Farmer organization as the backbone of agro-sustainability

PISAgro News, May 2017, Issue No 15, pp. 2-4

By Fitrian ArdiansyahIndonesia country director of IDH-Sustainable Trade Initiative

Original link: http://pisagro.org/images/uploadsfiles/FA-PISAGRO-Newsletter%2315-May’16.pdf

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IDH supported Nestle’s coffee farmers through Nescafe Better Farming Practices Program

Given the fact that most of the 40 million workers in the agriculture sector are small farmers, and they are facing with recurrent challenges of low levels of productivity and profitability due to a lack of access to market and financing, the notion of strengthening farmer organizations has become imperative.

Reaching sustainable agriculture goals, comprising improved productivity, protection of the surrounding ecosystems and ensured welfare of farmers, is challenging unless farmers’ capacity and knowledge on good agricultural practices are improved. Such improvement is difficult to be facilitated without strong farmer organizations.

IDH-Sustainable Trade Initiative, in collaboration with partners, believe that innovations in supply chain sustainability require professional farming practices. Our approaches and pilots have shown that such farming practices can only be applied if strong farmer organizations are at the heart of our sustainable business model and values.

In our coffee program, with PT Asal Jaya(1) in Malang for example, efforts to strengthen farmer organizations is considered as a key intervention. These efforts focus on providing institutional support that will lead to the development of Sustainable Agriculture Business Cluster (SABC).

When different farmer organizations are aggregated further into an SABC, they will be perceived to be having an economic of scale. Such scale would help them access finance from financial institutions (FIs). They can also easily sell coffee bean in a bulk way with a relatively better price and as trade-off, receive good agriculture practices (GAPs) and good management practices (GMPs) including accounting system literacy from the company and organizations like IDH.

This type of aggregated farmer organizations would provide a greater opportunity for farmers to get support from off-takers or other organizations to secure legal entity over their lands. Off-takers would see an increased credibility of such organizations and reduced risks in investing in these farmers. As many have known, without legal entity, farmers would have difficulty in getting a deal or financial support from banks.

The presence of good farmer organizations with the support of off-takers and other organizations can help farmers gradually demonstrate that they can improve or have improved their practices shown by results over a particular period. In a good farmer organization, documentation of farming process and accounting system is usually the norm.

Strengthening farmer organizations, nevertheless, is not an easy task. Often farmers are unwilling to be grouped in an organization such as a cooperative. Innovation or slightly different approach is sometime required.

As an example, in our palm oil program in North Sumatra, working with a state-owned company(2), a different model for farmer organizations has been introduced to support farmers to achieve Roundtable on Sustainable Palm Oil (RSPO) certification. The difference is that the organizations still consist of farmer groups (kelompok petani) but managed by traders.

This slightly different approach is chosen due to the fact that traders have many farmers under their wings (approximately several hundreds) and this has been perceived as a way to scale up the coverage of farmers in a sustainable supply chain of palm oil. In addition, with traders’ involvement and their staff in supporting farmers, they can also be seen as some forms of extension services, not only connecting farmers to the supply chain but also providing concrete support in forms of GAPs.

A similar approach has been done with Asian Agri(3) in Jambi, in which farmer organizations are supported through traders. In this case, traders are trained so that they can further help and reach out farmers with GAPs and GMPs. With the increased capacity of traders, they also are gradually equipped with good capacity in taking bigger responsibility in this sustainable supply chain.

A traditional type of farmer organizations such as cooperatives (e.g. Koperasi Unit Desa or KUD), nevertheless, is still crucial since KUD or a similar organization exist in almost every kabupaten (district) in Indonesia. For this reason, IDH also works with different corporate partners to show that strengthening KUD can bring about better benefit for farmers. The recent initiative in South Sumatra with IndoAgri London Sumatra shows that KUD can also be a good platform for palm oil farmers to achieve RSPO certification.

Farmer organizations and aggregation or clustering, to a large extent, can help farmers to increase their economic scale. Such “clustering”, however, needs to be done with tailor-made services, so that choices are also created for farmers since different types of farmers may require a different type of approaches and clusters.

One key lesson-learned in establishing such cluster is, at least, a principle of open and transparent farmer organizations should be upheld. This is critical so small farmers will see such organizations as a fair and just platform and can support their agenda of improved productivity and sustainability – not only the agenda of off-takers or traders.

The presence of strong and credible farmer organizations will not only provide a vehicle for improved productivity for farmers in a relatively scalable level, but also can be used to support farmers in promoting the agenda of environmental protection in a significant way.

Encroachment and conversion of forests and peat – and cultivating using fires – have been perceived as challenging issues when it comes to small farmers and deforestation and environmental protection. A good farmer organization can, to some extent, be an umbrella that develop a treaty or agreement for conservation of the remaining or surrounding forest and peat, equipped further with a good plan, investment and monitoring system.

