A bottled water factory or a shoe manufacturer can freely determine\nthe price label on its products. They calculate raw material costs,\nbreak down operational expenses, add a profit margin, then release the\nproduct to the market. Farmers, however, are different. They are also\nproducers: they till the soil, prepare seeds, plant, tend crops and\nharvest, yet they are powerless to determine the selling price of their\nproduce. Mighty in the realm of production, but weak in the sphere of\ncommerce. The price is not born from the calculation of the farmer\u2019s\nhard work, but is instead determined by a single buyer or middleman. An\nirony that continues to repeat itself to this day.<\/p>\n
The bargaining position of Indonesian farmers is so weak in the face\nof the market because: First, the majority of our farmers operate\nindividually on a very small scale. The 2023 Agricultural Census\nrevealed that the number of smallholder farmers, or those controlling\nless than 0.5 hectares of land, reached 16.89 million, or more than 60\npercent of all farmers in Indonesia. Narrow landholdings and fragmented\nproduction mean farmers have no bargaining power when dealing with large\ntraders.<\/p>\n
Second, Farmer Groups (Poktan) and Combined Farmer Groups (Gapoktan)\nhave so far been unable to serve as effective marketing vehicles.\nVarious agricultural economics studies show that more than 80 percent of\nPoktan and Gapoktan in Indonesia merely function administratively as\nchannels for distributing government assistance such as subsidised\nfertiliser allocations and agricultural machinery aid, without any\neffort to transform into collective and aggressive marketing forces.<\/p>\n
Third, limited access to formal banking or responsive microcredit\nschemes forces farmers to turn to middlemen to borrow working capital.\nThese loans become a psychological shackle that indirectly dictates that\nfarmers sell their entire harvest to the lender at a unilaterally\ndetermined price.<\/p>\n
Fourth, the absence of agricultural corporations capable of\nconsolidating farmers on the downstream side. Without a corporate entity\nacting as a marketing conduit and creator of added value, farmers\u2019\nharvests are directly sucked into the raw market, which is vulnerable to\nprice manipulation.<\/p>\n
Looking at World Agricultural Corporations<\/p>\n
The absence of connecting corporations in Indonesia is the opposite\nof the agricultural landscape in developed countries. There, farmers are\nnot left to fight alone in the free market because they are fortified by\ncorporations that control the value chain from upstream to\ndownstream.<\/p>\n
For example, CBH Group (Co-operative Bulk Handling) in Australia. CBH\nis a giant agricultural corporation fully owned by around 3,700 wheat\nfarming families in Western Australia. The corporation professionally\nmanages the supply chain from receiving, storage, processing, logistics\ntransport, to export marketing abroad. As a result, dividends and added\nvalue from the supply chain flow back into farmers\u2019 pockets. Each member\nalso receives guarantees or insurance if they experience crop failure\ndue to natural disasters or pest and disease attacks, and the annual\nmeeting is packaged as a gathering to exchange information on the latest\napplicable agricultural technology. Other examples can be seen in CHS\nInc.\u00a0in the United States or Zen-Noh in Japan. These global-scale\ncorporations are rooted in the aggregation of farmer consortiums managed\nin a modern way, financially robust, and highly competitive in the\nglobal market.<\/p>\n
Seeing the success in developed countries, the orientation of\nagricultural development in Indonesia should not only focus on\nself-sufficiency that emphasises increasing productivity alone, but\nshould intensively initiate the formation of agricultural corporations.\nIn several places, agricultural corporation initiatives have been\nproposed by various institutions but often do not run as they should.\nThe main cause is imprecision in structural execution that begins with\nrole disruption: farmer group administrators are suddenly required to\nbecome business managers, marketing directors, and even financial\nexperts. This double burden creates a clash of competencies where the\nfocus on farming is disrupted, while the desired market segment drifts\nfurther away.<\/p>\n
The Ideal Agricultural Corporation<\/p>\n
This systemic deadlock can only be unravelled by establishing a firm\ndemarcation of roles. Traditional farming institutions (on-farm) and\nmodern business entities (off-farm) must be separated, yet strongly\nbound through a capital ownership structure. Poktan or Gapoktan\ninstitutions are returned to their primary purpose in the on-farm area.\nFarmers focus fully on applying precision cultivation techniques, water\nuse efficiency, soil health, and product quality standardisation.\nFarmers are freed from the burden of thinking about where to sell or\nwhat the market price will be tomorrow morning, so that production\ncapacity can be optimally boosted.<\/p>\n
Outside the Poktan structure, an independent business entity is\nformed, whether a limited liability company (PT), CV, or cooperative,\nwhose board of directors and management are filled by non-farmer\nprofessionals (accountants, operational managers, and marketing\nexperts). This corporation manages post-harvest facilities (such as\nmodern rice milling plants, drying machines and packaging houses),\nbuilds brands, handles product certification, and negotiates directly\nwith retail markets, manufacturing industries, and government\ninstitutions.<\/p>\n
The crucial point of this corporation lies in the position of farmers\nas majority shareholders, not merely product suppliers. The land area\nand potential production capacity owned by farmers are appraised and\nconverted into share participation units in the corporation. This share\nparticipation does not transfer the farmer\u2019s land ownership certificate,\nbut the productive use rights and supply commitment are integrated into\nthe corporate ecosystem.<\/p>\n
Next, to break the shackles of capital loans<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/producers-without-bargaining-power-1786891893", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }