Organic Farming as an Alternative in Improving the Economic Viability and Sustainability of Rice Farms (Study case in North Sumatra, Indonesia)

Transcription

1 ing as an Alternative in Improving the Economic Viability and Sustainability of Rice s (Study case in rth Sumatra, Indonesia) Diana Chalil) and Riantri Barus) )University of Sumatera Utara )University of Nusa Bangsa Abstract In the use of High Yield Varieties (HYV) regarded as success stories in tackling the growing food needs. However, the use of HYV needs to be followed by the use of large amount of chemical fertilizers, which then leads to an increase in fertilizer scarcity and price. Therefore Indonesian Government provides subsidized fertilizer, especially for important commodity such as rice. In 0 the Indonesian Government spent US$. million for the fertilizer subsidy. In such a condition, sustainability and economic viability of conventional rice farming in the future is in question, and organic rice farming is then widely discussed as an alternative. However, many farmers believe that organic farming is less profitable because its productivity is relatively low and production costs are relatively high. To analyze these perceptions, this study was conducted in an organic rice farming center in rth Sumatra. Viability and sustainability of organic rice farming is compared with those of the semiorganic and conventional ones. The collected farm level data were calculated by using selling price scenarios namely () existing condition selling price and () potential selling price, and cost scenarios namely () existing condition, () without fertilizer subsidy and () opportunity costs. The results show that, except the cost of fertilizer, all cost components of conventional rice farming similar to that of the organic rice farming. agricultural fertilizer costs only about 0% of that of the organic farming. In fact, the difference is mainly stemmed from the subsidized fertilizer price enjoyed by conventional rice farmers, which is least provided for the organic ones. The average productivity of organic rice farming is only about 0% of

2 the conventional farming. Although the decrease in productivity is followed by the increase in selling price, it is only about % and not enough as compensation. Actually, the organic rice can be sold times higher if the rice has been certified. In such a condition, the ratio of the selling price and the cost per kg of the certified organic rice could also reach more than times higher than that of the conventional one, with values of. and., respectively. Therefore, it can be concluded that with proper management, organic farming has great potential to improve the sustainability and economic viability of rice farming. Keywords:,, Rice ing, Viability, Sustainability, Indonesia Introduction In Indonesia, rice is the staple food for most of the 0 million population, thus rice price and availability problems could lead to state instabilities. In relation, the Indonesian government heavily intervenes with the rice industry, including in the pricing of fertilizer and dry grain harvest. In 0 the Indonesian Government spent as much as US$. million for the fertilizer subsidy, but no significant improvement have appeared in the rice price and supply, thus the subsidy began to be considered a burden for government s. However, cutting the subsidies will likely lead to a decrease in the Indonesian rice production. This is indicated by the cointegrating equation estimation result of the rth Sumatra monthly Urea real price and paddy s production data (from Ministry of Agricultural and Statistic Indonesia, 0000) shows a negative relationship between the variables (Appendix ). As an alternative, in 00 the Indonesian government launched organic farming programs which are expected to reduce the use of chemical fertilizers. The goal is that in 00, Indonesia will been able to produce organic rice on a large scale and

3 to export it. In fact, until 0 the progress is still very slow, with no large scale organic farms even only for supplying the domestic needs. Many farmers believe that organic farming is less productive and less profitable, hence reluctant to apply it. Moreover, organic rice agribusiness still faces various weaknesses and threats such as narrow land areas, low productivity, low stage of implementation, no farm records, low income, lack of separate rice milling drying floor and irrigation, lowquality product, lack of marketing network and the government support, which have not been overcome, while the strength and opportunities such as farmers experience, increasing demand trend, farmer groups and nongovernmental organizations supports, have not been optimized (Safitri and Chalil 0, ). In such conditions, the expected role of organic paddy farms in improving the economic viability and sustainability of rice farms are questioned. This study is designed to analyze the expected role and hopefully provide useful information for improving rice farms viability and sustainability. Literature Review agriculture is an ecological production management system. This does not mean that the products are completely free of residues, but minimizing the use of offfarm inputs and using management practices that restore, maintain and enhance ecological harmony (USDA in Gold 00). It integrates various operation such as organic crop and livestock operation and spreads the operations, therefore a good organic production should also be economically sustainable (Kuepper and Gegner 00). Since economic viability is a necessary condition for sustainable agricultural and food systems (Ikerd 00), an organic should also be economically viable. However, many organic farming has limited economic implications, therefore, it is still questionable whether organic farming is a viable tool to enhance farmers livelihood (Woranoot 00; Chalil 0).

4 Viability is understood as the ability of a business to survive and prosper over a long period, which can be measured by the level of profitability and its ability to meet financial commitments and pay all its liabilities through its assets (Wiebe 00). These measurements can be influenced by various factors, such as level of subsidies and ratio of farm input and grocery food prices. The importance of the subsidies on farms viability can be analyzed by the impact of abolishing them. In European countries, many farms with positive income could be negative when all subsidies are cut. On average, % of farms in European countries would be viable if subsidies were to be abolished. However, the level of dependency to subsidies appears to have huge difference among countries. The worst country would be left less than % farms of the positive income if all subsidies are removed (Johnston 00). In Canada, depressed farm product prices are found to be the main cause of farm viability declining. input and grocery food prices have gone much faster than farm product prices. In addition, extra costs related to the marketing demand, such as specialized packaging, food traceability, quality assurance programs, food safety programs, and sundry demands from processors and retailers without compensating return could also lead to the decrease in farm viability (Scott and Colman 00). The compensating returns could be driven if consumers are willing to pay premium prices. With more distance between consumers and producers, a label is needed as a guarantee, Therefore, organic certifications become an essential factor. However, the certification costs are not expensive and the process of certification is not simple, thus farmers need both financial and technical supports from all stakeholders. s viability could also be influenced by the farm size, offfarm income, domestic, and productivity of crops. Among all, farm size and offfarm income appear to be the most significant discriminating factors (Singh et al. 00, ).

