Premium quality rice for urban consumers in Indonesia and beyond

Premium quality rice for urban consumers in Indonesia and beyond

The booming demand for healthy and organic rice is an excellent opportunity for Javanese rice farmers.

In Indonesia, a meal without rice is not really a meal. Rice is a key ingredient of breakfast, lunch, dinner and snacks. No wonder the average Indonesian consumes about 114 kilograms of rice per year! In case you are wondering: that is quite a lot. The average Asian eats about 93 kilograms of rice a year; the average West-African 80 kilograms; the average Latin-American 37; and the average North-European only 4.

Rice does not only hold a central place in the Indonesian kitchen and culture. It is also a crucial part of the country’s economy. Indonesia is the third-largest rice producing country, right after China and India. Up to 90% of Indonesia’s rice is produced by small-scale farmers. These farmers usually produce low quality rice. Premium quality rice production is largely controlled by large companies, as the capacity and infrastructure of small and medium producers to produce quality rice is limited. However, it is precisely the production of premium rice that could offer better incomes to small-scale rice farmers, as the demand for premium quality rice is booming.

This is not only the case in export markets, but also in local markets. Soon, more than half of Indonesia’s population will belong to the middle class. These new middle-class consumers are no longer satisfied with low or medium quality rice. They are happy to pay up to three times more for premium quality rice that is certified “healthy” (i.e. produced with organic pesticides and a limited amount of chemical fertiliser) or “organic”. Market research confirms this: the sale of premium organic rice grows by 20-25% per year in Indonesia, while the sale of conventional rice grows only by 5% per year.

Indonesia’s main rice producing island is Java, known for its green sawahs (rice fields) surrounded by volcanoes. But Java is also the world’s most populous islands: mega-city Jakarta and urban centres as Solo, Yogyakarta and Bandung are home to 57% of Indonesia’s population. Making sure all these urban consumers have access to healthy food, rice in particular, is a big challenge for local governments and offers opportunities to the island’s many rice farmers.

Since 2014, VECO Indonesia has been working with three associations of small-scale rice farmers: APOB and APPOLI in Central Java’s Boyolali district and SIMPATIK in West Java’s Tasikmalaya district. Together, they represent nearly 10,000 male and female rice farmers. APOB, APPOLI and SIMPATIK, with the support of VECO Indonesia, have been guiding their members to produce high-quality healthy and organic rice in a sustainable manner since 2014; and have in the meanwhile achieved the necessary certificates to sell their rice on national and international markets. Important challenges remain to be tackled, however, to make sure that every rice farmer can earn a living wage from premium quality healthy or organic rice production.

Challenges

  • To have their premium quality rice certified as “healthy” or organic, the associations must have an Internal Control System (ICS) in place which guarantees that all rice is produced according to the desired standards. Currently, not all farmer groups belonging to these cooperatives are using ICS – in the case of APOB, for instance, only 11 out of 26 farmer groups do so. Making sure that every farmer produces according to the same standard is challenging and time-consuming, but crucial. The associations can only collectively sell the rice that is certified healthy or organic. The farmers that are not yet able to adhere to the ICS, have to sell their rice independently, at lower prices.

Mr. Murbowo, Head of APOB: “My dream is that all our members produce certified healthy or organic rice, so that APOB will be able to collectively sell all our members’ rice and can make sure that they all receive a fair price.”

  • Farmers have a hard time to find good-quality local seeds and organic fertilisers.
  • Climate change phenomena like El Niño negatively affect the amount of rice produced and its quality. Droughts have in the past years led to a lack of water and reduced production, and unexpected heavy rainfall affects the rice’s quality.
  • All three organisations do their own processing, but specific capacities and techniques are required to select, clean and process premium quality rice.
  • The farmer organisations still have work to do to manage their businesses sustainably: women and youth engagement is limited; their bookkeeping, marketing, and negotiating skills leave much to be desired; and they do not have the necessary skills yet to negotiate fair contracts with buyers or to access financial services.
  • Indonesian national rice policies are not adapted to the new reality in which consumers are willing to pay more for healthy or organic premium quality rice. Currently, BULOG, the Indonesian National Logistical Supply Organisation decides on the producer and market price for rice. This price is set very low, and the government does not distinguish between low quality and premium quality rice. Farmers that produce premium quality rice depend on the goodwill of buyers to receive an above market-rate income. For this to change, the Indonesian government would have to set different prices for different types of rice. The ASEAN Economic Community’s guidelines already underline the need for such a multi-quality based rice pricing system.

