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RICE SUSTAINABILITY IN ACEH: PRODUCTION AND BEYOND1

Manajemen Rantai Pasok Padi di Aceh

Erna Maria Lokollo, Dewa Ketut Sadra Swastika and Wahida

Indonesian Center for Agricultural Socio Economic and Policy Studies

Jl. A. Yani 70 Bogor 16161

ABSTRACT

PDRB Provinsi Nagroe Aceh Darussalam (NAD) turun selama periode 2000-2006 terutama karena bencana tsunami. Walaupun dmeikian peran sector pertanian dalam PDRB naik rata-rata 7,18 persen per tahun selama periode 2002-2004, dan selama periode 2004-2006 PDRB tumbuh rata-rata 2,96 persen per tahun. Sebanyak 48 persen penduduk Aceh bekerja dis ketor pertanian dna 70 persen penduduk pedesaan mengandalkan sector pertanian, khususnya tanaman pangan. Padi merupakan komoditas pangan penting dalam hal penyediaan lapangan kerja, mata pencaharian, dan pembangunan pedesaan. Makalah ini bertujuan untuk menguraikan manajemen rantai pasok padi, khususnya di banda Aceh, Aceh Besar, dan Pidie. Pelaku dalam rantai nilai adalah petani, pedagang pengumpul, pengusaha penggilingan padi, pedagang besar, dan pengecer. Produksi padi berasal dari sawah irigasi dan tadaha hujan. Petani di lahan irigasi mempunyai surplus yang bisa dipasarkan kerna bisa panen dua kali setahun. Kegiatan nilai tambah meliputi pengumpulan dari pedagang desa, pengangkutan, pengeringan, penentuan kualitas, penggilingan, pengemasan dan penyaluran ke pasar local atau pasar di Medan. Pedagang besar atau pengusaha penggilingan beras berfunsi sebagai pusat informasi maupun pemberi pinjaman odal secara informal. Permintaan pasar di NAD maupun di medan masih sangat terbuka. Pangsa pasar untuk beras premium sekitar 10-20 persen, sedangkan untuk kualitas sedang dan rendah masing-masing 65 dan 25 persen. Implikasi dari penelitian ini adalah peningkatan produksi padi di NAD masih akan memberikan pendapatan yang menjanjikan. Disamping itu, perbaikan penanganan pasca panen bisa meningkatkan harga jual beras. Kata kunci: padi, Provinsi NAD, rantai nilai padi, manajemen rantai pasok.

ABSTRACT The Province of Nanggroe Aceh Darussalam (NAD)'s Gross Regional Domestic Product

(GRDP) declined during 2000-2006. It was mainly due to the damage of almost all economic sectors after the Tsunami. However, the contribution of agricultural sector to the GRDP of NAD grew at a rate of 7.18 percent/year in 2002-2004 and between 2004-2006 it grew by 2.96 percent/year. Most of Aceh population is involved in the agricultural sector, i.e. 48 percent out of the total labor forces. Around 70 percent of rural households depend on the agricultural sector, especially on the sub-sector of food crops. Rice is the most important food product contributing to employment, rural livelihoods and rural development. This study aims to get comprehend views of rice supply chain in NAD’ Province especially in Banda Aceh, Aceh Besar, and Pidie. The actors of rice value chain in the NAD’ Province are farmers, village collectors, small or medium rice millers, trader agents (wholesalers), and retailers. Rice in Aceh Besar’ District comes from the irrigated and the rain-fed areas. Since the farmers in irrigated area could grow rice twice a year, they have a significant marketable surplus. In the rain-fed areas, farmers grow rice only once a year (rice-fallow). Value added activities include seeking, collecting from the village-collectors, transporting, drying, grading, milling, packaging and delivering to the local or Medan market. They are also functioning as the price information pool and sometimes as informal capital providers. The market capacity to absorb potential rice production in NAD Province is still high enough (both for millers in Aceh Besar and Medan). Market’ share for the premium quality of

1 Paper presented at the 7th Annual Conference of the International Society of Paddy and Water Engineering on “Promising

Practices for the Development of Sustainable Paddy Fields”, October 7-9, 2009, ICC-IPB, Bogor, Indonesia.

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rice is around 10-20 percent, whereas for the medium and low quality are 65 percent and 25 percent respectively. This study suggests that enhancing rice production is still promising. In addition, post harvest handling improvement will increase rice selling price. Key words: rice, NAD Province, rice value chain, supply chain management (SCM)

INTRODUCTION

Background and Justification

The Province of Nanggroe Aceh Darussalam (NAD) had a gross regional domestic product (GRDP) of IDR 37,069 billion in 2006. In general the GRDP’ growth of all economic sectors declined. During the 2002-2004, they grew by -2.35 %/year, while during 2004-2006 (after Tsunami) the growth was -4.18 %/year. This decline in GRDP was mainly due to the damage of almost all economic sectors.

The GRDP of agricultural sector during 2002-2004 (before Tsunami) grew by 4.65 %/year, while in 2004-2006 (after Tsunami) it grew at a rate of -1.79 %/year. Table 1. The Percentage Distribution of GRDP in NAD in 2002-2006 (Constant Price 2000)

Economics Sectors 2002 2003 2004 2005 2006 Growth

2002-04

2004-06

Agriculture 17.40 17.03 19.99 21.37 21.19 7.18 2.96

Mining and Quarrying 34.72 36.14 30.38 26.15 24.88 -6.46 -9.50

Industry/Processing 20.93 20.17 18.35 15.86 14.27 -6.37 -11.82

Construction 3.51 3.36 3.75 3.50 5.07 3.36 16.28

Trade, Hotel & Restaurant 11.52 11.19 12.05 14.29 14.99 2.27 11.53

Transport and Comm. 3.33 3.27 3.76 4.78 5.18 6.26 17.37

Bank and Finance 0.74 0.91 1.21 1.22 1.33 27.87 4.84

Electricity & Water Supply 0.10 0.11 0.15 0.16 0.18 22.47 9.54

Services 7.75 7.82 10.36 12.67 12.91 15.73 11.52

GRDP 100.0

0 100.0

0 100.0

0 100.0

0 100.0

0

Source: Aceh in Figures, 2006.