Examples of fire-free villages – a joint-work between companies and villages to address forest and land fires across Indonesia – can be used to show that with an organization of villagers or farmers, actions to address (prevent or mitigate) fires are much easier to apply. Without clear farmer or villager organizations, a company, donor agency or government would have difficulty in pushing the agenda of fire prevention or other environmental protection.

In brief, the presence of strong, credible and accountable farmer organizations has become a necessity in sustainable agriculture. Such organizations would help farmers to develop a good business case at farmer level, improved provision of service delivery or extension services, and increase access to adequate and sufficient finance.

The immediate next step, as often the case, is to replicate, magnify and scale up models of good farmer organizations. PISAgro and its members, in this case, have the opportunity to transform such models into larger applicable platforms across Indonesia and in variety of commodities.

Endnote:

  1. The IDH’s work with PT Asal Jaya is entitled The Ecosystem Chain Scale in a Sustainable Coffee Smallholder Business in East Java. The period of work is between January 2016 to December 2020, targeting 15,000 farmers. Currently, around 3,400 farmers are part of the program. The focus of the program is to support farmer organizations, GAP and GMP practices, and farmers driven research.
  2. The work is with PTPN 3 with approximately 600 farmers to be supported but 59 will be certified soon under RSPO.
  3. The initial target of the work with Asian Agri is to support 10,000 farmers and now 6,000 farmers (around 30,000 ha) are part of the program. The program focuses interventions that can be categorized as “beyond certification” approach (not only aiming to achieve certification).
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Feeding nation while protecting environment

The Jakarta Post, Thursday, 5 January 2017,

By Fitrian ArdiansyahIndonesia country director of IDH-Sustainable Trade Initiative

Original link: http://www.thejakartapost.com/academia/2017/01/05/feeding-nation-while-protecting-environment.html

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Farmer works cultivating rice in the field (Antara/Berto, as shown in the Jakarta Post)

The year 2016 has just ended, but a question remains. Will countries, including Indonesia, be able to supply food for their growing populations, taking into account the constraints of our limited natural resources?

The global demand for food, fiber and fuel is on the rise. This demand needs to be matched while we also need to ensure that our resources, landscape and ecosystems will be sustainably managed for the long term. Several projections, including from the Directorate General of Food Crops in 2013, for example, reveal that Indonesia’s rice consumption would exceed its production starting in 2020, taking into account land availability and climate change.

Threats to food security will likely increase as the population continues to soar and economic activities develop, while land availability becomes more limited. Hence, improved productivity and technological developments are necessary.

Globally traded commodities produced in Indonesia, namely palm oil, coffee and cocoa, face similar challenges.

Palm oil is one of the most efficient crops but the productivity level in Indonesia, especially on small farmers’ lands, is still relatively low at 3.2 tons of crude palm oil (CPO) per hectare — the global average is between 4 and 5 tons.

If productivity and practices are not improved, the increased global demand for palm oil could lead to expansion and exploitation of the remaining forests and peat lands and potentially to forest and land fires.

However, a decree for conservation has been adopted by the government, which is in tandem with global markets that increasingly support sustainable products.

Land cultivated for palm oil needs replanting. In South Sumatra alone, between 2016 and 2021, replanting needs are estimated to be at least 270,000 hectares.

The investment required for oil palm replanting could reach US$5,000 per ha. A new financial plan is needed to support replanting, especially if it involves small farmers.

Without adequate finances and technical support for replanting, growers and farmers could opt to expand their palm oil cultivation to high risk areas, such as forests and peat lands.

Concerning cocoa and coffee, low productivity is a huge challenge as land is often managed and cultivated by small farmers.

Low productivity has trapped small farmers in a cycle of poverty and a cycle of debt. The inability of small farmers to access finances and sound agriculture practices has led to reduced quality of input which in turn produces a low level of output (quantity and quality).

Without a provision of better input, farmers will have difficulty meeting global standards — hence, their struggle to break into the global market.

Funding for farmers is even more challenging because financial institutions perceive giving loans to small farmers as a high risk.

This perception relates to the unclear land status of farmers, low capability and accountability of farmer organizations and existing debt by farmers.

Innovation could help farmers gain agriculture knowledge, input material, improve farmer organizations and reduce investment risks. This is key to producing more with less — more productivity with less environmental impact.

Models for this have been tested across the globe, including in Indonesia.

A good model usually consists of a supply chain company committed as a long-term off-taker of commodities supplied by farmers, a farmer organization or cooperative, a bank that provides a soft-loan for a cooperative with a grace period taking into account the harvesting cycle, a provider of seeds and input materials and a donor or private foundation that provides technical support for farmers.