5 Research Method This study was conducted in Desa Lubuk Bayas, Kecamatan Perbaungan Kabupaten Serdang Bedagai, which is purposively selected as it holds the largest organic rice land area in rth Sumatra (Bitra Indonesia 0). The data was collected through depth interviews with organic, semi organic and conventional rice farms, comprising land area, production, consumption, rice prices, the amount and price of labor, fertilizer, and pesticides usage, household, and income from side jobs. viability is measured by the net income, revenuecost ratio and costs per kg of each of the organic, semi organic and conventional farm. Selling prices are calculated in scenarios namely (a) existing condition selling price and (b) potential selling price. Potential selling prices are calculated for organic rice by using the certified organic rice average retail price and the existing ratio of uncertified rice price at farmers and retails level as follows: = where P refers to price, the subscript u and c refer to the uncertified and certified organic rice, and superscript f and r refer to the farmer and retail price levels. Production costs are calculated in scenarios namely (a) existing condition, (b) without subsidies and (c) with opportunity costs. Existing condition refers to the actual incurred costs, without subsidies refers to the total costs when all subsidies are abolished, and opportunity costs include all the imputed costs including family labors, subsidies and land rent. Sustainability is measured by the difference between the farm revenue and the total of production costs and household expenses, and the difference between the total farm revenue and side jobs income and the total of production costs and household expenses. Household consists of s on food, children's school needs, water,

6 electricity, fuel, transportation, communication, social activities and health costs. Positive difference shows a sustainable condition, otherwise unsustainable. Results and Discussion Lubuk Bayas is one of the rice production centers in Sumatera Utara, which has long been a model for other riceproducing centers. Many innovative programs have been developed in this village, including the organic rice program. Unfortunately, the development of the organic rice program is still slow. Since it was first introduced in 00, only farms have continuously implemented the organic system (Chalil 0). Many are reluctant due to the low production which in turn gives low income. In fact, the existing condition calculation (scenario ) shows that the average net income of conventional rice appears to be higher than the semiorganic rice and organic. Table Table shows the net income of organic, semiorganic and conventional rice farming in scenarios. paddy net income is the highest in all scenarios, including that without subsidies. On average the price of fertilizer subsidy is only about 0% of the nonsubsidized, thus conventional farms expend only 0% of their imputed fertilizer costs. This will greatly affect the net income if the share of fertilizer cost to the total costs is significant, and the share of the subsidized fertilizer to the total fertilizer is significant too. In fact, on average conventional farms use.% of subsidized fertilizers, while that of the semi organic and organic farms only.% and.0%, respectively (Figure ). Figure farms only receive subsidized petroganic fertilizer. They expend IDR.,/ha (US$ 0.0/ha) and IDR.0,/ha (US$./ha) for the subsidized

7 and non subsidized farms, respectively. In addition, organic farmers still need an additional as much as IDR..,/ha (US$.0/ha) for manure, which none being subsidized. In total they use around. tons/ha organic fertilizer/ha, whereas the recommended amount is tons/ha. On average the organic farms only use less than IDR ,/ha (US$.0/ha) of the subsidized fertilizer, while that of the conventional reach more than IDR,000,000/ha (US$.0/ha). In total, the conventional farms expand more than IDR,000,000/ha (US$.0/ha) on fertilizer cost, while the organic ones only around IDR,000,000/ha (US$.0/ha). All of these show that organic farming could reduce the subsidized dependency in rice farms. However, abolishing fertilizer subsidies is unlikely to change the net income of each farm system. In conventional farms, fertilizer only contributes.% of the total costs, thus its net income in scenario is still higher than that of the organic farms (Figure ). Therefore, it can be said that in terms of organic and conventional farms do not severely depend on the subsidies. Figure In terms of composition, most farmers tend to use the same type of fertilizers with those of the subsidized ones. In this case, conventional farmers receive subsidized fertilizers, namely Urea, ZA, SP and NPK, while Ministry of Agriculture Republic of Indonesia recommends a composition of NPK, Urea, SP and KCL. Urea and ZA contain the same main ingredient, Nitrogen, while NPK have Kalium in the form of KCl. All farmers use Urea, and more than 0% use SP and ZA, while only less than 0% farmers use KCL (Figure ). This is likely due to a longer and observable impact of not using Urea, SP or ZA, such as disruption of crop growth, yellowing leaf and inhibition of grains formation. In contrast, the effects of KCl that are more apparent only at the time of harvest,