The contribution of agricultural sector to the GRDP of NAD grew at a rate of 7.18 %/ year in 2002-2004, while in 2004-2006 it grew by 2.96%/year. Except construction, trade, and transportation sectors, most of economic sector after Tsunami faced with lower growth compared to before Tsunami. The construction, trade, and transportation sectors have increasing growth, because a lot of NGOs and government were doing reconstruction and rehabilitation of the damaged facilities, trade, as well as transportation facilities.

The agricultural sector consists of five sub-sectors, namely food crops, estate crops, livestock, forestry, and fishery. Of the five sub-sectors, the biggest contributor is food crops. Most of Aceh’ people engage in agricultural sector, 48% out of the total 2 487 426 labor forces (Economic Development Atlas of NAD, 2007). Around 70% of rural households depend on the agricultural sector, especially on the sub-sector of food crops. Food crops produce not only protein, mineral and fibers, but also contribute to so-called non-food services. Non-food services include food security, national security, rural development, poverty reduction, rural livelihoods and these also act as a filter for excessive urbanization.

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Among food crops commodities, rice is the most important food product contributing to employment, rural livelihoods and rural development.

Generally, for many countries in Asia, and particularly for Indonesia, rice is considered to be a strategic commodity as it is considered to be the foundation for rural development. The paddy/rice industry is related to the development of upstream and downstream industries. The upstream industry consists of seed, fertilizer, and the agriculture tools and pesticides industries. The downstream industry consists of rice milling, hotel/food stall/restaurant, flour and food industries, and the feed industry as well (Figure 1) (Quoted from: Sawit, and Lokollo, 2008).

The input/output data (I/O) 2003 showed that the backward and forward linkages effect ratio was higher than 1. This means that the backward and forward linkages effect ratio is above the average of all economic sectors. With an index >1 the paddy and rice industry becomes the key industry for rural development and the key to encouraging the development of small and medium enterprises (SMEs).

DOWN STREAM

INDUSTRY

FINAL

CONSUMERS

UP STREAM

INDUSTRY

Seed

Agri. Tool

Fertilizer

Pesticide

Paddy IndustryRice Industry

(Rice Mill)

Rice Flour

Hotel/

Restaurant/

Warung

Feed

Rural HH

Urban HH

Traders

Transportation

(Services)

Flow of Goods Flow of Services

Figure 1: The Rice or Paddy Industry and Its Linkages

The paddy and rice industries in Indonesia employ 12.1 million workers, the highest labor absorption ever, not only in the agriculture sector but of all other industries nationally. Small-scale farmers are the major players in the paddy/rice industry, while, half of the rice milling industry is categorized as small-scale. Only 5.5% of the milling capacity (equal to 39 million tonnes/year) is provided by large millers.

Many researchers have analyzed the importance of food security in Indonesia. Rice is more than just a foodstuff. Rice production creates a social benefit for the public by way of a public good. This means that the consumption of a product for a person does not reduce its availability for other consumers. Dillon et al (1999, from Sawit and Lokollo, 2008) identified the role of non-food services of rice as follows:

“(a) Political stability: unless there are adequate supplies of domestic rice at an affordable price, consumers tend to panic. Rice riots contributed to the downfall of both President Sukarno and President Soeharto. (b) Environmental and cultural preservation: irrigated sawah production makes a positive contribution to soil fertility,

to the prevention of urban flooding and to biodiversity conservation. Indigenous cultural

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traditions associated with the rice cycle are preserved. (c) Public health: irrigated rice

production generates rural ambient cooling and involves continuous village water flow. The former reduces morbidity risk and the latter enhances rural sanitation. (d) Employment generation: rice is the most labor-intensive rural activity. Rural labor absorption reduces rural under-employment. This discourages excessive rural-urban migration and eases urban congestion costs. (e) Income-distribution: labor intensive rice production raises rural incomes and reduces rural poverty. This contributes to a positive improvement in income distribution. (f) Labor-market competitiveness: rice is the principle wage-good for unskilled labor. A competitive and stable supply of rice contributes to stable and competitive labor costs. This, in turn, inspires labor intensive development in the non-rice sub-sectors. (g) Economic stability: adequate rice supplies contribute to price stability and improve the domestic investment climate.”

Several programs in NAD are presently on the stages of transition from relief-oriented livelihood to facilitation phase to let local market develop in a more secure, productive and just communities. The preliminary assessment has identified rice as key sub-sector for further value chain analysis relevant to the criteria, such as: unmet market demand, potential for value-added, market linkages and leverage, potential to address local needs and engage local entrepreneurs, and the ability to show results in two years. Since rice is a crucial staple crop, it is an appropriate target for livelihood security of micro, small and medium enterprises in NAD.

Objectives

The overarching goal of this study is to get comprehend views of rice supply chain in NAD’ Province.

The specific goals of this assessment are:

1. to assess the supply chain management (SCM) of rice in Banda Aceh in the Nanggroe Aceh Darussalam (NAD) Province

2. to identify areas for improvement through participatory approach/ process, where all stakeholders or actors involve in the rice chain participate in the focus group discussion

3. to assess and engage the potential collaboration and partnership among all stakeholders involved in the rice chain

Methodology

The methodology of this research was as follows:

1. Mapping of the SCM of rice (supply chain management). Activities included were mapping of product/rice flows, mapping of cash flows, information flows, activities to add value, services, what determines price, the relationships among actors/ stakeholders, who are the key decision-makers.