Such models have been applied in Aceh for aquaculture, Riau, Jambi and South Sumatra for palm oil, Lampung for coffee and Sulawesi for cocoa.

Individual corporations, organizations and banks or multi-stakeholders’ platforms, such as Partnership for Indonesia Sustainable Agriculture (PISAgro), are examining these models in collaboration with a number of cooperatives and government agencies.

A model in just one supply chain may not be enough as there are many challenges and issues shared among different actors in different supply chains.

These shared issues include land legality, water and landscape management, fire prevention and energy provision and require a holistic approach beyond just one farm or supply chain.

In Musi Banyuasin district, South Sumatra, a supply shed approach led by its regent is being tested to support the development of integrated sustainable commodities, such as palm oil, rice, rubber and protecting forests and peat lands.

This approach has gathered the support of local government agencies, mills and local and international organizations to collaboratively help identify and map independent small farmers and their challenges.

A combination of segregated supply chain and integrated supply shed approaches with clear financial support and sound agriculture practices is one of the most effective ways to develop commodities while protecting our fragile ecosystem.

The bold part of this journey is to build on these approaches to increase investment, develop commodity production and protect larger areas.

It is time for Indonesia to demonstrate its ability to “produce more with less”.

Developing sustainable cocoa

By Fitrian Ardiansyah, COKELAT magazine, 12th Edition, January – May 2016, pp. 44-46. For the complete pdf version of the magazine (4MB), please click: post-LKipG-majalah-cokelat-2016-08-05-10-54-45-ID

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IN recent years, the cocoa sector in the world and also in Indonesia, has been working to be transformed into a more sustainable, environmental, and socially friendly while continuing to improve productivity. The biggest challenge in building a more sustainable cocoa sector is developing business models at the farmer level, which does not only focus on improving productivity, but also encourage an entrepreneurial farmer and cooperative management as well include elements of environmental protection.

With cocoa production level at more less 350,000 tons per year (2014/2015), Indonesia currently ranks third in the world. Cocoa is one of the most important export commodity for Indonesia. Commodities are also important to the rural communities because the majority of the production of cocoa is produced by small-scale farmers. Currently, Indonesia has at least 1.5 million hectares of cocoa plantation, especially in Sulawesi, North Sumatra, West Java, Papua, and East Kalimantan. With so many cocoa production produced by small-scale farmers, cocoa sustainability aspect can not be achieved without the involvement of them.

In order to ensure success in establishing a sustainable cocoa sector, there should be additional efforts to encourage the option in developing sustainable livelihood for the communities where the cocoa farmers live, and to help farmers in increasing entrepreneurial capacity. Without the innovations that help the capacity of farmers (especially in the context of increased productivity, better land management, and funding for farmers organizations or cooperatives) it will be difficult to ensure the sustainability of the cocoa sector.

In addition, due to the situation of export markets today which has been increasingly asking for a commodity to be produced with more attention to environmental and social protection, the development of sustainable cocoa in Indonesia should include aspects of local community development, women empowerment, poverty and malnutrition alleviation, and land management that does not cause fires, environmental degradation, and deforestation. In the realization of a sustainable cocoa sector, the development of a model or proof-of-concepts initiated jointly by industries, nonprofit organizations, farmers, and government institutions becomes important. Due to the model is expected to be replicated or developed on a broader scale to ensure coverage for the cocoa sector sustainable concept adopted by many parties.

Innovations in the land productivity improvement and farmers financing

Compared to other commodities, one of the challenges to achieve sustainable cocoa sector is low productivity of the cocoa crops, particularly production of farmers with unit of per hectare. Due to this, a large number of cocoa farmers trapped in a cycle of poverty that causes them to be significantly indebted continuous and heavily. Low input which then produces a low output (quantity and quality), chronically detain the growth of cocoa commodity. The scheme to help farmers in the provision of better inputs, still do not have the same standards.

Meanwhile, funding for the farmers in managing land better is often not available on the grounds because the bank institutions are still assuming that it is a high risk to assist farmers in managing their cocoa farming, so farmers still depend on informal donors with only provide limited funds and in a short time, and of course, with high interest rates. This condition is exacerbated later by the aging plants, and unclear form of funding scheme for rejuvenation and rehabilitation.

Even so, there are actually several initiatives that have been developed in several places to overcome the cycle of low input-low output. For example, the support of a company that acts as a partner for farmers who could then guarantee a low price in the purchase of fertilizers that help farmers to ensure the availability input of fertilization. The development of certification and traceability (tracking in the supply chain) also helps to strengthen the relationship between companies/buyers and farmers, and it can help in identifying the components at the farm level that needs to be strengthened, including in terms of agricultural input. Funding schemes and risk sharing in the provision of fertilizers and truck rental, can also be supported as an innovation that will help input certainty. In addition, the electronic banking systems (mobile banking) also continues to conceive as an innovation that will put farmers as actors who can be trusted to get help in the supply of inputs.

