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REPORT

STUDY ON MARKET APPRAISAL AND VALUE CHAIN

DEVELOPMENT OF CHILLI PRODUCTS IN EAST JAVA

By JABAL TARIK IBRAHIM

Submitted to

Food and Agricultural Organization (FAO)

TCP/INS/3303 Project

FACULTY OF AGRICULTURE AND ANIMAL HUSBANDRY

UNIVERSITY OF MUHAMMADIYAH MALANG

2012

1

CONTENTS

Chapter Contents Page

I. INTRUDUCTION 2

1.1 Background 2

1.2 Scope of Study 5

1.3. Objectives 5

1.4. Outputs. 6

II. METHODOLOGY 7

2.1. Data Types 7 2.2. Data Collection Techniques 7

2.3. Sampling Techniques. 8

2.4. Respondents. 10

2.5. Data Analysis 11

III RESULTS 12

3.1. The General Condition of Research Areas. 12

3.2. Topography and Infra-structures 14

3.3. Farming Activities and Inputs of Chilli Production 14

3.4. Chilli Productivity 18

3.5. Cost, Revenue, Benefit, Breakeven Price (BEP), and R/C

ratio.

19

3.6. Marketing Agency, Marketing Chain, and Product Flow 23

3.7. Market Margin. 25

3.8. Chilli Processing 28

3.9. SWOT Analysis and The Strategies for Developing Chili

Value Chain in Blitar and Kediri

30

3.10.STEER Analysis and Needs Assesment of Technology 41

3.11.Strategy recommendation for Value Chain Development of

Chilli

42

IV CONCLUSION AND RECOMMENDATION 43

4.1. Conclusion 43

4.2. Recommendation 43

REFERENCES 45

ANNEXES 47

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I. INTRUDUCTION

1.1 Background

Horticulture is one of the rapidly growing sectors in Indonesia agriculture. Other

plants are cultivated in horticulture include fruits, vegetables, and floriculture. While in

horticulture, vegetables are a good source of vitamins and minerals. Chilli is vegetables

that have an important role for agriculture in Indonesia. Chilli is consumed both in fresh

and processed form like chilli sauce and chilli pasta. Fresh chilli can be usually used as a

cooking spice, condiment and food decoration. Meanwhile the form of processed

products is sauce, chilli sauce, and chilli powder.

The demand of chilli commodities still depends on the amount of chilli produced.

However, generally the amount of chilli production is determined by the area harvested

and productivity of the land. Each year the amount of chilli offered is subject to change.

These changes occur because of fluctuations in harvesting areas, quantity of production

as well as land productivity. Three provinces in East Java significantly contributes

toward national chilli stock. The all three provinces are East Java, Central Java, and West

Java. In the last five years East Java is always be the largest producer of small chili,

however West Java produces the highest number of big chilli. Chilli production in all

three provinces in the last five years is shown in this following Table 1.

Table 1: Chilli Production in Three Provinces in Java Island and Indonesia in The

Last Five Years (2007 - 2011)

Small Chilli (ton)

Province 2007 2008 2009 2010 2011

East Java 140,552 130,490 177,795 142,109 181,806

Central Java 48,811 50,662 80,936 60,399 65,227

West Java 79,713 73,261 106,304 78,906 105,237

INDONESIA 451,965 457,353 591,294 521,704 594,227

Big Chilli (ton)

Province 2007 2008 2009 2010 2011

East Java 73,776 63,033 65,767 71,565 73,677

Central Java 91,150 100,083 139,993 134,572 119,131

West Java 184,764 168,101 209,265 166,691 195,383

INDONESIA 676,828 695,707 787,433 807,160 888,852

Source: http://www.deptan.go.id/infoeksekutif/horti/pdf-ATAP.

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Nationally, chili production in Table 1 tends to increase. It is the result of

Indonesian residents’ escalation. The number of resident’s factor is one of framer

components of chili demand. The increasing of residents will affect the increasing of

chili demand as well. Annual Per capita consumption of chili in Indonesia tends to be

stable, but small chili is slightly decreased.

Tabel 2 : Year Average per Capita of Chili Consumption in Indonesia, 2007-2011.

Kind of Chilli

2007 2008 2009 2010 2011

Big Chilli (ounce) 14.704 15.486 15.226 15.278 14.965

Small Chilli (ounce)

15.174 14.444 12.879 12.984 12.097

Source : National Sosio-Economic Survey, 2007-2011

Chilli is one of commodities which have substantial price fluctuations. Fluctuation on

price of red chilli result either in positive or negative influences. Positive influence can

be seen when the price of chilli reach over medium-high. In that position, the number of

sellers who will benefit from chilli trading is quite large. Fluctuation of red chilli’s price

is caused by movement of supply and demand. High amount of supply will lead to price

decrease, meanwhile lower amount of supply will lead to price increase (ceteris paribus).