8 such as the breakage of paddy straw. Moreover, without subsidy, KCL price is much higher than Urea and SP. Figure In general, farmers do not know the recommended amount of each fertilizer. Instead, the usage is influenced by the subsidized fertilizers supply or their financial condition to buy the fertilizers. Table shows the comparison between the fertilizer usage and recommendation. Table Many suggested that as a trade off to reduce fertilizer costs, organic farms need more labor usage, hence expend more on labor costs. In fact, Table shows that no significant difference is indicated among the organic, semi organic and conventional labor costs, with a total value around IDR million/ha (US$.). However, most organic farms use a large amount of family labor. While the semiorganic and conventional farms use less than 0% of family labor, that of organic farms use more than 0%. Table The main reason for using more family labor is to reduce the production costs, since organic farms give fewer revenues. However, the family labor usage might also affect the productivity for at least for two reasons. First, in general paid workers are more specialized thus more effective than family labor. Second, family labor need to handle various works within larger areas, thus might affect the quality of their works. In fact, in this case the average productivity in organic rice farming is only about 0% of the conventional farming. Table Table shows that organic rice productivity can reach. tons/ha, which is equal to the average productivity of conventional rice, but not many can reach it. In theory the

9 transition from conventional to organic farming systems will initially cause a decrease in the level of productivity. Herawati et al. (0) suggested that the transition period will at least take about years. On average, organic rice farmers in Lubuk Bayas have implemented organic farming for more than years. Therefore, theoretically, it should pass the transition period production level, but this is not the case. In addition, Amala dan Chalil (0) indicated that other factors that might cause the low productivity of organic rice stems from the inappropriate usage of supplementary fertilizer. Some farmers reduce the amount to less than recommended, as transporting the fertilizers need some additional labor costs. Currently, no sizeable road is provided for vehicles to deliver the fertilizer until the farm sites. Similar things appear in the pesticides usage, which are reduced due to the lack of supply. Currently, no production input shop provides the organic pesticides, therefore farmers need to make their own or buy it from other farmers. In fact, collecting the raw materials for organic pesticides needs additional time, while farmers often do not have enough time. Moreover, farmers suggest that the organic pesticides usage is not effective, because it only temporarily repels pests while many organic farm locations are still not fully separated with the organic ones (Figure ). Figure The decrease in organic farm productivity has been compensated by the increase in selling price. However the increase is only about % or IDR,, (US$ 0.)/kg compared to IDR,,/kg (US$ 0./kg) of the conventional price, which is not enough as compensations. Actually, the organic rice can be sold times or IDR,00/kg (US$ 0./kg) higher if the rice has been certified. However, the certification process is not easy and needs supports from all stakeholders in all the rice agribusiness subsystems. For example, organic farms in Lubuk Bayas still use the same irrigation channels with the conventional ones. Addressing this needs a reallocation of each different farming system

10 in a stretch of land area, or builds a separate irrigation for the organic farms. Both cannot be carried merely by farmers. Such a condition makes some farmers reluctant to implement the organic farming system in a larger scale. Without including the fertilizer subsidy (scenario ), production cost for organic farm is still higher than the semi organic and conventional due to lack of fertilizer subsides and the imputed labor costs. In detail, the production cost per kg for organic, semi organic and conventional system for the scenarios can be seen in Table. Table With such cost conditions, the value of R/C ratio for the three types of farming systems in the scenarios can be calculated in selling price namely the existing and potential prices. Table shows that the R/C ratio for the existing selling price is greater than one in all the scenarios. Table In existing condition (scenario ) organic R/C ratio is lower than the conventional ones. Similar condition appears in the opportunity costs (scenario ), since the organic use much higher family labor imputed costs. In contrast, organic R/C ratio without subsidies (scenario ) is slightly higher than the conventional, showing its less dependency on the fertilizer subsidy. The results dramatically change when the revenue is calculated with the potential selling price. The organic R/C ratios increase far above the conventional R/C ratios in all scenarios, indicating the importance of certification in improving the viability and sustainability of organic rice farms. Table If using common criteria, R/C ratio> indicates a feasible condition. In fact, the R/C> only shows an ability to cover the production costs from the generated revenues. In 0

11 fact, as a main income source, the farm revenue is not only expected to cover the production costs but also the household. Otherwise, parts that is supposed to be distributed for production costs could be used for household. If such a condition continues, the farms sustainability would be threatened. Table Table shows that in all scenarios the revenue derived from rice farming has not been able to meet all expenses for the cost of production and household consumption. Household consumption is much larger than that of the production costs. However, with an additional income from side jobs, farmers can cover all of their cost production and household s; even if the subsidies are abolished (scenario ) or the imputed cost are calculated (scenario ). However, with seasonal farms harvest versus a daily base of household s, some farmers require additional loan capital as can be seen in Figure. Figure In such a condition farmers still plant rice for over years because the rice is also used for their household consumption (Table ). Many organic farmers even grow organic rice only for their family s consumption, as they believe that organic rice is better for health than the conventional one. Table Conclusion and Recommendation While there are great potentials of organic farming in improving the viability, which in turn the sustainability of rice farms, a number of conditions need to be improved. This need to be done through all aspects, including production, selling price, and input provision and price. The development of organic inputs industry could improve their

12 availability and price, which in turn is expected to reduce the production costs and increase the organic paddy production. To do so, full commitment of all stakeholders, including the government, researchers and investors is indispensable. The support of price certification could significantly improve the organic rice selling price. The government with all its related ministries could assist technically and financially. This includes the provision of all required infrastructures, such as a separate irrigation for the organic paddy fields.

