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The Design of a Contract Farming Model for Coffee Tree Replanting

Author

Listed:
  • Adi Haryono

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Mohamad Syamsul Maarif

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Arif Imam Suroso

    (School of Business, IPB University, Bogor 16151, Indonesia)

  • Siti Jahroh

    (School of Business, IPB University, Bogor 16151, Indonesia)

Abstract

Coffee tree replanting is needed in Indonesia, yet a financing scheme is not available at the moment due to its economic feasibility and farmers’ reluctance to reinvest. This research aims to design contract farming for coffee tree replanting in Indonesia to support coffee farmer welfare. The method used in this study is Soft System Methodology (SSM), including interviews with several coffee cultivation respondents, with case studies in the Lampung region. The initial study indicates that the replanting program must integrate coffee farmers with banks or investors and coffee processing companies. The study of one farmer community successful in profiting from a new coffee production method enables the possibility of a new model of replanting through contract farming. Aside from banks, institutions that will have an essential role in the development of successful replanting are land owners and exporters or processing companies as offtakers. The implementation of the European Union Deforestation Regulation on traceability will impact Indonesia’s replanting effort, as exporters or importers will be accountable for the compliance of their supply chain. The five main factors that need to be evaluated consist of (1) financing as an initial investment, (2) farmer competencies as the farmer’s skill to implement the coffee tree replanting, (3) technology to ensure the successful implementation of coffee tree replanting, (4) production to maintain the income flow, and (5) synergy between actors to ensure the role in contract farming development.

Suggested Citation

  • Adi Haryono & Mohamad Syamsul Maarif & Arif Imam Suroso & Siti Jahroh, 2023. "The Design of a Contract Farming Model for Coffee Tree Replanting," Economies, MDPI, vol. 11(7), pages 1-18, July.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:7:p:185-:d:1188887
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    References listed on IDEAS

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    1. Ba, Hélène A. & de Mey, Yann & Thoron, Sylvie & Demont, Matty, 2019. "Inclusiveness of contract farming along the vertical coordination continuum: Evidence from the Vietnamese rice sector," Land Use Policy, Elsevier, vol. 87(C).
    2. Lajili, Kaouthar & Barry, Peter J. & Sonka, Steven T. & Mahoney, Joseph T., 1997. "Farmers' Preferences For Crop Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(2), pages 1-17, December.
    3. Esther Sri Astuti & Astrid Offermans & René Kemp & Ron Cörvers, 2015. "The Impact of Coffee Certification on the Economic Performance of Indonesian Actors," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 12(2), pages 1-15, December.
    4. Phil Simmons & Paul Winters & Ian Patrick, 2005. "An analysis of contract farming in East Java, Bali, and Lombok, Indonesia," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 513-525, November.
    5. Marc F. Bellemare, 2010. "Agricultural extension and imperfect supervision in contract farming: evidence from Madagascar," Agricultural Economics, International Association of Agricultural Economists, vol. 41(6), pages 507-517, November.
    6. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.
    7. Kozhaya, Rodrique, 2020. "A systematic review of contract farming and it's impacts on broiler producers in Lebanon," MPRA Paper 99369, University Library of Munich, Germany.
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