This mechanism is occurred in all districts, including Kediri as the research location.

Based on the study results of Ibrahim, et al (2011), fluctuations of price’s chilli in 2010

can be seen at the image below.

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Figure 1: Monthly fluctuation of chilli price at Kediri in 2010.

The increase in price was due to decreasing supply, since there are only small

production. It happened when only few farmers plant and harvest chilli. If at the same

time the demand also rises due to people’s celebration, holiday or festivals, the price will

increase higher. Meanwhile, the increase of supply will cause a drop in price. It

happened when there were many farmers plant and harvest chilli. The reason why

farmers plant or does not plant chilli is mostly because of the season. Most farmers do

not like to plant chilli out of the season because there will be more disease attack.

Chilli cluster development in the future are expected to use the concept of

clusters with a strategy based on strengthening the competitive advantages, as explained

by Porter (1995) with the aim to strengthen the value chain. Strengthening the value

chain should be started from the input activity, production, transformation, and

marketing toward consumption.

Figure 2 : Value Chain of Chilli.

Looking at supply and demand of chilli and interesting business for its

stakeholders, the government through the Ministry of Agriculture has conducted various

0

2000

4000

6000

8000

10000

12000

14000

1 2 3 4 5 6 7 8 9 10 11 12

Price (Rp)

month

Input production transformation trading consumption

Seed,

fertilizer,

pesticide

Plantation,

harvest Sorting,

packing

Distribution,

transport consumpton

5

programs to stabilize prices and improve chilli farmers welfare and all stakeholders in

general. The programs include Chilli Planting Movement (GERTABE) in 2011

(especially during of May-June and September-October). This movement in East Java

was supported by local program namely Rural Development Agent (Penggerak

Membangun Desa) given to 10 farmer groups in Kediri District, and Self-sufficient

Micro and Middle Institution (Lembaga Mikro Menengah Mandiri) in Banyuwangi,

East Java.

1.2 Scope of Study

The study on "Market appraisal and value chain of chilli products" will focus on

2 districts namely Kediri and Blitar, East Java Province. Scope of the study are :

a. Conducting supply and value chain analysis and development and market appraisal of

the main chilli varieties ; wet/fresh market, processing/industry, and retail, including a

detailed breakdown of prices, cost and margins along the chain, from farm to

consumer;

b. Reviewing existing on farm, off farm and agro-industry; and marketing activities of

chilli based on primary and secondary data;

c. Identification of interventions to develop and strengthen the chilli value chains so as

to benefit all stakeholders but in particular the small producers;

d. Conducting a market appraisal of fresh domestic and processed chilli markets;

1.3. Objectives

The objective of this study is to strengthen the chilli value chains and to carry out

market appraisal to determine the possibility of expansion of chilli markets two

production centres of Kediri and Blitar Districts. Two specific objective are to identify

measures to stabilise prices of chilli for both farmers and consumers and to improve the

income from chilli production for the farmers. Activity and commodity are included on-

farm, off-farm and processing activities for chilli planted in upland and lowland up to

marketing activity practiced by stakeholders involved such as producer i.e grower or

farmer, processor, agriculture extension, traders, Indonesia Chilli Agribusiness

6

Association (AACI) and consumer, and government officers for processing and

marketing horticulture products.

1.4. Outputs.

The outputs expected from the study are:

a. Appraisal report on value chain of fresh chilli market and processed chilli market

b. Detailed crop budgets for the main types of chilli in each of the production areas

c. Detailed documentation of prices, costs and margins in the existing value chain from

farm gate to consumer for each of the chilli varieties and production area.

d. Recommendation for project implementation

e. Strategy recommendations for the development of the chilli sub-sector and specific

interventions at production, processing, marketing, quality control and food safety

issues.

In detail the outputs will cover:

a. Value-chain mapping on the production of chilli including a discussion of the

opportunities and constraints by type of land and agro-ecological zones which

contextualize production within the natural environment of the country.

b. Crop budget analysis by land type.

c. Situation of farming inputs supply as well as the rural finance scenario.

d. Analysis of fresh and processed chains with particular attention on the relevance and

performance of the technologies used.

e. Analysis distribution of process and its efficiencies. Attention will be given to the

enabling environment for chilli production, marketing and processing including and

appraisal of infrastructure, policies, and supporting institutions.

f. Identification of leverage where policy changes and interventions can positively

affect the largest numbers of participants in the sub-sector. Strategy

recommendations for the development of the chilli sub-sector and specific

interventions at production, processing, marketing, quality control and food safety

issues will also be covered.

g. The report will culminate in the preparation of an implementation plan that identifies

the potential markets for goods produced within the selected value chains, specifying

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the activities needed to assist entrepreneurs in producing quality produce that is

competitive in the long term. The plan will lay out the inputs, materials, finance and

technical assistance required. Ideas to increase competition in the project area

(holding competitions, designing incentives and organising tenders) will be

mentioned. The national strategy for chilli development will also be studied.