13 Table Net Income Scenario Semiorganic existing condition,, (US$.),,0. (US$.),,. (US$,.) without subsidies 0,,0 (US$.) 0,,. (US$ 00.),0,. (US$,.0),,. (US$.) te: Exchange rate: USD = IDR.0,,0. (US$.0),0,. (US$.) with opportunity costs 0 Existing Condition,00,000,,00,0,,00,000 0,,0 0,0,000,00,000,,000,,,0,000,000,000,,000,0,,, Without subsidies With opportunity costs Net Cost Cost Net Income Cost Net Income Income,,00,,00,00,000,,00,,00.00,00,000.00,,00.00 (,00.00),0,0 0,,,,00,0,0 0,,.,,00.00,0,.,,0.,,0,,,0,,,0,,0.,0,.,,.,,.,,,,0,00,000,,,,0.,00,000.00,0,.,,0.,0,000,,00,,0,0,000,,0.000,,0.00,0,000.00,,0.00,0,,,0,0,000,0,,,.0,0,000.00,,.,0,0.,,0,,0,00,000,,,0.,00,000.00,0,0. (,00,0.) 0,,,0,,,000,0,,,.00,, ,,.00,,.00,,0,0,,,,,0,0,0.,,.,0,.0,0,.,,00,0,00,0,000,,00,0,00.00,0,000.00,, ,,00.00,,0,,0,000,000,,0,,0.00,000,000.00,,0.00 (,,0.00),,00(,,00),,000,,00(,,00.00),, ,0,00.00(,,00.00),,0,,,0,,,0,,.,0,.0,,. 0,,.,,0,,,,,0, 0,,0.,,.,,.0,,. Semiorganic Existing Condition Cost 0,0,000,0,000,0,000,000,000 0,,,0, 0,,000,00,000,00,000,,000,0,000,,,0,000,00,000,0,000,,,,,0,,,0,,,,00,0,000,,000,0,00,,000,,,,000,0,000 Net Income,,000,0,,0,,,,,00,,,,00,0,000,,000,0,00,,000 0,,00,,000,0,000 Without subsidies Cost,0,000,0,000,0,000,000,000 0,,,0, 0,,000,00,000,00,000,,000,0,000,,,0,000,00,000,,00,,,0, 0,,,,0,,,,00,,00,,000,0,00,0,00,,,,00,,000 Net Income,,00,0,,,0,,,,0,,,,00,,00,0,000,,00,,00,,00,,00 0,,000 With opportunity costs Cost,0,000,0,000,0,000,000,000 0,,,0, 0,,000,00,000,00,000,,000,0,000,,,0,000,00,000,,00,,,,,0,,,0,,,,00,0,00,0,000,,00,,00,,00,,00,0,000 Net Income (,00),0,,,0,,,,0,,0,,00,00,0,000,,00,0,00,,,,00,0,000

14 Existing Condition Cost,,00,00,000,000,000,0,,,,0,00,,00,0,,0,,,0 Net Income,,000,,00 (,0,),0,,,,,,,,,0 Without subsidies With opportunity costs Cost,0,000,0,00 0,,,,,,0 Net Income 0,,00,,00 (,,),, 0,,,,00,00,000,000,000,0,,,,,00,,00,,,0,,, Net Income,0,000,,00 (,,),0,,,,0, 0,,,,,0,,,0 Cost,,00,00,000,000,000,0,,,,, Existing Condition Without subsidies Cost Net Income,,,00,,,,,,, 0,,0,,,,0 0,,0,0,,,000,,,0,,,000,,,,,,,,,,000,0,,0,,,000,,00,,0,,0,,00,0,,000,000,,000,0,000 0 With opportunity costs Cost Net Income,,.,,,00, 0,,,,. 0,,0,,,,,,,0,.,,000,, 0,0, 0,,,0,.,,,,0,,,,,,.,,000,0,,,,,00,,0,,0.00,,00,,0,,0,,,,00,,,,.,,00,, 0,,,,000,000,000,,000,,000.00,000,000,,000,,000,,,0,,0,000,0,,,.,0,000,,,,,00,000,,,,,00,000,, 0,,.,00,000,,0,,,000,000,,,0,0,000,000 0,, 0,,0.,000,000,,,,,,00,,,0,,,00,0,,0,.,,00,,,,,,000,,,,,,000,, 0,,0.0,,000,,,0,,00,000,,0,0,0,00,000,0,0,,0.00,00,000,,00 (,,00),,000,,0,0,,,000,,,,.,,000,,,,,0,000,0,,,,0,000,0,,,.00,0,000,0,,,,,,,0,,0,,,, 0,,.,,,,,, 0,00,000,0,000,0,000 0,00,000,,000,00, ,00,000,0,000,0,000,,000,,00 0,0,00,,000,,00,0,00.00,,000,,00,,00,,0,,,,,,0,,,0,.,,0,0,0,0, Cost Net Income

15 ,%,0 %,0 % Subsidize, % 0, % n subsidize, % Subsidize n subsidize Semi organic Subsidize n subsidize Figure Subsidized and n Subsidized Fertilizer Usage Subsidized fertilizer Other fertilizer Total Without Subsidize subsidize Semi organic Without Subsidize subsidize Without Subsidize subsidize,,0,0,,,,,0,,,,,,,0,0,0,0,0,0,,,,0,0,,0,,,,,

16 , %,0 %, % Fertilizer, %, % Others, % Fertilizer Others Fertilizer Semi organic Others Figure Fertilizer Cost Share Fertilizer Others Total production cost Without Subsidize subsidize,,,,0,0,,0, Semi organic Without Subsidize subsidize,0,,0,,00,,00, Without Subsidize subsidize,,,,,00,,00,,,0,,,,,0,,0,,,

