Coffee and Cocoa: Climate-Sensitive Businesses in the hands of Smallholder Farmers

Coffee and cocoa are two of five largest export commodities in Indonesia after rubber, palm oil and coconut, putting them in the same top export product group prioritized by the Indonesian government for national development. The strategic role brings major impact for the national economy, involving 1.96 million families of smallholder coffee farmers and 2.18 million families of smallholder cocoa farmers. (Central Bureau of Statistics: Economic Census 2013)

These two agricultural products are now feeling the pressures of the global climate change. Changes in harvesting seasons, decreased availability of land suitable for growing coffee, and also a decline in production volume have instigated supply shortages around the world while domestic consumption of coffee and cacao continually increase. Coffee consumption in 2015 has increased to 0.98 kg per Indonesian person per year (International Coffee Organization 2016) and cacao consumption has increased to 0.5 kg per person per year (Association of Indonesian Cocoa Industry 2016). Consequently, the two products are always in high demands nationally and internationally. The good news is, increased consumption has triggered growing downstream industries such as processing and turning the commodities into ready-for-consumption products, which has absorbed quite a number of local labors.

Adapting to climate change and making commodities more resistant to climate change, smallholder farmers need a better understanding of the local climate, ecosystem and farming methods that adopt agro-ecological principles. To address this issue, VECO Indonesia has conducted field schools on climate change and sustainable agriculture since 2014 in several locations. Furthermore, in 2014-2016 VECO Indonesia has also developed a program, bringing forward the inclusive business ideas, namely Sub Sector Development (SSD) and Inclusive Modern Market (IMM), specifically to target changes in the structural level of the value chain and help ensure sustainability of agricultural products to meet market demands. SSD and IMM purposely pursue the sustainability of coffee and cacao by fostering partnerships between private-sector buyers and VECO Indonesia’s farmers organization partners.

To date, the program area covers the provinces of Jambi (Kerinci District), West Java (Tasikmalaya District), Central Java (Districts of Boyolali, Sragen, Karanganyar, Klaten, Sukoharjo and Wonogiri), South Sulawesi (Districts of North Luwu, East Luwu, Enrekang and North Toraja), West Sulawesi (Polewali Mandar District), Southeast Sulawesi (Districts of Parigi Moutong and Palu), and East Nusa Tenggara (Districts of East Flores, Sikka, Ende, Bajawa, Manggarai and West Manggarai). The program has successfully boosted farmers’ income and at the same time contributed to the sustainable management of production environment, meeting international environmental and social standards. Some farmer organizations even benefit from premiums for independently certified farming practices.

Supporting business development, an MoU was signed in August 2014 between the Bank of East Nusa Tenggara and ASNIKOM Farmers Organization—a farmer organization partner of VECO Indonesia—stating commitments to improve the livelihood of coffee, cocoa and rice farmers in Flores, East Nusa Tenggara. Starting February 2015, loan packages were disbursed for ASNIKOM and other VECO’s partners. VECO Indonesia’s Field Team in Ende, led by Henderikus A.M. Gego as the Area Manager, continuously monitors the effectiveness of the loan. The partnership had given access to funds totaling IDR 1.8 billion up to April 2016. The figure is growing steadily because ASNIKOM has also received fresh funds from several other private-sector sources.

Targeting direct consumers, ASNIKOM Farmers Organization in East Manggarai, Flores, and also Masagena Farmers Organization in North Luwu, Sulawesi, have even developed a downstream business. A café located right across Komodo Airport in Labuan Bajo, West Flores, was established by ASNIKOM in cooperation with the Kopi Mane network, while Masagena chose to collaborate with Calodo chocolate manufacturer to develop their business.

At this year’s IMM Local Partner Meeting held in Jakarta on June 8-9, 2016, Dr. Soetanto Abdullah, a senior researcher from the Indonesian Coffee and Cocoa Research Institute (ICCRI) reminded that downstream businesses should take into account the required standards of quality and hygiene. Partnering with the private sector is the right choice, as envisioned by the Partnership and Mediation Model (Motramed) program, which was developed by ICCRI in 2005.

The meeting was attended by representatives of VECO Indonesia, Cocoa Sustainability Partnership (CSP), Specialty Coffee Association of Indonesia (SCAI) and Sustainable Coffee Platform of Indonesia (SCOPI). The meeting was intended to find ways to help improve the success achieved at the structural level by Pilot Chains for coffee and cocoa. [Text & photos by: Sapta M. Cakra, VECO Indonesia’s Value Chain Specialist]