II. METHODOLOGY

2.1. Data Types

Type of data used in this study is primary data and secondary data with the

following details.

1) Primary data obtained from: The chilli growers, collectors / chilli middleman, chilli

farmers group members both men and women, chilli farmers cooperative, chilli

merchants, chilli consumers, Indonesia Chilli Agribusiness Association (AACI), the

Association of Horticulture Farmers (IPPH), Department of Agriculture in each

district, and Agricultural Extension Agency (BKP3).

2) Secondary data, obtained from various agencies such as Agricultural Service in each

targeted district, Agency for Food Security and Agricultural Extension at district

level (BKP3), and local banks or any private financial institutions which supported

chilli farmers and their groups.

2.2. Data Collection Techniques

For data collection, the techniques used in this study include:

1) Documentation

To obtain the secondary data, researcher used documentation technique, a way to

quote or copy relevant documents to be used as data in this study. These documents

obtained from: Provincial Agricultural office, local Bureau Statistics Office, and the

District Government, and others.

2). Focus Group Discussion.

FGD conducted in Kediri and Blitar Districts. In FGD, for each location of study,

researcher team guided the discussion on value chain for two different chilli varieties

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produced at upland and lowland area. Data collected from FGD verified through field

survey.

3) Survey

In the survey, 71 respondents per district interviewed by the researcher members

based on a structured questionnaire developed for the purposes of this study.

Observations carried out to identify the each stage of market chain of chilli, the cost

incurred and revenue gained along the value chain, technology transfer, support system,

current problems, and the needs for the future.

Respondents who will be interviewed are : The chilli growers, collectors / chilli

middleman, chilli farmers groups members both men and women, chilli farmers

cooperative, chilli merchants, chilli consumers, Indonesia Chilli Agribusiness

Association (AACI), and the Association of Horticulture Farmers (IPPH), Department of

Agriculture in each district, Food Security and Agriculture Extension Agency (BKP3),

and local banks or any private financial institutions which supported chilli farmers and

their groups.

4) Observation

Researchers used observation technique to obtain information on the real

condition of the farm level and institutional chilli trade system and the policies that have

been done so far. To obtain accurate data, the researchers will validate the information

from the head of the village, extension staff, and community.

2.3. Sampling Techniques.

This study use multistage random sampling to choosing respondents. The first

step, choosing two district which represent the highest number of chilli farmers or the

highest production areas. The selected districts are Kediri and Blitar. The sub districts are

decided based on the number of farmers in chilli types, i.e big chilli and small chilli. In

Kediri district, the subdistrict chosen were Kepung (upland big chilli), Puncu (upland

small chilli), Papar (lowland big chilli), Pagu (lowland small chilli). In Blitar District, the

selected sub districts are Wonotirto (upland big chilli), Panggungrejo (lowland small

chilli), Srengat (upland big chilli), Sutojayan (lowland small chilli). Two villages chose

at each sub district. Description can be seen in the picture below.

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Figure 3: Sampling Areas

The villages which is chosen as study location can be seen at Table 4.

East Java

Kediri Blitar

Kepung

(upland

BC)

Puncu

(upland

SC)

Papar

(lowland

BC)

Pagu

(lowland

SC)

Wonotirto

(upland

BC)

Panggungre

jo (upland

SC)

Srengat

(Lowland

BC)

Sutojayan

(lowland

SC)

V V V V V V V V V V V V V V V V

BC: Big chilli

SC: small chilli

V: village

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Table 4: Locations of survey in Blitar and Kediri

District: Blitar

Sub District Village Commodities

Srengat Karanggayam

Krejen

Big chilli, lowland

Sutojayan Kedungbunder

Jingglong

Small chilli, lowland

Wonotirto Pasiraman

Sumberboto

Big chilli, upland

Panggungrejo Panggungrejo

Sumberagung

Small chilli, upland

District: Kediri

Sub District Village Commodities

Papar Janti

Peh Kulon

Big chilli, lowland

Pagu Menang

Tanjung

Small chilli, lowland

Kepung Kebonrejo

Kampungbaru

Big chilli, upland

Puncu Asmorobangun

Gadungan

Small chilli, upland

2.4. Respondents.

The study conducted in Kediri and Blitar Districts of East Java Province.