2. Finding ways to improve the SCM of rice. These activities were identified based on the participatory approach. Each stakeholders invited in the focus group discussions (FGD). The participants were asked to identify ways to improve the chain based on their own experiences. It is with the hope that the results of the meeting and discussions could benefit all stakeholders who formed the chains.

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Coverage of the study:

Banda Aceh, and Aceh Besar (Sibreh, Samahani, Indrapuri, Lhok Nga, Peukan Bada, Lambaro Market, Kampung Baru Market, Blangrakal Supermarket, Pante Pirak Supermarket, Wholesaler (UD. Modal Nekat in Banda Aceh).

Pidie (Geuleumpang Minyeuk, Meureudeu, Beureunuen Market).

RICE SUSTAINABILITY IN ACEH

Banda Aceh as a capital city plays a significant role in the rice value chain of NAD’ Province. Tsunami disaster slightly contributed to a changing in demand of good quality of rice. In line with the relief activity, Banda Aceh became a center of all activity of many institutions engage to the relief actions in NAD’ Province. This condition has created the increasing demand for rice especially of the good quality. Culturally, the Aceh’ people prefer good quality of rice, and these kind of preferences is existed even stronger in Banda Aceh. The increasing demand among others come from the increasing number of hotel, restaurant, and from the high-income class who prefer to consume the white rice compare to the broken rice.

In 2006 the Aceh Besar’ Regency produced 85,091 tons of milled rice. This amount of rice production was found more than what their consumption’ needs (39,316 tons). The ratio of production to consumption was 2.16. In other words, the production was more than double compared to the total consumption (see Table 2). That was one of the reason why a lot of Aceh Besar’ paddy and milled rice were being sold to Medan (North Sumatera). Table 2. Rice Self Sufficiency in Aceh Besar, 2006

I t e m s Number

1. Total population 302,428

2. Consumpt/capita (kg/cap/y) 130.00

3. Total consumption (ton) 39,316

4. Paddy production (ton) 135,065

5. Equiv. milled rice production (ton) 85,091

6. Surplus/deficit (ton) 45,775

7. Production-Consumption ratio 1) 2.16

8. Status of Aceh Besar rice surplus

Source: Field interviews and Aceh in Figures, 2006 1) = Equivalent milled rice production/Total consumption (5/3)

The Rice Production

Producers in the Aceh Besar’ District comes from two areas namely the irrigated and the

rain-fed areas. In the irrigated area, the producers are categorized as (i) the owner-operator, (ii) the operator only (share-cropper), and (iii) the owner only (land-lord).

The main producer area of rice in the Aceh Besar is located at the Sibreh, Samahani and Indrapuri Sub Districts. Most of paddy field area in these sub-districts is classified as the irrigated rice-field area. These areas were not damaged by the tsunami disaster. The main goal of farmers producing rice is to fulfill their own-household consumption. They sell their marketable surplus (the rest), in the form of wet paddy (GKP), only after keeping some for their-own consumption.

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The common cropping pattern in the irrigated area is rice-rice. The first (wet season) rice is planted in October or November and harvested in February. The second (dry season) rice is planted in February or March and harvested in June or July (see Appendix 2). Since the farmers in irrigated area could grow rice twice a year, they have a significant marketable surplus. Thus, they can be categorized as the Net Producer Farmers (Table 3).

The producers/farmers in the rain-fed grow rice only once a year (rice-fallow). Similar to the farmers in irrigated area, the main objective of farmers producing rice in this area is also to meet/fulfill their own-home consumption. In the area where the average farm size is only about 0.25 ha/farmer, the farmers keep all paddy for their own consumption. They dry and store their rice at home, and gradually bring it to rice miller as much as they need for daily consumption (Figure 2). However, they can not avoid from selling a part of their paddy, in case they need some money for the school of their children or other emergency’ expenses. Generally, they produce rice less than the amount they need for household consumption. Therefore, they can be grouped into the Net Consumer Farmers. Farmers with average farm size of 0.4 ha or larger are able to produce rice more than what they need for their own-household consumption. Thus, they can be classified as the Net Producer Farmers. In more detail, the status of producers/farmers in the Aceh Besar is presented in Table 3.

Table 3. Production, and Consumption of Rice in Aceh Besar and Pidie, 2007-2008

Cost & income components Sarbini

Ng.Umbang Lhok nga

Kel.Bahagia Mon Cut Lhok Nga

Jammiliah Tmb.Baru Kt.malaka

Abdullah Tmb.Baru Kt.malaka

Kelp. Serbaguna Kelp. Jmp Indah

Aneuk Glee Jeumpa Pidie

Cropping pattern Rice-Peanuts Rice-Fallow Rice-Rice Rice-Rice Rice-Rice Rice-Rice

Farm Size (ha) 1.00 0.47 0.25 0.50 0.50 0.25

Rice variety Ciherang IR 64 IR 64, Ciherang

IR 64 Cibogo, Cigelis Ciherang, Mekong ga

Tractor (IDR.000) 1,000 450 250 400 425 250 Other land prep (IDR000) - - 50 - - 150

Seed (kg) 25 20 30 20 20 10

Planting (IDR.000) 300 150 100 150 450 150

Fert: Urea+SP36+KCl+NPK (kg) 100+75+125+0 - 50+10+20+0 100+75+25+0 25+15+ 25+30 50+25+25+25