17 Table Fertilizer Usage and Recommendation Ratio (kg/ha) Types Semiorganic Usage Recom.) Ratio Existing Recom.) Ratio Urea SP KCL ) Source: Ministry of Agriculture Republic of Indonesia Semiorganic Urea (kg) NPK (kg) SP (kg) KCl (kg) Urea (kg) SP (kg) NPK (kg) KCl (kg)

18 00% 00% % 0% % 0% % 0% 0% 0% 0% 0% 0% % 0% 0% Urea SP ZA Semi organic KCl NPK 00% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 00% % % % % Urea SP ZA KCl NPK Figure ers Composition based on the Use of Fertilizers

19 Table Composition of Family Labor and Paid Labor Labor Costs Activity family labor Semi paid labor family labor paid labor family labor paid labor Land tillaging (US$ 0.00),000, (US$.0) (US$ 0.00),0,. (US$.) (US$ 0.00),0,. (US$.) Nursing,0. (US$.),.0 (US$.),0. (US$. 0,0. (US$.),.0 (US$.),. (US$.) Planting (US$ 0.00),0,. (US$.0) (US$ 0.00),,.0 (US$.0) (US$ 0.00),0,. (US$.) Maintaining,. (US$.),. (US$.),. (US$.),. (US$.),0. (US$.),.0 (US$.) Making Pesticides,. (US$.) (US$ 0.00) (US$ 0.00) (US$ 0.00) (US$ 0.00) (US$ 0.00) Harvesting (US$ 0.00),,0. (US$.) (US$ 0.00),,. (US$.) (US$ 0.00),,. (US$ 0.) Sub Total,. (US$.),,. (US$.),. (US$.),,. (US$.0) 0,. (US$.),,0. (US$ 0.).... %.. te: Exchange rate: USD = IDR.0

20 Table Productivity (ton/ha) Season Semiorganic average range average range Range Rainy Dry Production (kg) Productivity (ton/ha) Land area (ha) 0.0,0.00, ,0.00, ,00.00, ,00.00, ,00.00, ,00.00, ,00.00, ,000.00, ,00.00, ,0.00, ,0.00, ,.,... Rainy Dry Rainy Dry Semiorganic Land area (ha) Production (kg) Rainy Productivity (ton/ha) Dry Rainy Dry,00 0,000.00, ,000.00, ,00.00, ,0.00 0, ,0.00, ,0.00, ,00.00, ,0.00, ,00.00, ,.00, ,0.00, ,.00, ,00.00,

21 Land area (ha) Production (kg) Rainy Productivity (ton/ha) Dry Rainy Dry 0.0,0.00, ,0.00, ,00.00, ,0.00, ,0.00, ,0.,..0. Land area (ha) Production (kg) Rainy Productivity (ton/ha) Dry Rainy Dry.,00.00, ,00.00, ,00.00, ,000.00, ,00.00, ,000.00, ,0.00, ,000.00, ,00.00, ,00.00, ,000.00, ,00.00, ,00.00, ,00.00, ,00.00, ,00.00, ,00.00, ,0.00, ,0.00, ,.0,...0

22 Source: Chalil 0, Figure Map of Lubuk Bayas Village

23 Table Costs per Kg (IDR/kg) Scenarios Semiorganic existing condition,.0 (US$ 0.),. (US$ 0.),. (US$ 0.) without subsidies,.0 (US$ 0.),. (US$ 0.),. (US$ 0.) with opportunity costs,.0 (US$ 0.),0. (US$ 0.),.0 (US$ 0.0) te: Exchange rate: USD = IDR.0 existing condition without subsidies Costs per Total costs kg (IDR) (IDR/kg),,00,. 0,,000,0.00,,00,.0,,,.,,000,.0,,,0.,0,0,.,,0,.,, 0.,,00,.,,0,.,0,00,0. with opportunity costs Costs per Total costs kg (IDR) (IDR/kg),,00.00,.0,0,000.00,0.,,00.00,.0,0,.,0.,,000.00,.0,,.,0.,,0.00,.,,0.00,.,,.,.0,,00.00,.,,0.00,.,0,00.00,. Production (kg) 0,00.00,0.00,000.00,000.00,00.00,00.00,00.00,000.00,00.00, ,, ,,000.00,,00.00,,.,,000.00,,.,,0.00,,0.00,,.,,00.00,,0.00,0,00.00,.,0.00,.0,.,.0,0.,0.,. 0.,.,.,0.,00.00,00,00.00,.,00,00,.,,00.00,.,.,,.,.0,0,,.0,0,.,.0 Total costs (IDR) Costs per kg (IDR/kg) Semiorganic existing condition without subsidies Costs Total costs per kg (IDR) (IDR/kg),,000.00,,,0.00,,,.,,,00.00,,,000.00,,,00.00,,,00.00,,,000.00,0,,000.00,0,,0.00,,0,00.00,,,00.00, with opportunity costs Costs Total costs per kg (IDR) (IDR/kg),,000.00,,0,0.00,,,.,,,00.00,,0,000.00, 0,,00.00,,,00.00,,0,000.00,,,000.00,,0,0.00,,,00.00,,,00.00, Production (kg) 0,00,000,00 0,00,0,0,0,0,0,0,0,0,0,000.00,,0.00,,.,,000.00,00,00.00,0,000.00,,00.00,0,000.00,,000.00,0,00.00,,000.00,,00.00,0,0,00,0,,,0,,0,,,,0,,000.00,,,00.00,,,00.00,0,0,,000.00,00,,000.00,,,000.00, Total costs (IDR) Costs per kg (IDR/kg)