Determination of the farmer respondents carried out with some consideration, such as:

board of farmer group (2 person), members of farmer group (3 person, selected based on

land ownership), and women farmers (2 person). So, each village selected 7 farmers and

the total numbers of farmer respondents at both districts were 112 person. In addition in

each regency, key respondents were selected from middleman (2 person), wholesales (2

person), merchants (2 person), Chilli consumers (2 person), Board of AACI (Indonesia

Chilli Agribusiness Association, 1 person), Board of IPPH (Association of Fraternity

Farmers Horticulture, 1 person), chilli production facilities trader (1 person) and chilli

processing company owner (1 person each type of company). Number of key

respondents can be tailored to the field situation.

Also, key respondents took from senior staff of Department of Agriculture in

each district, and Agricultural Extension Agency (BKP3).

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Table 5: Type and number of fixed respondents

No Type of Respondent

Number of

Respondents in each

District

1 Farmer (lowland and upland; big chilli and small

chilli)

40

2 Farmer group leaders 16

3 Collector 2

4 Wholesaler 2

5 Chilli processor (big chilli and small chilli) 2

6 Retailer 2

7 Agency for Agricultural Technology Application

(BPTP)

1

8 Local Finance Agency 1

9 Local government Official/agricultural extension 1

10 Chilli association 1

11 Consumers 2

Total 71

2.5. Data Analysis

Data collected from the field analysed and compared with the summary review from the

desk study and FGD. Discussion and recommendations derived from the results of the

analysis.

SWOT analysis (Strengths, Weaknesses, Opportunities and Threat)

STEER (Socio-culture, Technology, Economy, Ecology and Regulatory) analysis.

Value Chain Analysis (fresh and dried chilli)

Analysis of cost and revenue, including R/C ratio. Revenue cost ratio calculated for

one (1) cycle of cultivation and harvesting season for chilli cultivated in upland and

lowland area.

Market analysis (margin, share, chain/channel)

Needs assessment for food technology (chilli).

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III. RESULTS

3.1. The General Condition of Research Areas.

This research is conducted in East Java with the area of 47,922 km2 and

37,070,731 residents. East Java has the largest areas among 6 provinces in Java Island. In

physiographical perspective, East Java has three zones: South zone (plateau), central

zone (volcanoes), and North zone (creases). Upland and lowland in central zone (Ngawi,

Kediri, Blitar, and Malang) are fertile areas. In the North zone (Bojonegoro, Tuban,

Gresik, and Madura), there are limestone mountains and barren Kendeng mountains

(Statistical Bureau of East Java, 2011).

East Java offers large areas for planting rice, corn, cassava, and vegetables

(including chilli). Farming areas include rice field and non-rice field farming areas.

There are three farming areas in East Java based on irrigation types: technical irrigation

(683,353 ha), semi technical irrigation (120,803 ha), and non technical irrigation (73,304

ha). Non-rice field farming areas cover garden bare land (111,450 ha), garden shifting

cultivation (44,312 ha), and estate (97,182 ha).

Rice field and non-rice field farming areas in the research areas are presented in

the table below.

Table 6: Rice Field Areas Based on Their Irrigation Types and Non-Rice Field Farming

Areas Based on Their Usage in East Java, Year 2011

Rice field Areas based on Irrigation Types (ha)

Province/District Technical Semi Technical Non technical

Blitar 22,762 3,850 3,423

Kediri 35,601 5,894 3,235

East Java 683,353 120,803 73,304

Non-Rice Field Farming Areas (ha)

Province/District Garden bare land Garden Shifting

Cultivation

Estate

Blitar 44.940 - 13,347

Kediri 27,896 - 8.849

East Java 111,450 44,312 97,182

Source: Statistical Bureau of East Java, 2012, in numbers.

Statistical Bureau in East Java states that central zone (Kediri and Blitar) are

fertile and suitable for farming areas. Vegetable, particularly chilli, is of popular sub-

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sector of farming. Moreover, Ministry of Agriculture declared that East Java occupied

the largest harvested area for small chilli and the third largest harvested areas for big

chilli in Indonesia (see the table below).

Table 7: Harvested Areas of Small and Big Chilli in East Java, Central Java, West Java,

and Indonesia, Year 2007 – 2011

Small Chilli (ha)

Province 2007 2008 2009 2010 2011

East Java 35,460 37,226 46,863 43,812 40,130

Central Java 12,830 13,363 15,342 13,779 12,789

West Java 6,623 6,773 8,466 8,466 7,519

INDONESIA 96,686 102,388 116,726 114,350 102,760

Big Chilli (ha)

Province 2007 2008 2009 2010 2011

East Java 9,706 10,266 12,445 13,894 13,810

Central Java 18,225 18,885 25,387 23,138 21,059

West Java 15,447 14,606 16,109 17,621 14,059

INDONESIA 107,362 109,178 117,178 122,755 110,341

Source: http://www.deptan.go.id/infoeksekutif/horti/pdf-ATAP.