Price of fertilizer (IDR.000/kg) 1.6; 2.5; 2.8; 3.0 - 1.5; 2.5; 3.0; 3.0

1.6; 2.5; 3.0; 3.0

1.5; 3.0; 3.0; 3.0

1.5; 3.0; 2.8; 3.0

Pest & Weed control (IDR.000) 200 125 100 - 300 200

Harvest cost (IDR000) 570 250 250 300 450 200

Paddy production (kg gkp/hh/season) 2,500 1,645 1,000 2,500 2,500 1,375

Farmers share (kg gkp/hh/season) 1) 2,500 1,645 670 1,675 1,675 1,031 Equiv. milled rice (kg/hh/year) 1,125 1,481 603 1,508 1,508 928

Paddy Price (IDR.000) 2.70 2.70 2.60 2.60 2.50 2.50

Total Revenue (IDR.000/season) 6,750 4,442 1,742 4,355 4,188 2,578 Cash cost (IDR.000) 2) 2,893 1,035 950 1,333 1,808 1,275

Family Labor Opp cost 2,500 1,175 625 1,250 1,250 625 Total cost (IDR.000/season) 5,393 2,210 1,575 2,583 3,058 1,900

Unit cost (IDR000/kg) 3) 2.16 1.34 1.58 1.03 1.22 1.38

Income from rice (IDR.000/hh/season)

1,357 2,232 167 1,772 1,130 678

Majority farm size (ha/hh) 4) 0.25 0.4 0.25 0.25 0.5 0.25

Net milled Rice prod (kg/hh/year) 5) 281 1260 603 754 1508 928

Rice consumptn (kg/hh/year) 600 730 548 584 626 730

Status of farmers Net consumer Net producer Net Producer Net producer Net producer Net producer

Source: primary data from individual farmers and farmers group interviews, ICASEPS 1) Farmers share = for share cropper; 2) Excluded family or unpaid labor; 3) Cost of producing 1 kg wet paddy; 4) Farm size of the majority of

farmers in the respective village; 5) Net milled rice got by the farmers (respondent) = 0.9 x 0.5 x farmers paddy share; gkp= gabah kering panen= wet paddy.

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The sample producers we interviewed in the Pidie’ district are farmers who renting land with the rent rate of 450 kg of paddy/0.25 ha for wet season and 225 kg of paddy for dry season. The major farm size is about 0.25 ha. They grow rice twice a year. The total rent is 675 kg of paddy/0.25 ha/year. Most of the rice-farming activities are done by the female/women workers. The male workers/men are only do the land preparation and pest control (using pesticide). Since majority of the farmers in Pidie grow rice twice a year, they can be categorized as having enough marketable surplus of rice.

The owner-operators are more likely to have a bigger quantity of marketable surplus compared to the share-croppers. It is because the share-croppers have to share one-third of the production to the land owner (land-lord). Meanwhile, the land-lord is likely to sell most of their rice to the millers, directly or through the inter-village collectors, since most of them have a large size of land.

The Rice Value Chain’ Map

The supply chain of rice in Banda Aceh/Aceh Besar is shown in Figure 2. From the field survey we found that the actors/players of rice value chain in Banda Aceh (also in Aceh Besar) are farmers, village collectors, small or medium rice millers, trader agent (wholesaler), and retailers. During the period of harvests, the small or medium rice millers are also function as the sub-district’ collectors and with the agent of transportation they will bring the un-husked rice or paddy to Medan. Prior to the field survey, we assumed that most of rice from NAD’ Province are re-polished and re-grading in Medan, and sent back to Aceh, however, as reviewed in the last section of this chapter, we found that Medan turn out to be the final destination market of rice from NAD’ Province.

Figure 2. The Rice Value Chain in the Aceh Besar’ and Pidie’ Regencies, NAD Province, 2007-2008

Flow of paddy Flow of milled rice Milled high quality rice

TRADERS (in A.Besar, B.Aceh & Pidie

Rainfed Area (Net Consumers)

Village collectors in

A.Besar

Producer in Aceh Besar & Pidie

Irrigated Area

Owners & operators

Sharecropper/ consumer

Owner (Land lord)

Inter-village

collectors

RICE MILLERS

In Aceh Besar &

Pidie

RICE MILLERS In Medan

I n p u t s S u p p l y

CONSUMERS (in Aceh Besar, B. Aceh, & Pidie)

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The Rice flow in the Marketing Channel

After keeping part of paddy production for their own consumption, farmers in the Aceh Besar sell their paddy to the village collectors or to the inter-village collectors. The inter-village collectors then usually sell the paddy to the rice millers in the Aceh Besar or to the rice millers in Medan. Similar to the farmers in the Aceh Besar, farmers in the Pidie’ Regency is also keeping their paddy, drying and stores it for their own-home consumption. They sell the rest directly to the nearest rice miller or through inter-village collectors who come to the village (Pidie’ farmer’ case). A lot of paddy from Aceh Besar and Pidie flow to Medan. There are at least two factors that cause the flow of paddy from the NAD’ Province or Aceh to Medan. Firstly, the capacity of rice market in the Aceh Besar and Pidie are limited, so that the market can not buy or absorb the entire paddy produced in the Aceh Besar and the Pidie. Secondly, some traders prefer to sell paddy to Medan, due to the quick cash payment reason (i.e. Medan buyers pay in-cash directly, while wholesalers in Banda Aceh will pay about one month after deliver). Thirdly, Medan’s market can absorb all quality of paddy from NAD. Some consumers buy the rice from the traders (retailers in the market) and some (who are close to the RMUs) buy directly from the millers.

In terms of the milled rice, the capacity of market in Banda Aceh is also found too small to absorb all rice. Therefore, similar to paddy, traders in Aceh Besar are also preferred to sell rice to traders in Medan. However, milled rice of a certain quality is also come from Medan to Banda Aceh to meet the demand of the high-end consumers. The marketing chain of rice from Aceh Besar and Pidie is as presented in Figure 2.