Our strategies

  • Rikolto facilitates trainings on Internal Control Systems to the farmer organisations’ boards and organises capacity building for members of the organisations.
  • We support the rice farmer organisations in local rice seed breeding according to market requirements and in the production of organic fertilisers. These local seeds and organic fertilisers are sold at discount prices to members, and at market-rate prices to other rice farmers.
  • Rikolto further introduces the System of Rice Intensification (SRI) model to the organisations and their farmer members, to deal with continued droughts. SRI is an organic system which implies giving rice plants more space to grow, which reduces water usage by 50% and produces drastic increases in rice production.
  • Rikolto facilitates trainings on bookkeeping of stocks, milling, processing and warehousing for premium-quality rice.
  • We enable rice farmer organisations to manage their businesses professionally and sustainably. This means, amongst other things:
  1. Supporting them to create more space for engagement of women and youth, through internal policies promoting their participation and through popular events such as summer camps for the district’s youngsters;
  2. Providing training on (online) marketing of their rice, business and organisational management, network and decision making;
  3. Organising capacity building activities on access to finance and supporting the development of business plans to meet the requirements of financial service providers;
  4. Facilitating dialogues and linkages between the rice producer organisations and buyers, both nationally and internationally, to develop business opportunities that benefit small-scale farmers.
  • Rikolto guides the cities of Solo and Bandung in the development of policies that support the production of healthy food for their inhabitants. City policies can offer opportunities for farmers and push food production and consumption towards more sustainability. We also partner with Gita Pertiwi, YLKI and PIB to improve consumers’ awareness of the importance of a healthy lifestyle and of consuming healthy food, and research alternative marketing strategies such as to school canteens, catering businesses, restaurants, hospitals, etc. to provide healthy food for consumers in both cities. The lessons we learn are shared in our international Food Smart City cluster.
  • Rikolto works towards scaling up the lessons learned in its work with these farmer organisations, to achieve policy changes that benefit smallholder farmers, that stimulate sustainable production and that motivate younger generations to partake in healthy food production and consumption. We do so at:
  1. the local level, through our work with cities, districts and provinces;
  2. the national level, in collaboration with partners such as API, the National Indonesian Farmers’ Association. With API, VECO lobbies with the government and other stakeholders for a multi-quality based rice pricing system which would lead to higher incomes for rice farmers producing premium quality rice;
  3. the international rice sector, through our participation in the Sustainable Rice Platform, an international multi-stakeholder platform.

Rikolto supports two rice cooperatives in Central Java (Boyolali district) and one cooperative in West Java (Tasikmalaya district).

  • APOB (Asosiasi Petani Organik Boyolali, or Organic Farmer Association of Boyolali) currently consists of 26 farmer groups, and a total of 1,848 farmers; of which 1,634 are men, 214 are women and 90 are younger than 30 years old.
  • APPOLI (Aliansi Petani Padi Organik Boyolali, or Organic Rice Farmer Alliance of Boyolali) consists of 81 farmer groups with in total 4,426 farmers; 3,708 men and 718 women.
  • SIMPATIK (Sistem Pangan Organik Tasikmalaya, or The Organic System of Tasikmalaya) has 2,854 members, 2,445 men and 409 women.

What did we achieve so far?

  • The number of rice farmers in each association increased significantly. As long as farmers are not certified healthy or organic and do not use ICS, their rice is not collectively marketed by the associations. But even if farmers still have to market their own rice, being a member brings them the advantage of having access to trainings.
  • After a period of significant income increase, the average income (in Indonesian Rupiah, per hectare) decreased in Boyolali and Tasikmalaya due to the effects of climate change: most rice farmers could not plant in the last planting season 2015 (harvested in early 2016) because of the long drought, which led to a decrease in productivity.
  • APPOLI and SIMPATIK both obtained international certificates for organic rice and built a very successful relationship with PT. Bloom Agro, selling different types of organic rice to export markets under the ‘Sunria Brand’. Biofresh markets the Sunria rice in Belgium.
  • APOB has successfully implemented internal control systems in 11 of its 26 farmer groups. In 2016, they obtained their first domestic organic rice certificate, now selling organic rice to the buyer HealthyChoice in Jakarta and to markets in nearby Solo and Yogyakarta.
  • Any “left-over” rice is being processed into rice powder for baby food and sold to local markets.
  • APOB, APPOLI and SIMPATIK have held regular youth camps in 2015 and 2016; each association now employs some of these young trainees as agro-technical assistants.
  • • APOB, APPOLI and SIMPATIK’s business and bookkeeping capacities have significantly improved.

When I visited APPOLI in 2013, I was warmly welcomed by a group of farmers. At that time, they had no clear vision on how to conquer the rice market, they did not have a proper organisational structure and management in place, the presentations were not well prepared, etc. When I came back in February 2018 I was truly impressed. Now APPOLI is a well organised farmer organisation with good leadership, and they have a professional business entity. The farmers are capable of meeting high quality standards, and now export even part of their rice to Europe, US and Australia.

Roos Peirsegaele Strategic advisor, International Office

Expected results in the short term?

  • APOB, APPOLI and SIMPATIK successfully guide their members to use internal control systems (ICS) and implement SRI.
  • More young farmers are involved in the daily practices of the farmer organisations and become staff and governing members.
  • The three farmer organisations obtain credit from financial institutions to support their business.
  • APOB, APPOLI and SIMPATIK have an integrated business of seeds and organic fertilisers to support the needs of farmer members and non-members of their organisations.
  • The organisations supply the rice market with premium rice that meet the requirements of the buyers, resulting in long term business contracts with these buyers.
  • Farmer organisations sell their organic/healthy rice directly to consumers with their own brand.
  • The government consistently implements a multi-quality pricing policy for rice, distinguishing between low, medium, and premium qualities of rice.
  • The City Governments of Solo and Bandung stipulate policies that favour sustainable production and consumption.

We will always sell to other buyers, exporters and local companies alike, but our dream is to also, ourselves, have our own brand of rice and export it.

Mr. Susatyo Head of APPOLI

What do we expect in the long term?

Our long-term goal is to support a new generation of farmers with the capacities to feed consumers in urban areas with healthy food, while earning a living income without damaging the environment.

Nana
Nana
Rice coordinator VECO Indonesia