The above table shows that East Java is one of main producers of small and big

chilli. Harvested areas of small chilli in East Java occupied the highest position in

Indonesia, covering 40,130 hectare or 39.05% of national harvested areas in 2011,

followed by Central Java and West Java in the second and third positions. In 2011,

harvested areas of big chilli in East Java occupied the third highest position in Indonesia,

covering 13,810 hectare or 12.51%, after Central Java and West Java in the first and

second positions.

In 2009, the East Java Food Security Office reported that Kediri almost always

had the largest harvested areas (both for small and big chilli) in East Java in 10 years

(from 1999 to 2008). In 2008, harvested areas in Blitar exceeded the areas in Kediri

(Blitar = 3,683 ha; Kediri= 3,399 ha). According to staff of Department of Agriculture in

Blitar, chilli plantation in Blitar has vastly developed since 2005.

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3.2. Topography and Infra-structures

In this research, topography includes lowland and upland. Lowland covers the

altitude below 250 meter above sea level, while upland is above the number. The

altitudes of the research areas are presented in the following table.

Table 8: Altitude and Infra-structure (street) in 8 Research Sub-districts

District Sub-district Altitude (m)

Village Street

Condition

Distance between

Sub-District and

District (km)

Kediri Papar 120 65% land and stone 15

Pagu 135 29% land and stone 5

Puncu 300 – 650 43% land and stone 40

Kepung 360 – 500 50% land and stone 45

Blitar Srengat 120 7% land and stone 6

Sutojayan 170 7% land and stone 12

Wonotirto 250-400 90% land and stone 35

Panggungrejo 250-350 90% land and stone 50

In lowland, the street infra-structure for transporting chilli is good (90% asphalt).

In contrary, the street infra-structure in upland is considered poor (30% land and stones).

The poor street infra-structure connects villages to sub-districts, and makes it difficult for

farmers to transport chilli from farming fields to their houses and markets. This condition

results in additional transportation cost to spend.

Irrigation infra-structure in lowland is better than in upland. Farmers in lowland

get water from irrigation, river, and well; while in upland water is obtained from rain,

water reservoir, river, and water from house pipes. Farmers in upland plant chilli in the

beginning of rainy season (September/October). They apply some irrigation techniques

such as making water reservoir, using water pump, transporting water with cars, and

distributing water with pipes by means of gravitational principle.

3.3. Farming Activities and Inputs of Chilli Production

Most respondents of this research have farming field less than 0.5 hectare (85%);

15% others have more than that. Small farmers often do inter-cropping, alley-cropping,

or multiple-cropping in order to avoid great loss. In general, 81% farmers have their own

land, 18% farmers rent the land, and 1% farmers are engaged in partial agreement.

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Farmers working on their own land get higher profit, as they do not spend the high cost

on rent (IDR 10,000,000 in Blitar, 15,000,000 in Kediri).

It is possible to plant chilli (both small and big chilli) the whole year. However,

farmers consider these aspects before planting chilli: season, irrigation, competitive

commodities, pest and plant disease, and price. Cropping and harvesting periods in some

research areas are presented in the table below.

Table 9: Cropping and Harvesting Seasons of Chilli in Blitar and Kediri, Year 2011

Sub-district/

District Village Kinds of Chilli Cropping Season

Harvesting

Season

Srengat/Blitar Karanggayam

Krejen

Big chilli,

lowland

March, April June, July

Sutojayan/Blitar Kedungbunder

Jingglong

Small chilli,

lowland

June, July, August September,

October,

November

Wonotirto/Blitar Pasiraman

Sumberboto

Big chilli, upland October, November,

December

January, February,

March

Panggungrejo/Blitar Panggungrejo

Sumberagung

Small chilli,

upland

October, November,

December

January, February,

March

Papar/ Kediri Janti

Peh Kulon

Big chilli,

lowland

May, June September,

October

Pagu/ Kediri Menang

Tanjung

Small chilli,

lowland

June, July October,

November

Kepung/ Kediri Kebonrejo

Kampungbaru

Big chilli, upland September, October December,

January

Puncu/ Kediri Asmorobangun

Gadungan

Small chilli,

upland

October, November,

December

January, February,

March

Chilli is ready to harvest after 3-4 months, and the life span of chilli reaches 6

months. The life span of chilli is determined by some variables: soil fertility, light

intensity, and chilli varieties. Chilli varieties or brands chosen by farmers in the research

areas are presented in the following table. The choice of chilli varieties is based on valid

information on their high productions, resistance to diseases, easy nursery, and high price

on markets.