As described previously, the channel of rice value chain in producer area starts from the farmers as producers. They sell the paddy/unhusked-rice to the collectors and the price is set by the collectors. Since the farmers are located in the main producer areas where farmers could plant rice twice a year, every harvesting time they are able to sell certain amount of their production to the collector in the village. The village collector sometime acting as a middle man which help the farmers sell their paddy to the larger collector (sub district collector) and in which they get the commission only. The decision of the sub-district collector to sell the paddy either locally or directly to Medan is depend on the seasonal condition. One of the respondents in the Mon’I’ village, Samahani District stated he sold his paddy to Medan usually during the month of September – October and the month of March – April. Meanwhile, during the month of August – November or January – March, he usually sell his paddy to a local miller, since during that period Medan is experiencing the harvesting time. During the shortage-of-rice’ period, the District collectors usually sell the milled-rice from the millers and transported to the other Districts within the NAD.

Rice miller units we found in the location are mostly categorized as having small to medium capacity with the total capacity is around 3 - 4 MT per day. In certain location we found the medium rice miller unit with the capacity of more than 6 – 8 MT per day. Paddy could come from the village collectors, sub-district collectors, or directly from the farmers. The village or sub-district collectors deliver the paddy to the millers, however during the shortage of paddy, the rice millers usually buy directly from the farmers. The price of paddy is varied depend on where it came from. Price at the collector, nowadays, is on average IDR 2, 683 per kilogram, whereas price at the farmer’ level (farm gate price) is found at IDR 2 600-2 700 per kilogram of paddy. The differences caused by the quantity of paddy brought to the miller. Small amount usually get cheaper price compare to the large amount of paddy, for example small volumes 1-2 sac gets price tag of IDR 2 600 per kg while big volumes/above 2 sac gets price tag of IDR 2700 per kg. The competition to get paddy is quite high in the Aceh Besar.. The rice miller unit has also the strategy to get the paddy from the farmers at the harvest’ time and deposit it in the RMU’ storage room, since the farmer do

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not have the storage facilities. At the off-season, farmers then can mill them into the rice form. The rice miller unit get the benefit if farmers decide to keep their paddy (and has already in the form of dried-condition) until the shortage or off-season. This is due to the fact that the unit price of milled-rice is usually found to be higher during the shortage or off-season period.

Payment system in the rice marketing’ channel is varied depend on the season. During harvesting time, the payment system is one to two weeks delayed, however in the shortage season; the transaction is usually in-cash, since the supply of rice is limited. Value chain activities created and done by the rice millers are: collecting from the village collector, transporting (from the farmer), drying, grading, milling, packaging and delivering to the targeted market. Rice millers sell their rice to the market (wholesaler), to the small shops in the village (kedai), to the inter-district agent, and to the restaurant. The price at the retailer is generally found higher than the price at the wholesaler.

The other important key player in supply chain management for rice in Aceh Besar is the trader agents. Trader agents are the large collectors. Their targeted market is Medan. The decision whether they will sell paddy or milled rice, will depend on season and price in Medan market. The source of product is collected from village Rice Milling Units in the villages. During harvesting time, trader agents could transport around 100 MT of paddy to Medan per week. Medan is the big market of rice, almost 50 percent supply rice in Medan is come from the NAD’ Province, and Aceh Besar is one of the major production areas in the NAD’ Province beside Pidie, Pidie Jaya, Panton Labu and other areas in NAD. Table 4. Value Added Creation and Marketing Margin for Rice Value Chain in Aceh Besar and Banda Aceh (IDR per kg)

Marketing Channel Buying Price

Trans port

Dry- ing

Mill Grad Pack De-liver

Selling Price

Mar-gin

1. Farmer/grower *) 4514 2. Village collector 4514 50 4614 50 3. Sub District Collector 4614 50 150 50 4. Rice Miller/Processor 4714 300 100 100 5300 86 5. Wholesaler /Trader Agent Sell to Medan 5300 50 70 100 5620 100 6. Wholesaler in Kampung Baru Market (BA) 5300 5385 85 7. Kedai/small shop in village @) 5350 50 5500 100

8. Medium–Large /RMU in Medan 5620 5820 200 Purchase rice from trader agent 6000 180 9. Retailer 5820

Source : primary data Note : Rice miller or processor will sell their rice to different customers (5, 6 and 7),

Margin for trader agent sent to medan included 25 IDR per kg commission for agent in Medan. *) At farm level, about 1.736 kg of wet paddy is needed to produce 1 kg of milled rice @) Kedai purchases rice from both RMU and wholesaler in the market

Based on our findings in the field, the trader agents’ other activities such as selling rice bran or rice’ sacks is found to be more profitable for them than selling the rice itself. Presently, the break even point for the price of medium rice is IDR 5,620 per kg.

In Medan, most of the Aceh Besar’ rice is bought by the medium RMU’s and they usually marketed it to the estate-crops’ workers nearby (low to medium level of consumers) The taste of milled rice from NAD is not preferred by the high end consumer. Medium and large scale RMU’s in Medan are found to be many in quantity, scattered and located mostly around the Langkat’ District (Stabat). During our field work in Medan, the rice supply from the NAD was in its shortage’ season, therefore it was very difficult to trace back the sources of rice from which RMU’s. According to discussion with the RMU’s owner in Langkat named “Kilang Deli”, the quality of the paddy from the NAD is always cleaner but the taste is not as good as rice from the Lubuk Pakam. The price of paddy is determined by the condition of its’ post-harvest handling. The dried paddy (GKG) is usually gets higher prices compare to the

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moist-paddy (GKP). From the experiences of the RMU’ owners get in Medan, they are able to pinpoint that the poor post-harvest handling usually become a limitation of the NAD’ farmer to get higher price for their paddy. Improving the post-harvest handling activities will definitely improve and increase the selling price of paddy. The medium and large rice millers in Medan conclude that profit from rice is very thin. To keep them in the business, they prefer to purchase dried paddy rather than rice, since they will get more income from the by- product s of rice milling activity (i.e.,rice bran or dedak). The profit per kg of rice bran is found much higher than the margin that they could get from selling milled rice.