24 Production (kg),0,,000.00, without subsidies Costs Total costs per kg (IDR) (IDR/kg),,000.00,0,0,,00.00,,0,00.00,,,00.00, 0,,00.00,,,00.00,0,,00.00,,0,0,00.00,,,00.00,,,00.00,,0,,00.00,,0,00.00,,,00.00,,.,,.0,.,0,0.0,.,00,.,0. existing condition Total costs (IDR) Costs per kg (IDR/kg) existing condition without subsidies Costs per Total costs kg (IDR) (IDR/kg),00,,00.00,,0.00,,00.00,0,00.00,,00.00,,0.00,,000.00,,00.00,,0.00,,00.00,,00.00, with opportunity costs Costs Total costs per kg (IDR) (IDR/kg),0,000.00, with opportunity costs Costs per Total costs kg (IDR) (IDR/kg) 0,,.,,,.,00,,000.00,,,00.00,,,00.00,,,00.00,,,.,00,,000.00,,,.,,,.,0,0,.,,,., Production (kg) 0,00,00.00,0.00,00.00,00.00,00.00,0.00,000.00,00.00,0.00,00.00,00.00,00,.,,.,,000.00,,000.00,0,00.00,0,00.00,,.,,000.00,0,.,,.,,.,0,.,,,,0,,,,,0,,00,00.00,,.00,,00.00,,,.00,,00.00,,0.00,,00.00,,0,00.00,,00.00,,. 0,00.00,0,0,.,,000.00,0,0.00,00,000.00,,00,0.00,00,000.00,,000.00,,000.00,,0,000.00,,0.00,,000.00,,0.00,,,000.00,0,.00,,0.00,,.00,,,0.00,,.,,.,.,.,. 0,,.,.0 Total costs (IDR) Costs per kg (IDR/kg)

25 Table R/C Ratio with Existing Selling Price Scenario Semiorganic existing condition... without subsidies... with opportunity costs... R/C ratio existing condition without subsidies.. with opportunity costs Semiorganic R/C ratio existing condition without subsidies with opportunity costs

26 R/C ratio existing condition without subsidies with opportunity costs

27 Table R/C Ratio with Certified Product Selling Price Scenario Cost Income R/C existing condition,0, (US$,.),,0 (US$.),, (US$,.). without subsidies,0, (US$,.),0, (US$.),, (US$,.).,0, (US$,.) te: Exchange rate: USD = IDR.0,, (US$,.),0, (US$,0.00). with opportunity costs Existing Condition Cost Net Income R/C ratio 0,,. 0,,.,,0.,,.,,.0,,0.,,0.,,.,0,0.,,.,0,.,,.0,0,.,,00,0,0,,0,,,0,000,0,,,0 0,,,,0,,00,,0,,00,,0,,.,,0.0,,.,,.,,.0,0,0. 0,,.,0,.,,.,,.,,.,,.0 0,, ,0,.0,,0,,.0.,,. Without subsidies Cost Net Income R/C ratio,,00,,..0 0,,.,0,0,,0.0.,,0.,,0,,..,,.,,,,..,,.0,0,000,,.0.,,0.,0,,0,0..,,0.,,,,.0.,,.,0,,,..,0,0.,,0,,.. 0,,.,,00,,..,0,.,,0,,..

28 Without subsidies,,.0,,00,,.0.,0,.,,0 0,,0..,0,.0,0,,,.. Cost Net Income R/C ratio With opportunity costs 0 Cost Net Income,,. 0,,.,,0.,,.,,.0,,0.,,0.,,.,0,0.,,.,0,.,,.0,0,.,0,.0,,00.00,0,.,,.,0,.,0,000.00,,.,0,0. 0,,.00,0,.0,,00.00,,0.00 0,0, ,,.,,.0,,.,0,.,00,0.,,.,,.0,,.,,0.,,. 0,0,.0,,.,,. (,0,.0),,.,0,. R/C ratio

29 Table Family Income and Expenditure Semi Scenario : existing condition household/farm., (US$.) 0, (US$.)., (US$.),,. (US$.).,0 (US$.0),,. (US$.).,0 (US$.), (US$.)., (US$.),,. (US$.)., (US$.),,. (US$.).,0, farm revenuetotal (US$ 0.) 0,0 total incometotal (US$.) te: Exchange rate: USD = IDR.0.00,, (US$ 0.) 0,0. (US$.0).,,0 (US$ 0.),. (US$.) farm revenuetotal total incometotal Scenario : without subsidies household/farm farm revenuetotal total incometotal Scenario : opportunity costs household/farm Scenario : existing condition 0,000 00,000,,000,000 farm revenuetotal (,),,000,00,000,,,00,000,0,,0,,,00,,,0,000,000 (,,0) (,0) 0,000,,,, 00,000,00,00,000 (,),,0,,000,000 0,,000,000 (,0),, 0,000,,,,, 0,000 0,0,0, (,,0) (,0) Side jobs Household total incometotal (,) 0,,,,,,000 (,0), 0,0,000 0,000,0,0,,000,0,,0 00,000,00,000 0,,, (,,) (,,),00,00,000 0,,,000 (,0,) (,00,),,000,00,000,0,,000,0,,0,,,,00,,, (,) 0,