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Table 10: Chilli Varieties (brands) Cultivated by Farmers in Kediri and Blitar, Year 2012

Small Chilli Big Chilli

Variety (brand) Percentage (%) Variety (brand) Percentage

Gandul 17.85 TM 99 21.42%

Tiyung (local) 16.07 Lado 14.28%

Lengkong 5.35 Gadha 10.71%

Cakra 5.35 TW 10.71%

Kencana 3.57 Krida 3.57%

OP Bredel 3.57 Karina 2.57%

Prentul 3.57 Prada 2.57%

Taiwan 3.57 Sakata 2.57%

Banyuwangi, bhaskara,

Galunggung,

Mahameru, Benggolan,

Dewata, and Others

Less than 1% for each

variety

Pusaka, Fantastic,

Yosi

Less than 1% for each

variety

Business on chilli seeds and seedling in the research areas runs well and is an

important component on supply chain. The average price for chilli seeds per 1000 seeds

(1 package) ranges from IDR 80,000 to IDR 120,000. In one cultivation period, farmers

produce 20% of total seeds their own, and the rest 80% is bought from stores. It is also

possible that they do not grow seeds and choose chilli seedling. The price of chilli

seedling ranges from IDR 150 to IDR 250 per plant (seedling). Some farmers devote

themselves as nursery specialists.

One hectare land requires 16,000 to 21,000 seedling. Farmers in lowland plant

approximately 20,000 seedling, while farmers in upland plant 18,000 seedling. Upland

has less chilli plantations than lowland due to several reasons: land tilt. Micro-climate

and more land borders.

The farmers in Kediri Regency are used to buy the seedling from other farmers

who specialize in producing the chilli seedling.This act aims to minimize the risk of pest

and disease attack from the beginning. However, in 2009, the production of seedling

from the nursery was contaminated by Gemini virus, therefore, the production in that

year decreased. From this experience, it is important to give skill and knowledge to the

farmers producing the seeds. The developing program for healthy seedling farmers

(nursery) may be conducted in Kediri Regency and Blitar

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Some steps in plantation are nursery include choosing good seeds, preparing

farming fields with mulch, fertilizing, controlling pest and disease, weeding, etc. Some

production inputs in chilli farming are presented in the following table.

Table 11: Some Production Inputs in Chilli Farming in Kediri and Blitar, Year

2011/2012

Inputs Small Chilli Big Chilli

Upland Lowland Upland Lowland

Mulch 66 kg/ha 109 kg/ha 122 kg/ha 95 kg/ha

Pesticide 11.44 litre/ha 7.33 litre/ha 15.53 litre/ha 14.86 litre/ha

Organic Fertilizer 3.4 ton/ha 3.05 ton/ha 3.14 ton/ha 5.7 ton/ha

Chemical Fertilizer:

Phosphate 1.78 qu/ha 1.64 qu/ha 2.13 qu/ha 3.06 qu/ha

ZA 2.83 qu/ha 2.74 qu/ha 3.38 qu/ha 5.11 qu/ha

NPK (Mutiara brand) 2.83 qu/ha 2.47 qu/ha 3.39 qu/ha 4.62 qu/ha

Note: 1). Based on FGD note, the use of mulch is 120 kg/ha, 3 ton/ha organic fertilizer, 2,5 qu/ha

Phosphate, 4 qu/ha ZA, 4 qu/ha NPK (Mutiara brand). Pesticide brand is determined by demolish

(insecticide).

2). Theoretically, the recommended amount of fertilizer is 2 qu/ha urea, 2 qu/ha TSP, 1,5 qu/ha KCL

(Brotoaji, 2012).

The use of mulch varies. Most farmers of small chilli in upland especially in

Blitar do not use mulch. However, almost all farmers of big chilli in upland use mulch to

reduce evaporation and inhibit the growth of weeds (gulma). The Plastic mulch price

ranges from IDR 18,000 to 25,000/kg.

Pesticide is more frequently used for big chilli than for small chilli (see table

11). Considering the relatively high occurrences of pest and disease, most farmers of big

chilli in both lowland and upland use pesticides. Farmers in upland used pesticide higher

than in lowland. They frequently share their success in demolishing pest and disease

with high dosage to other farmers. Some farmers who use cheap pesticides tend not to

tell the brands and dosage they use (including to the researcher).