The Rice Value Chain at the Net Consumer’s Area (Lhok Nga and Peukan Bada)

Rice production area in Aceh Besar can be categorized as (1) un-damaged area such as major producer of rice in Sibreh, Samahani and Indrapuri and (2) damaged area, such as Lhok Nga and Peukan Bada. Damaged area of rice fields due to Tsunami in Aceh Besar District included Banda Aceh has reach 6,930 ha, before tsunami (2004) total rice fields area was 41,164 ha. Major damage of the rice field was found in Banda Aceh. Level of damage identified in 4 category as follows 1) light (693 ha); 2) moderate (1386 ha); 3) severe (4158 ha) and wiped out (693 ha) (ICASEPS, 2005). Level of damage of rice fields in Lhok Nga and Peukan Bada is severe since level of sedimentation is more than 20 cm. Most of rice fields area is rain fed rice fields, until 2007 Corps has concentrated their rice relief activity and development in Lhok Nga and Peukan Bada. Total potential area in each location is 270 ha and 93 ha, The activity empowering 986 farmer in 141.1 ha area of production, in the same condition 185 farmer in Peukan Bada has been cultivated rice in 59 ha rice fields.

The highest level of damage became a limitation of the farmer to increase the area of production. In Moncut village, almost 50 percent of rice fields area still severe from the damage. This condition had caused an increasing number of pest (mice, boar, bird) and destroy their rice in the fields. Farmer group “Bahagia” in Moncut village has planted their rice fields 2 times, seed, fertilizers, agriculture equipment was donated by several NGO. Most of farmer in these locations planting rice for their own consumption needs. Common pattern in that area nowadays is their production is not enough for one season consuming, they have to purchase for rice to fulfill their basic need, average prices for rice is IDR 82,000 per 15 kg in rice miller (processor “Kilang 88”) and IDR 85,000 for the same amount in Lamlom’ market.

Rice value chain in net consumer area such as in 2 sub districts (Lhok Nga and Peukan Bada) could be found in Keuneu-eu Village, Peukan Bada sub district. Even though the rice fields in their surroundings still damage, small rice milling unit in Keuneu-eu still exist.

RMU processor picked up paddy from farmer in the village, and also from certain major producers area in Aceh Barat such as Indrapuri, Sibreh and Blang Bintang, the price of . Average capacity of the RMU is 700 kg per day. Farmer in the village maximized the function of RMU as a miller for their own consumption of rice. Service fee for milling paddy is IDR 300 per kg. Marketing margin for producing 1 sack (15 kg) of rice is IDR 1700.

Figure 3 shows the marketing margin for the rice miller unit (RMU) in the net consumer areas. As stated above to get 15 kg of rice, the RMU needs to purchase 23.4 kg paddy (factor conversion rate from paddy to rice is 0.64). The price of paddy in Sibreh or Indrapuri

is IDR 3000 per kg, the transportation cost is IDR 100 per kg of paddy, drying and milling activities which are conducted by the RMU or miller, and they usually cost IDR 300 per kg of rice and the packaging cost is determined by the price of sac (1 sac = 15 kg of rice) which is

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IDR 1300 each. The total cost for producing 15 kg of rice is then become IDR 78,300. The millers usually sell the rice IDR 80,000 per 15 kg, therefore the profit is IDR 1,700 per 15 kg or IDR 113.3 per kg. In case the miller would like to sell their rice outside the village the price is IDR 81,000 per 15 kg. Even though the profit that might come from selling rice is very small (IDR 113.3 per kg), the miller can also get profit from the rice bran and the contribution from rice bran is quite significant number and the price of rice bran is IDR 800 – 1000 per kg. The total revenue from selling rice bran is IDR 2300 per 15 kg of rice (10%x23.4 kg paddyxIDR 1000). If the miller mill the rice as explained in figure 3, the rice bran is then belong to the miller, however the miller also provide milling service to the farmer (from paddy to milled-rice). Within this pattern the miller only take service-fee to mill rice (from paddy) around IDR 300 per kg of rice, and the rice bran belong to the farmer to feed their ducks or chicken.

Figure 3. Marketing Channel Value Chain of Rice in Consumer’s Area

Marketing area of rice production is Lembata (Leung Bata), Tapang and Banda Aceh. Before Tsunami, the owner had sent rice to Pulau Aceh. Since tsunami the millers were marketed rice locally. Payment system is one week delay (consignment). Total profit is 200,000 IDR per ton paddy and rice bran. In shortage season, the local processors hire the collector for IDR 40,000 per day to collect paddy from farmers usually within the village. In the shortage season, sometime small scale RMU is found had to be competed with the large scale RMU since the production for paddy is limited.

The Rice Value Chain in Medan

The rice value chain in Medan is presented in the figure 4 below.