30 Scenario : without subsidies Side jobs 0,000 00,000,,000,000 farm revenuetotal (,),,000,00,000,,,00,000,0,,0,,,00,,,0,000,000 (,,0) (,0) 0,000,,,, 00,000,00,00,000 (,),,0,,000,000 0,,000,000 (,0),, 0,000 00,,,,, 0,000,,0, (,,) (0,) 0,,,,,,000 (,0), 0,0,000 0,000,0,0,,000,0,,0 00,000,00,000 0,,, (,,) (,,),00,00,000 0,,,000 (,0,) (,00,),,000,00,000,0,,000,0,,0,,,,00,,, (,), Household Scenario : opportunity costs total incometotal (,) 0,000 00,000 0,,000,000 farm revenuetotal (,00,),,000,00,000,0,,00,000,,,,,,00,,,0,0,000,000 (,,0) (,) 0,000,,,, 00,000 0,,00,000 (0,) (,),0,,000,000,,000,000 (,),, 0,000 0, (0,) (0,),, 0,000,,0,0, (,0,0) (,0,0) Side jobs Household total incometotal (0,) 0,,,,,,000 (,), 0,0,000 0,000,0,0,,000,0,0 00,000,00,000 0,,, (,,0) (,,0),00,00,000,,,000 (,,) (,,),,000,00,000,,0,,000 (,0),,,,,,00,00,0,, (,0,) 0,0 Semiorganic Scenario : existing condition Side jobs,0,000,00,,,,000,000, Household,000,000 farm revenuetotal,, total incometotal,,,,, 0

31 ,00,000 farm revenuetotal (,) total incometotal,0,0,0,000,000,000,,000,,000,0,,,000,,,,,000,000,000,,000 (,0),,,,00,,,,000 (,) (,),0,,,,,000 (,,) (,00),0,000 00,000,000,,000 (,000) (,000) 0,,,,,,,000 (,,) (,),0,000,00,000,,,0, (,),,,,,,,,,00 (,0,0) (,),,,,,00,,000 (,) (,00),,,.00,,, (,000),,,,0,000.00,0,,0, (,),0,,,00,00,000.00,,,, (,0),0, 0,000,00,000.00,0,, (,,0),00,0,,000,000.00,,,,000.00,00,0,00,,00,000.00,0,,,000.00,,0,,0,,,0,,,, (,),, Side jobs,00,000,0,000,,00,000,,000,,,00,000,, Household Scenario : without subsidies farm revenuetotal,,00 total incometotal,,00,0,000,000,,,,0,000,,00,000 (,),0,,00,000,,000,0,0,000,000,0,0,,0,,,00,000,,,,000,0,,0,,,,000,000,0,0,,000 (,),,,,00,,0,,000 (,0,0) (,0,0),0,,,,,000 (,,) (,0),0,000 00,000,,,000 (,) (,) 0,,,,,,,000 (,,) (,00),0,000,00,000,0,0,0, (,0),0,,,,,,,,00 (,,0) (,),,,,,0,,000 (,0) (,0),,,.00 0,,, (,),,,,0,000.00,0,000,0, (0,),,,00,00,000.00,,0,, (,0),0 0,000,00,000.00,0,, (,,0),,0,,000,000.00,,,, (,00) 0,00,,00,000.00,,0,, ,0,0 Side jobs,0,000,0,00,,,000,000,00,000 Household

32 Side jobs,0,,,0,, farm revenuetotal (,) Household,, Scenario : opportunity costs total incometotal,,,0,000,,00 farm revenuetotal (,00),,,000,000,,,000,000 (,0),0,,00,000,0,000,0,,00,000 (,),,00,000,,000,,0,000,000 (,0),,,,,00,000,,,,000 (,),,,,,000,000,,0,,000 (,,),,0,,00,,,,000 (,,) (,,),0,,,00,,,000 (,,00) (,0,) Side jobs Household total incometotal (,00),0,000 00,000,000,,000 (,000) (,000) 0,,,,,,0,,000 (,,0) (,),0,000,00,000,,0,0, (,,),,,,,,,,0,,00 (,0,0) (0,0),,,,,,,000 (,,0) (,0,),,,.00,,, (,0,000) (,),,,0,000.00,,,0, (,,000) 0,000,,00,00,000.00,,,, (,,0) 0, 0,000,00,000.00,0,, (,0,0),0,0,,000,000.00,,,, (,00) 0,00,,00,000.00,,0,, (0,0) (,0),0,,,0,0,,, (,,) 0,0 Scenario : existing condition,000,000 farm revenuetotal,0, total incometotal,0,,,00,000 (0,),0,0,000,000,,,000,000,0,,0,,0,000 00,000,,000,000 (,,) (,,),,,000,000,00,0,000,000 (,,),0,,0,,,,0,000,000 (,0,) (,0),,00 00,000,0,0,00,000,,,00,000,,,00,00,000,00 0,,, 00,000,,000,000 (,) 0, Side jobs,,00,0,000,00,,,00,00,000,,00 Household

