The Strengthening Factors of Tea Farmer Cooperative: Case of Indonesian Tea Industry

Available online at www.sciencedirect.com ScienceDirect Agriculture and Agricultural Science Procedia 3 ( 2015 ) 143 148 The 2014 International Conference on Agro-industry (ICoA): Competitive and sustainable Agroindustry for Human Welfare The Strengthening Factors of Tea Farmer Cooperative: Case of Indonesian Tea Industry Henry Yuliando a *, Novita Erma K. a, Anggoro Cahyo S. a, Wahyu Supartono a a Department of Agro-industrial Technology, University of Gadjah Mada, Indonesia Abstract Plantation sector such as tea has been playing an important role to rural economic. This sector is labor intensive and has been providing an aid program to involve farmers in surrounding area to plant the same crops and buy the yield. However due to lower productivity of farmers, problem in quality and price selling arose and prolonged to other problems. Several policies has been proposed to overcome the problem, and including a policy to establish a tea farmer cooperative. Here, this study is aimed to determine factors that able to strengthen the tea farmer cooperative in commercializing tea farmer products. Some factors that are concerned to influence the performance of cooperative are analyzed using the analytical network process (ANP). The results show that factor of cooperation with other related institutions and environment played an important for the farmer cooperatives in order to increase commercialization aspect of their products. Effort to create added value, market and finance information access, and shareholding are among elements that are most prioritized by farmers groups. 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Peer-review Mada. under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada Keywords:tea farmer cooperative; commercialization; ANP; priority 1. Introduction Tea is the most popular and cheapest beverage next to water and is an important commodity in terms of jobs and export earnings for a number of tropical developing countries (Onduru et al, 2012, Sanne, 2008). Despite its * Corresponding author. Tel.: +62-274-551219; fax: +62-274-551219 E-mail address:henry_yuliando@yahoo.com 2210-7843 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Jurusan Teknologi Industri Pertanian, Fakultas Teknologi Pertanian, Universitas Gadjah Mada doi:10.1016/j.aaspro.2015.01.028

144 Henry Yuliando et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) 143 148 importance to the economic, the tea sector is faced with a number of constraints. In a review of six major tea producing countries (India, Indonesia, Sri Lanka, Kenya, Vietnam and Malawi), Wal (2008) reported that tea production is hindered by rising production costs (labor, fuel and electricity), mismanagement, age of tea bushes, high overhead costs, bad agricultural practices, low labor productivity, climate change and dilapidated infrastructure. In real terms, prices of tea have gone down by about 35% in the past 25 years (Mulder, 2007). The tea plantation area in Indonesia has been shifting to other crops such as coffee, oil palm, cocoa, and horticulture crops due to the low price of tea in the international market which is mainly destination for Indonesia tea. This has implied for the low price of tea in the domestic market as well. As a result, the tea farming becomes less attractive (DTI, 2013). The tea plantations in Indonesia mostly belong to estates. They are also responsible for developing farmers at surrounding area. A program namely core-nucleus project are used to be implemented by involving farmers to plant crops with technical and financial aid provided by estate and the yield is sold to estate at certain price level based on afforded quality. However due to the dynamic changing in market requirements, technology and other factors, tea farmers are used to suffer for the lack in productivity and quality. There are several policies to overcome this problem, and a policy to establish tea farmer cooperative is considered as a comprehensive solution. Tea farmer cooperatives aim more bargaining position in commercialization effort through the development of product varieties, market and financial access. Here, this study is aimed to determine factors that able to strengthen the tea farmer cooperatives in commercializing their products. By taking a sample at Pagilaran tea plantation, Indonesia, several factors that proper for the analysis were treated its interrelationship using Analytic Network Process (ANP) method. As Multiple Criteria Decision Making (MCDM) method, ANP has been widely applied to the complexities of many real world (Tsai et al, 2011; Yeh, 2014; Hsu and Hu, 2009; Tsai and Kuo, 2011). This method shows the relationship among analyzed factors based on respondents (farmers groups) opinion. In further, the output of ANP is a priority and this isvaluable for promoting more effective policy. 2. Data and method Tea farmer is facing problematic issues include low farm gate prices, poor extension services, limited market channels, poor access to credit and low level of farmer organization. Addressing the emerging issues requires adoption of alternative agricultural practices when making improvements in the current farming systems. To enhance sustainability of smallholder tea production, farmers need to acquire skills and knowledge about good agricultural practices and how to implement them as well as on how to respond to new situation as farming environments change (Onduru et al, 2012). Application of good agricultural practices requires facilities for learning process to enhance the creativity and competence of farmers. These are among constraints that become a trigger to draw factors that can influence the development of tea farmer cooperative. Here, 4 factors were identified based on literature and the pre survey including: (A) Learning, (B) Cooperation, (C) Business Unit, (D) Economic Environment. In further, these factors are divided into 14 elements, as shown in Table 1. Table 1. Supporting Factors and Element for Tea Farmer Cooperative Factors Element Government and company aid program (PRPI) Learning (PB) Supervisor (KP) Role model of successful tea farmer (CP) Financial buffer (PD) Cooperation (KA) Facility and infrastructure (IF) Mechanism monitoring, control and evaluation (Monev) Trading mechanism (MT) Added value increasing program (VA) Information access (SIM) Business Financial institution (Bank) Unit (US) Training program (PP) Mediator (Med) Economic Environment (EE) Shareholding program (Share) Down streaming program (HH)