Figure 4. Rice Value Chain in Medan

Purchase Paddy 23.4 kg = 70, 300,-

Transporting 100/kg

Drying & Milling 300/kg

Selling 80,000 per 15 kg

Farmer from L.Pakam,

Parbaungan

Farmer from NAD

Trader Agent Large Scale

Rice Milling Unit

Wholesaler or Trader Agent

Inter Province Trader (Pekanbaru, Padang,

NAD)

Wholesaler agent In Medan (Jalan

Sibayak)

Retailer Consumers

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Medan turns out to the biggest market for paddy and rice from Aceh. The major producer area of rice (paddy) flow to Medan come from Pidie, Kutacane, Meulaboh (Nagan Raya), Banda Aceh (Aceh Besar), Beureuneun, and other areas. Beside from NAD, paddy or rice to Medan are also come from the Lubuk Pakam, Parbaungan and Kisaran. The best quality of rice comes from Sawang (Bireun), the milling rate (paddy to rice) from this area almost 72 percent. Based on the large scale RMUs’ experiences, the paddy from the NAD is better (clean) compare to the paddy coming from Medan’s areas (i.e., the amount of remaining straw/garbage is still high). As a comparison for one day milling capacity, the rice miller could mill paddy from the local area around 90 MT per day, meanwhile from Aceh could be doubled (180 MT per day). Most favorable varieties for Medan’s market are the IR 64, and the Ciherang. The rice value chain in Medan is described as follows.

PTN is the famous rice brand from Medan due to long period of brand image. PTN rice is produced by the Kilang Padi Petani in Kisaran, North Sumatera (200 kilometers north of Medan). The supply of paddy comes from Tanjung Ledong, Teluk Bule and Labuhan Bili. The middle-men play an important role in the supply chain. The middle-men purchase the paddy from the farmers, and sell it to the Kilang Padi “Petani”, after doing some post- harvest activities (i.e., drying). The PTN rice is then being sold to all over location in the North Sumatera. The trader-agent’ (wholesalers) buying price for the local paddy is IDR 3000 per kg (moist-paddy) or equivalent to the IDR 3200 per kg of the dried-paddy. The post-harvest handling is then function as the main indicator to determine the price in the Medan’ market. Good post-harvests handling usually have a high milling-rate conversion of paddy. Therefore the large-scale RMUs in Medan maximize their capacity and equipped by machinery equipments such as dryer and miller. Compare with the previous years, presently the rice’ business are not as interested as it used to be. The increasing price of fuel and gasoline has reduce the profit of the RMUs (rice industries), thus to keep them on business each RMU will maximize their profit from by product of rice. Nowadays rice bran or “dedak” become the main contributor to the RMUs’ profit , even is found higher than the profit from the milled-rice itself. Nowadays the price of rice bran is around IDR 1,200 – 1,800 per kg. A good post-harvest handling produces a good quality of rice bran. Rice bran companies such as Charoen Phokpand and Sierad are the biggest demand for rice bran in the North Sumatera’ Province (Medan). Poultry Industries are also growing quite rapidly in the North Sumatera’ Province which in turn can accelerate the demand of rice bran from rice.

PTN rice is found marketed in the NAD’ Province through the trader agents. The trader agents are usually functioning as wholesalers and sometime they have their own transportation facilities to bring the rice from the Kisaran (Kilang PTN) back to Aceh. Besides PTN, there is some other rice brands of Medan come to Aceh, such as Lucky Flower, Payung, and Lemon brands. The demand of good quality of rice in the NAD’

Province is almost 10 percent from the total demand consumption of rice. PTN Kilang only engages with a few of wholesalers in big cities in Aceh, such as our respondent whose known as a trader agent for PTN rice in Banda Aceh. The company name is UD. Modal Nekat. According to the owner, the demand of PTN rice in Banda Aceh is around 8 MT per

month and the payment system is one week consignment. The price of PTN rice in Banda Aceh is cheaper than in Meulaboh. On average the price of PTN rice is IDR 7250 per kg whereas the price of the local variety of rice (Keumala ) is IDR 5600 – 6000 per kg. Keumala is known in Aceh as the best variety of local rice. Beside white rice from Medan, the second famous brand of rice is the rice come from Pidie which famous known as Keumala, and Tangse, which is known as “Kuku Balam” variety.

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SPECIFIC RICE VALUE CHAIN TO FOCUS ON

This chapter describes what should be the focus to develop market for the rice industry. The first thing to focus on for the rice market development in Banda Aceh/Aceh Besar’ is to strengthen the production’ side of the rice farming activities. Ever since the location in two sub-districts was damaged by tsunami, the high level of mud was formed in the rice fields. It has affected the fertility and quality of the soil; therefore it will need a strong support from NGO (both international and local) and from the Government’ institutions; to improve the quality of rice field areas of the farmers. Within the same sub-district in Lhok Nga the condition of rice field area is completely differ; most farmers in Moncut’ area is more severe damaged compare to areas of farmers in the Naga Umbang’ Sub District.

Short term intervention could start in the Naga Umbang’ Sub District by introducing deep well irrigation system to improve the water accessibility of rice-farmers . The condition of the rice-field in Lhok Nga is rain-fed. Presently the main objective of farmers in those areas to plant rice is merely for their own food-security reason; therefore the amount of rice that could be marketed (marketable surplus) remains limited. Improving the water accessibility will enable farmers to increase their rice’ cropping intensity. The efforts needed to rehabilitate the rice-fields at the Moncut’ village could be more complex compare to the one at the Naga Umbang. One big advantage of the farmer-group in Moncut is that they have a strong and close relationship among members, and a credit scheme for input of rice production which has been created long time ago; and the Tsunami made all their stocks of fertilizer destroyed. With these strong commitments they can reach the opportunities to develop their own village and increasing their rice production. The objective to fulfill the food security condition could then be shifted to meet the market demand of rice locally.

Besides increasing the water accessibility, farmers in the Naga Umbang are also need an assessment in their pest management technology and can maximize their rain- fed land by cultivating other commodities (i.e maize, ground-nut, red-pepper/chilli, lemon-grass, etc). The head of the farmer group can become and function as agent of change. Improving the accessibility of water will increase the demand of marketed rice, a small scale rice miller in the village could maximize the capacity of its miller if the amount of rice sufficient enough. Most of millers in the area have already established a value chain network with the wholesalers and the retailers.