33 Household farm revenuetotal (,) total incometotal (,) Side jobs 0,0,000 0,000,,000,000,00,000,,0,0,00,000 0,,0, 0,000,0,000 (0,) (,),0,000,00,000,,0,00 (0,) 0,,000,000,000.00,,, (,,) (,),,000,000,000.00,,,. (,),0,,0,000 0, ,0,,000.00,,0,,, 0, ,00,, (,) 0,,,,00,000.00,,, (,000),000,,,000.00,,00.00 (0,),,,0,0,,,, (,0),, Scenario : without subsidies,000,000 farm revenuetotal, total incometotal,0, 0,,00,000 (,),0,,000,000,,,000,000,0,,0, 00,000,0,,000,000 (,,) (,,),,,000,000,,,000,000 (,,),,,0,,,,,000,000 (,,0) (0,),,00 00,000,,0,00,000,,,00,000,,,,00,000 (,),,, 00,000 0,,000,000 (,), 0,0,000 0,000,,000,000 (,) (,),00,000,,,,00,000 (,) 0,, 0,000,,000 (0,0) (0,0),0,000,00,000 0,,0,00 (,),0,000,000, ,0,, (,,0) (,0),,000,000, ,,,. (,),,,0,000 0, ,,, ,,,, 0, ,00,, (,),,,,00,000.00,,, (,),,,,000.00,0,00.00 (,),,,0,0,,0,,, (,),, Side jobs,,00,0,000,0,,,00,00,000,,00,0,000 Household Scenario : opportunity costs,,00,0,000,,,000,000 farm revenuetotal (,0),,00,00,000,0,00,000 (,0) Side jobs Household total incometotal,,,

34 ,000,000,,,000,000 farm revenuetotal,,,0,000 00,000,,,000,000 (,,) (,,),,,000,000,,0,000,000 (,0,),,,0,,,,,000,000 (,,0) (0,),,00 00,000,,0,00,000 (,0) (,0),00,000,,,,00,000 (,) (,),, 00,000,,000,000 (,) (,) 0,0,000 0,000,,0,000,000 (,,0) (,,0),00,000,,0,0,00,000 (,0) (,),,00 Side jobs Household total incometotal,,, 0,000,,000 (,0) (,0),0,000,00,000,0,,0,00 (,0,),,000,000,000.00,,, (,0,) (0,),,000,000,000.00,0,,,. (0,),,,0,000 0, ,0,, (,0),,, 0,000.00,0,,, (,0,000) (0,000),,,00,000.00,,, (,,000),000,,,000.00,,0,00.00 (,) (0,),,0,0,,,,, (,,0),

35 ,% 00% 0% 0%,%,% 0% 0% Own capital 0% 0% 0% Loan capital 0%,% 0% 0%,%,0% Semiorganic Figure ers Capital Resources Capital Resources Have own capital Frequency % Loan Capital Total Percentage (%) Semiorganic Capital Resources Have own capital Frequency Loan Capital Total Percentage (%) Capital Resources Have own capital Loan Capital Total Frequency Percentage (%)

36 Table Composition of Rice Production and Consumption Semi organic Production (kg) Rainy,.,.0,. Dry,.,.00,.,.,0.,. Consumption (kg) Rainy Dry Percentage Rainy..0. Dry

37 Appendix Cointegrating between Urea Real Price and Paddy s Production Date: 0// Time: : Sample (adjusted): 00M0 00M Included observations: after adjustments Trend assumption: Linear deterministic trend Series: PRODUCTION UREAPRICE Lags interval (in first differences): to Unrestricted Cointegration Rank Test (Trace) Hypothesized. of CE(s) Eigenvalue Trace Statistic 0.0 Critical Value Prob.** ne * At most Trace test indicates cointegrating eqn(s) at the 0.0 level * denotes rejection of the hypothesis at the 0.0 level **MacKinnonHaugMichelis () pvalues Unrestricted Cointegration Rank Test (Maximum Eigenvalue) Hypothesized. of CE(s) Eigenvalue MaxEigen Statistic 0.0 Critical Value Prob.** ne * At most Maxeigenvalue test indicates cointegrating eqn(s) at the 0.0 level * denotes rejection of the hypothesis at the 0.0 level **MacKinnonHaugMichelis () pvalues Unrestricted Cointegrating Coefficients (normalized by b'*s*b=i): PRODUCTION.E0.E0 UREAPRICE Unrestricted Adjustment Coefficients (alpha): D(PRODUCTION) D(UREAPRICE) 0.. Cointegrating Equation(s): 0.. Log likelihood. rmalized cointegrating coefficients (standard error in parentheses) PRODUCTION UREAPRICE (.0) Adjustment coefficients (standard error in parentheses) D(PRODUCTION) 0.0 (0.) D(UREAPRICE) (0.000)

38 0 0 0 Year Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct v Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct v Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct v Dec Urea real price (Rp/kg),0.,0.,.0,0.,0.0,0.,.,0.0, ,.,0.,0.,0.,0.,.,. Paddy s Production (kg),.,0.,.,0.,.,.,.,0.0,0. 0,.,. 0,0. 0,.,.,0.,0.0,. 0,0.,.0,.,0.0,.,.,00.,.0 0,. 0,.,.0,.0,0.,. 0,0.,.,. 0,.0, Year Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct v Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct v Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct v Dec Urea real price (Rp/kg) ,.,.,.,.,.0,.0,.,.,.,.,0.,.00,.,.,.,.,.,0.,0.,.,.0,.00,.0,. Paddy s Production (kg) 00,.,0.,.00,.,.,.,0.,0.,. 00,.,. 0,.,. 0,.,0.,. 0,.,. 0,.,0.,0.,.,.0 0,0. 0,.,.,.,.0,0.,.,.,.,.,.0 0,0.0,.