There are 33 pesticide and 4 fungicide brands to control pest and disease. Five

common pesticide brands are Demolis (26%), Agrimek (10%), Curacron (6%), Dakonil

(5%), and Antonik (4.5%). There are 28 other pesticide brands with the usage less than

4.5%. The four fungicide brands are Antracol, Bion, Confidor, and Biotan.

Almost all farmers use the recommended amount of organic pesticides, 3 ton/ha.

However, farmers of big chilli in lowland use more organic pesticides, averagely 5.7

ton/ha. This is due to the short distance between farming fields to chicken husbandry

18

(mostly in Srengat, Blitar). Unfortunately, the volume of organic fertilizer does not equal

its fertilizing substance because of different materials and making process.

Farmers of big chilli use more chemical fertilizers than farmers of small chilli.

They even disregard the recommended dosages. For instance, farmers of big chilli in

lowland use ZA and NPK fertilizers more than the recommended dosages, exceeding

5.11 qu/ha (ZA) and 4.62 qu/ha (NPK) respectively. They highly expect to have their

chili grow taller and with dark green leaves.

Most chili farmers use the above mentioned production inputs. In addition, they

use growth hormone, bamboo sticks, and liquid fertilizers. Some of them fail to mention

in detail the amount of production inputs and the total number of workers. It is

recommended that they get used to keeping the records on these matters.

3.4. Chilli Productivity

In national scope, in 2011 East Java contributed 8.28% big chilli production and

30.59% small chilli production. In East Java, big chilli production reaches 73,677 ton and

small chilli production reaches 181,806 ton, with harvesting areas 13,810 ha and 40,130

ha respectively (www.deptan.go.id). In short, the productivity of chilli is 5.33 ton/ha (for

big chilli) and 4.53 ton/ha (for small chilli). The productivity of big and small chilli in

the research areas is presented in Table 12 below.

Table 12: Chilli Productivity Based on Kinds of Chilli, District, and Topography in

Kediri and Blitar, Year 2012.

No. Kinds of Chilli

Productivity (ton/ha)

1. All chilli (big and small chilli) in Blitar 7.05

All chilli (big and small chilli) in Kediri 7.74

2. Small chilli in Blitar 5.57

Small chilli in Kediri 7.00

3. Big chilli in Blitar 7.23

Big chilli in Kediri 9.33

4. Small chilli in lowland 6.56

Small chilli in upland 6.71

5. Big chilli in lowland 7.61

Big chilli in upland 8.74

19

The productivity of farmers in Kediri (both for small and big chilli) is higher

than farmers in Blitar. This is due to the fact that farmers in Kediri have been in the

business far earlier than farmers in Blitar. They use more production inputs. Moreover,

Government of Kediri has long initiated the introduction to techniques in chilli

plantation. During the research, some governmental staff in Kediri showed various

development programs in chilli plantation.

Based on topography, the productivity of chilli in upland is higher than in

lowland (applies for both small and big chilli). The determining factor is not production

input, but altitude. Production inputs used by farmers in lowland are not always lower

than farmers in upland. Pesticide, as one of production inputs, is more frequently used in

upland than in lowland.

3.5. Cost, Revenue, Benefit, Breakeven Price (BEP), and R/C ratio.

The average of production cost spent by chilli farmers (big and small chilli) can

be seen in the table below.

Table 13: The Average Production Cost of Chilli (All chilli) Paid by Farmer in Kediri

and Blitar, Year 2012 (IDR/ha).

No. Activities Blitar (n=56) Kediri (n=56)

1. Land preparation 2,995,501 2,356,986

2. Labor 605,403 2,503,285

3. Pesticide 2,005,574 2,498,619

4. Chemical fertilizer 1,536,660 4,989,670

5. Organic fertilizer 2,129,027 2,063,943

6. Seed 1,403,114 1,426,202

7. Mulch 2,533,664 1,174,944

8. Irrigation 1,287,691 711,497

9. Transportation 85,550 174,199

10. Others 1,862,258 2,585,575

Total Cost*) 15,839,045 20,484,000

11. Land rent 10,000,000 15,000,000

Total Cost 25,839,045 35,484,000

Note: *) excluding land rent

The above table presents the result of interviews with 112 chilli farmers

(Kediri=56; Blitar=56). The difference between the cost of big chilli and small chilli is

not presented in the table. The average cost for chilli production in Kediri was IDR

20,484,000 and in Blitar was IDR 15,839,045 (excluding land rent). Production cost in

Kediri was higher than in Blitar because farmers in Kediri more intensively utilize

farming inputs (fertilizer, pesticide, and labour) than those in Blitar.

20

Production, revenue, Benefit, BEP, and R/C ratio of chilli in East Java are

presented in the following table.