Besides improving the rice production, it should be noted that it is very important to develop the rice millers’ capacity too. The lack of capital become the main problem nowadays especially during harvesting time. Meanwhile it is the only time for the rice millers to create paddy’ stock or un-husked-rice for their milling activities for certain days or months. If the possibilities to create more stock of the paddy from the local producer’ area is quite certain, it will helps the miller to expand the time of milling capacity for more than 6 month in a year.

Table 5. Consumer End-Market for Rice in Banda Aceh/Aceh Besar

No.

Type of

Consumer

Rice Characteristics

color % broken softness cleanness

1. Low yellowish > 25 % hard dirty

2. Medium broken white 10 – 25% medium med - clean

3. High sparkling white < 10% soft clean

Source : Rice traders and RMU’s interviews, 2008

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The market capacity to absorb the potential rice production is still high enough (both for millers in Aceh Besar and Medan). Presently, from the field interviews, we found that the market’ share for the high/premium quality of rice is around 10 percent – 20 percent, whereas for the medium and low quality are 65 percent and 25 percent respectively. The intervention should focus on all type of consumers. However, the low and medium end consumers can be heavily targeted on.

CONCLUSIONS AND RECOMMENDATIONS

The actors/players of the rice value chain in Banda Aceh/Aceh Besar are farmers, village collectors, small or medium-scale of rice millers, trader agents (wholesalers), and retailers. On the harvest seasons, the small or medium-scale of rice millers are also functioning as the Districts’ or sub-district’ collectors and transporting the rice or paddy to Medan’ market. Banda Aceh as a capital city plays a significant role in the rice value chain of NAD’ Province. In 2006, the amount of rice production in Aceh Besar (85,091 tons of milled rice) was found more than what its population consumption’ needs (39,316 tons). The ratio of production to consumption was 2.16. That was one of the reason why a lot of Aceh Besar’ paddy and milled rice were being sold to Medan (North Sumatera).

Producers in the Aceh Besar’ Regency comes from the irrigated and the rain-fed areas. In the irrigated area, the producers are categorized as (i) the owner-operator, (ii) the operator only (share-cropper), and (iii) the owner only (land-lord). The main goal of farmers producing rice is to fulfill their own-household consumption. Similar to the farmers in irrigated area, the main objective of farmers producing rice in the rain-fed area is also to meet/fulfill their own-home consumption. The common cropping pattern in the irrigated area is rice-rice while the pattern in the rain-fed which can only grow rice once a year is rice-fallow. In the area where the average farm size is only about 0.25 ha/farmer, the farmers keep the entire paddy for their own consumption. They dry and store their rice at home, and gradually bring it to rice miller as much as they need for daily consumption. Generally, they produce rice less than the amount they need for household consumption. Therefore, they can be grouped into the Net Consumer Farmers. However, farmers with average farm size of 0.4 ha or larger are able to produce rice more than what they need for their own-household consumption. Thus, they are classified as the Net Producer Farmers. Value added created by the producers/farmers in the rice chain is to produce a consistent supply of rice.

The other important chain members of the rice in Banda Aceh/Aceh Besar are the traders and the RMUs. Value added activities created and done by them are seeking, collecting from the village-collector, transporting (from the farmer), drying, grading, milling, packaging and delivering to the local’ or Medan’ market. They are also functioning as the price information pool and sometimes as informal capital provider.

The screening of the prioritized solution and possible activity at the farm/producers level state that the demonstration farm introducing the ICM and SRI technologies can be pursued as collaborative work of NGO, BPTP and the Dinas. The other activity is to introduce the Government’ credit scheme to facilitate the rice traders/RMUs’ needs of cash (kredit program LUEP, Kredit tunda jual, etc.).

Only through the collaborative and participatory works, the action plans can have a great impact to the areas. Understanding when and where to implement the action plan is also crucial. Consumers’ want and preferences of rice are not transmitted directly to the farmers who produce or plant the rice, so sometimes there are “missing links” connecting

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consumers at one end, and producers’/farmers at the other. Therefore understanding the whole supply chain of rice in Banda Aceh/Aceh Besar is necessary. It is the goal of this study to present the complete/whole picture of the rice SCM in Banda Aceh/Aceh Besar, and that the SCM/the value chain of rice in Banda Aceh/Aceh Besar can be comprehended and understood as the pre-requisite and basis for any intervention solution to improve the rice

chain. Aside from farmers/producers of rice, the traders/RMUs as the other actors of the rice SCM can definitely play a significant role to improve the whole rice SCM in Banda Aceh/Aceh Besar as they are also perform many value added activities to the rice industry in the areas.

The market capacity to absorb the potential rice production is still high enough (both for millers in Aceh Besar and Medan). Presently, from the field interviews, we found that the market’ share for the high/premium quality of rice is around 10 percent – 20 percent, whereas for the medium and low quality are 65 percent and 25 percent respectively.

REFERENCES

BPS. 2000-2005. Aceh Statistics. Badan Pusat Statistik, Jakarta, Indonesia

Dillon, HS, M.H.Sawit, P. Simatupang and S.R.Tabor. 1999. “Rice Policy: A Framework for the Next Millenium”, Report for Internal Review. Restricted only for Bulog (November 1999).

FAO. 2005a. Rice Market Monitor, vol.8(4).

FAO. 2005b. Rice Market Monitor, vol.9(4).

NAD. 2007. Economic Development Atlas of NAD. Banda Aceh, Indonesia

Sawit, M.H. and Lokollo, E. M. 2007. Rice Import Surge in Indonesia. ICASEPS & AAI.