Henry Yuliando et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) 143 148 145 2.1 Analytical Network Process (ANP) ANP comprises four major steps (Saaty, 1996): a. Identifying elements or criterion of the network and their relationships. Relationships between criteria can be determined by decision makers opinions via brainstorming or other appropriate methods such as literature reviewing (Chang, 2013). b. Conducting pairwise comparisons on the elements or criterion. Decision maker makes a series of pairwise comparisons to establish the relative importance of criteria (Chang, 2013). Synthesizing decision maker opinions is in compliance with the geometric mean method (Tsai et al, 2011). c. Placing the resulting relative importance weights (eigenvectors) in pairwise comparison matrixes within the supermatrix. d. Measure the consistency index (C.I) and consistency ratio (C.R) where C. I = λ max -n/n-1, n is the number of criteria. C.R= C.I/R.I with regard to the randomness index (R.I) is 0.00; 0.58; 0.90; 1.12; 1.24; 1.32; 1.41, respectively.when C.R 0.1 so the consistency of the pairwise comparison matrix is acceptable. e. Construct and solve the supermatrix. The perspectives and criteria weights derived from step 3 are used to obtain the column of the supermatrix. The supermatrix represents the influence priority of an element on the left of the matrix on an element at the top of the matrix with respect to a particular control perspective or criterion. Finally, the supermatrix will be stabilized by multiplying the supermatrix by itself until the supermatrix s row values converge to the same value for each column of the matrix namely limiting matrix. 3. Result and Discussion The analysis was begun with randomly dissemination of the pairwise comparison questionnaire to 17 tea farmer groups. The geometric average is used to weight the n number of answer. The interrelationship among criteria (factors) is presented in Table 2. Table 2. Interrelationship among factors (criteria) PB KA US EE PB KA US EE PRPI KP CP PD IF MONEV MT VA SIM BANK PP MED SHARE HH PRPI X X KP X X CP X PD X X IF X X X MONEV X X X X MT X X X X VA X X X X SIM X X X BANK X X X X PP X X X X X MED X X X SHARE X X HH X X The highlighted cell in Table 2 proves inner loops in the framework of interrelationship among factors. This loop is caused by element of CP and VA that influence other elements in the related factors to be inner dependence. This is as a basis to draw the network of the ANP framework.

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Henry Yuliando et al. / Agriculture and Agricultural Science Procedia 3 ( 2015 ) 143 148 147 requirements. Therefore, the development of information system facilities will indirectly give a positive effect on famer income which in turn will positively support the development of agribusiness Tea (Adinugroho, 2011). Table 4. Summary of local and global weights Factor Local weight Learning (PB) 0,11 Cooperation (KA) 0,23 Business Unit (US) Economic Environment (EE) 0,50 0,16 Local Global Element weight weight PRPI 0,70 0,079 5 KP 0,30 0,035 12 CP 0,18 0,041 10 PD 0,13 0,029 14 IF 0,19 0,042 9 MONEV 0,36 0,082 4 MT 0,14 0,033 13 VA 0,35 0,172 1 SIM 0,30 0,147 2 BANK 0,14 0,071 6 PP 0,13 0,065 7 MED 0,08 0,040 11 SHARE 0,64 0,104 3 HH 0,36 0,060 8 The third element that must be evaluated is ownership program or shareholding. According to Mwaura and Muku (2007) the limited ownership and decision making by smallholders on processing, marketing and distribution of profits at the factory levels failed to provide incentives to produce quality tea and reduce operational inefficiencies in tea collection and processing. 4. Conclusion In this study, factors that influence the development of tea farmer cooperative in Indonesia was evaluated. When the cooperatives able to be independent commercially to produce and distribute their products, efficiency that is achieved will become a provision to be paid to farmers. Value added and access information system for tea through branding and diversification of markets will ensure better returns to the farmers. It is necessary to formulate appropriate policy that would enhance smallholders' skills and bargaining power. Policies have to be geared towards creating an enabling environment in which smallholders could access and compete in fully functioning and efficient markets, both for internal consumption and export. The ownership program should be induced to help farmer in reducing their risk for expenses in managing their tea business. Acknowledgement The research was funded by Directorate General of Higher Education (MP3EI), Ministry of National Education and Culture. References Adinugroho, M. F and Harmini. 2011. Tranmisi Harga Teh Hitam Grade Dust Indonesia. Agribusiness Forum Volume 1 Number 2. Chang. Kuei-Lun. 2013. Combined MCDM Approaches for Century-Old Taiwanese Food Firm New Product Development Project Selection. British Food Journal Vol. 115 No. 8 1197-1210. DOI 10.1108/BFJ-08-2011-0204. Dewan Teh Indonesia (DTI). 2013. Rumusan Seminar Pertehan Nasional & Rapat Tahunan Anggota Dewan Teh Indonesia 2013. http//indoteaboard.org/zl/?p=629. Diakses tanggal 23 April 2014. Ethical Tea Partnership. 2014. Improving the Livelihoods of Smallholders Farmers Indonesia. www. Ethicalteapartnership.org. FAOSTAT. 2013. Top Production Tea 2011. http:/foastat.fao.org/site/339/default.aspx. Diakses pada tanggal 29 Agustus 2013. Ranks

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