In reaching a broader scale of the innovations that have been made, the cooperation between the various stakeholders (local authorities, local banks, and international parties) becomes important. This cooperation is required mainly to generate various funding schemes with medium or long term that encourage the availability of funding support in the provision of inputs to farmers, land ownership or land rental, and financing of other operations. In succeeding this approach, the formation and the effective organization of farmers and cooperatives is crucial. In the absence of effective former organizations or cooperatives, it will be difficult for banks to approve funding due to a risk to the financing scheme is higher if distributed to individual farmers.

In order to help farmers and their organizations, or cooperatives, to be more bankable, mentoring and empowerment as well as efforts to increase their capacity are necessity. Farmers and their organizations are expected to be introduced with the modules that will help them to manage their finances more efficient and reliably. Obviously, this can only be achieved if there are advocacy organizations at the local level, in cooperation with local banks or financial institutions, which is experienced in financial management in the region or village. Such cooperation can foster trust between the institutions and farmers can ask for facilitation and improve themselves and the institution. In turn, when farmers and their organizations can better manage their finances, farmers’ bargaining position with the banks become bigger and stronger.

Innovations in the protection and fulfillment of social rights

One aspect that is important in the development of sustainable cocoa sector is social protection or the fulfillment of the rights of society. For Indonesia, the components that need to be considered among them is the empowerment of women, improved nutrition, and public access to activities in the supply chain that have been done mostly by the industries. The context of women empowerment is strategic because cocoa farming is perceived as a sector dominated by men. This has hampered women’s access to land and resource use associated with the cultivation of land, and of course funding. Therefore, various innovations needed to provide an opportunity for women to be involved. For example, in the training provided, the portion of women’s involvement will be increased, or the percentage of agricultural credit for women farmers. Or other things that can be tried to increase the capacity of women is to engage them in entrepreneurial endeavors in cocoa sector, to become a leader in the farmers organization and cooperatives.

In the context of malnutrition, there are some breakthroughs that need to be done. Cases of child malnutrition, physical growth interferences, and poor sanitation can be overcome by combining the productivity of farmers’ program with an increased intake of nutrition for families and children. One model that could be applied is to introduce the cultivation of plants that are useful for the improvement of nutrition, nutrition education, and changes in dietary components for farmers, and better family financial. Better family financial management certainly will help farmers to set aside some funds to meet nutrient intake for the family.

Innovations in better land management and prevention of deforestation

Although it is not like any other commodity that is more expansive, preventive aspects of environmental degradation, including the prevention of deforestation in the cocoa sector has become an integral part of market request. Prevention of environmental degradation and deforestation involving various parties and interests, especially in the management of space and land, which is quite complex. Most of the challenge is also associated with good or poor governance where the cocoa is developed.

In other place, cocoa could also be considered as a buffer, which in turn can protect the forest for looted or converted into other commodities. However, the development of cocoa in the buffer zone should be productive and add value to cocoa farmers to keep them from extending coverage into forest or replace cocoa plants into other plants that are more expansive.

Development of a model that balances between increasing productivity while protecting the forest (production-protection) is relevant to the condition of Indonesia that still has beautiful natural forest. Productive cocoa farmers who care to environment, in turn, can be a very effective forest guards. If the model production-protection developed with other concepts, a kind of agroforestry, it could be interesting for non-conventional investors. Such investors can provide funding for their carbon uptake or protection of biodiversity, or value-added. It could be categorized as an additional income for farmers.

This kind of model can be effectively developed when planned at a landscape scale, which would require the involvement of local governments. The involvement of stakeholders from other commodities also become important for better objectives of landscape management should be supported by all business actors, farmers, and governments. The landscape approach can also provide economic stability to the region because it does not only depend on a single commodity, as well multi-commodity development synergies can be achieved.

Balance in sustainability

In the development of sustainable cocoa sector, it is clear that the aspect of increasing productivity along with social and environmental protection should be encouraged in a balanced manner. The involvement of relevant stakeholders is also important because it can help ensure the realization of a sustainable cocoa in the field. Partnership in developing the model needs to be improved further in a higher or larger scale, such as at the landscape level. Indonesia, as the third largest cocoa producer country in the world, has the opportunity to transform the cocoa sector, which of course can only be done if the innovations and models mentioned above can be developed and implemented in the most important centers of cocoa across the country.

 

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The writer is Indonesia Country Director at IDH-The Sustainable Trade Initiative. Email: Ardiansyah@idhsustainabletrade.com