. Also the role of farmers is smaller than before since they are obliged to sell the paddy rice on the field to middle men, because they have no cash or access to credit to hire harvesting teams. As such middle men harvest the rice by using their own hired labourers. Moreover, we have seen that farmers sell their premium value rice in order to make some money for other expenses, such as inputs, fertilizers and school fees. A part of this money goes to buying low quality, less nutritious rice which they consume within the household. Furthermore, it is more difficult for female farmers to use the new farm tools which are heavy.
What will your main activities be to address these challenges?
Our PPP project will be targeting 10,000 farmers in 29 districts in Central Java. These farmers need to become better organised, because in ‘kelompoks’ (farmers groups) they will have a stronger negotiation position. It is not our purpose to take all middle men out of the chain, but at least we would like to see the farmer’s power improved. We aim to transform the kelompoks into farmer enterprises called Lembaga Distribusi Pangan Masyarakat (LDPMs). Literally this means: ‘community food distribution institutions’, who belong to groups of kelompoks. At the moment the structure of the LPDMs is not very strong, and they are not adopting a business-to-business relationship among their stakeholders in the value chain. To strengthen the position of the farmers in the chain, the partnership will professionalize approximately 50 LDPMs into strong business organisations. For as long as the project takes place, the LDPMs will sell their rice to our PPP partner Sebelas Maret Berdikari (SMB). We hope this relationship will continue after the PPP ends.
Also the position of women in the LDPMs will be strengthened, because they will become the owner of harvest and post-harvesting equipment. They will also be trained in management skills, and how to increase their income. The project’s internal control system will help us to see how much high premium rice the farmers need for their families, and how much the farmers can actually sell to keep their situation food and nutrition secure.
Our partner Bank Jateng will develop new financial services and products. LDPMs will be trained in financial management and accountability. When the project starts, LDPMs will not yet have the capacities to manage credits from the bank. Therefore, in the first production cycle, the current middle men at village level will be involved to buy rice grains from the farmers groups. In the second production cycle, the project will start connecting the LDPMs with Bank Jateng.
The market for the high premium rice is increasing annually and the benefit for farmers has proven to be much higher. Productivity can and has to go up. The project will stimulate this by trainings in Good Agricultural Practices (GAP), a reduction in the use of chemical fertilizers and an increase in the use of organic fertilizers. Moreover, we will stimulate the use of better seeds. The trainings will be done by the consortium members VECO (coordinating the training programme), UNS (on use of fertilizer) and SMB (on use of seeds). Als government extension workers will be involved in the demonstration plots.
All these interventions will help farmers to lower their costs while at the same time increasing their production. We aim for a total additional production of 2,453 tons of rice grain per year (+20%), and the income rise for male and female farmers will be on average 76 Euro (+42%) per year. The income of female labourers in threshing will rise 30%.
How will you train the farmers?
The project is not targeting all 10,000 farmers at once, but we will train 400 farmers and those will each train 25 other farmers. There are some requirements to become part of that group of 400 farmers, since 25% has to be female, all farmers should be small-scale landowners, and they should demonstrate a strong willingness to join the trainings. We will start this November with the trainings, so 24 farmers will be trained before the first planting season in December. For the coming years, all trainings will be in line with planting seasons (three times a year).
Who are the partners in this PPP?
The partners in this PPP are the local Indonesian foundation Yayasan Jateng Berdikari (YJB), the local Bank Jateng, two private sector actors Unggul Niaga Selaras (UNS; provider of fertilizers) and Sebelas Maret Berdikari (SMB; miller and provider of seeds), the Food Security Board of the government of Central Java, the Belgian ngo VECO, and the Dutch ngo ICCO Cooperation SEA. Actually the PPP builds on the success by VECO, which supported the cooperatives in Boyolali to develop a business plan, to get access to the premium rice market, and to strengthen their organizational capacity. VECO has developed, tested and improved the intervention strategy, methods and activities (such as the Internal Control System, which is a monitoring record to trace all activities and treatment in the rice fields), the training programme for the LDMPs, marketing, etc.
What is special about this PPP in this particular area?
It is quite unique that private and public entities work together closely around this topic. It is not always easy to involve the government, because things might be more bureaucratic and slow. One local private partner even left the partnership for the fact that the government was going to join! But we see that government agencies are important to give support to the companies and to the bank, and also to deliver good extension staff.
ICCO Cooperation SEA is responsible for linking all the partners, and for strengthening the LDPMs. We aim to involve young farmers as well, in order to address the challenge that youth is not interested anymore in working in the rice industry. At least one member of every LDPM should be young (under 35 years old). We see opportunities here, since young farmers are more interested to use their own communication gadgets and means (sms, Whatsapp, etc) for agricultural purposes. In this way we can increase the transparency and visibility of our project.
Interested in more details about this PPP? The project profile about the partnership can be found here.