Table 14: The Average of Chilli Production, Price, Revenue, Benefit, BEP, and R/C

Ratio in Kediri and Blitar (All Chilli)

No. Item

Blitar Kediri

1. Production (ton/ha) 7,05 7,74

2. Farm gate price (IDR/kg) 9,384 9,998

3. Revenue (IDR/ha) or gross sale 66,157,200 77,384,520

4. Benefit*) (IDR/ha) 50,318,155 56,900,520

5. Benefit (IDR/ha) 40,318,155 41,900,520

6. BEP*) (IDR/kg) 2,246 2,646

7. BEP (IDR/kg) 3,665 4,584

8. R/C*) 4,17 3,78

9. R/C 2,56 2,18

Note : *) excluding land rent

BEP : Breakeven Price; R/C: Revenue per cost ratio

The average of chilli production in Kediri (7.74 ton/ha) was higher than in Blitar

(7.05 ton/ha). The high production and price in Kediri resulted in the high revenue of

farmers in Kediri. With the inclusion of land rent, farmer’s benefit in Kediri (IDR

40,318,155) was not significantly different from those in Blitar (IDR 41,900,520); this

was due to the high land rent and input production in Kediri. It was also evident that

chilli breakeven point in Kediri was higher than in Blitar and that R/C chilli ratio in

Kediri was lower than in Blitar.

Considering different category of chilli (big/small), cost of production, price,

revenue, breakeven point, and R/C ratio are shown in Table 15 and Table 16.

Table 15: The Average Production Cost of Big Chilli and Small Chilli Paid by Farmer in

Kediri and Blitar, Year 2012 (IDR/ha).

No. Activities Blitar Kediri

Small chilli Big chilli Small chilli Big chilli

1. Land preparation 3,638,515 2,747,323 2,179,733 2,888,748

2. Labor 451,166 649,478 2,347,833 2,969,642

3. Pesticide 2,665,283 1,836,782 2,089,885 3,772,823

4. Chemical fertilizer 769,166 1,607,484 4,581,083 6,215,433

5. Organic fertilizer 1,426,458 2,023,581 2,010,840 2,223,252

6. Seed 893,517 1,472,856 1,298,612 1,808,971

7. Mulch 607,472 2,725,982 492,445 3,222,440

8. Irrigation 953,157 1,427,753 767,406 543,769

9. Transportation 13,298 106,489 199,170 99,287

21

10. Others 869,166 1,965,205 1,416,992 6,091,326

Total Cost*) 11,771,940 15,913,459 17,451,856 29,835,696

11. Land rent 10,000,000 10,000,000 15,000,000 15,000,000

TOTAL COST 21,771,940 25,913,459 32,451,856 44,835,696

Note : *) excluding land rent

The total production cost for big and small chilli in Kediri was higher than in

Blitar, because farmers in Kediri utilized more production inputs than those in Blitar.

The components of production inputs included labour, pesticide, fertilizer, seed,

transportation, and land rent. The higher cost of pesticide and fertilizer in Kediri might

be due to more frequent usage of those two production inputs and/or the usage of more

expensive products. Farmers of small chilli mostly do not use mulch for planting; while

almost all farmers of big chilli do so (therefore, the purchasing cost of mulch for big

chilli is higher than for small chilli).

Table 16: The Average of Chili Production, Price, Revenue, Benefit, BEP, and R/C Ratio

in Kediri and Blitar (Big Chilli and Small Chilli), Year 2012.

No. Item Blitar Kediri

Small chili Big chilli Small chilli Big chilli

1. Production (ton/ha) 5,57 7,23 7 9,33

2. Farm gate price (IDR/kg) 9,333 9,400 10,192 9,071

3. Revenue (IDR/ha) 51,984,810 67,962,000 71,344,000 84,632,430

4. Benefit*) (IDR/ha) 40,212,870 57,962,000 53,892,144 54,796,734

5. Benefit (IDR/ha) 30,212,870 42,048,541 38,892,144 39,796,734

6. BEP*) (IDR/kg) 2,113 2,201 2,4931 3,197

7. BEP (IDR/kg) 3,908 3,584 4,636 4,805

8. R/C*) 4,42 4,27 4,09 2,84

9. R/C 2,39 2,62 2,20 1,89

Note: *) excluding land rent

In general, chilli productivity in Kediri was higher than in Blitar because

production inputs in Kediri were higher than in Blitar. Revenue and benefit of farmers in

Kediri was higher than in Blitar; better production and price in Kediri were the

contributing factors for the differences. However, BEP and R/C chilli ratio in Kediri

were lower than in Blitar.

The above calculations are tapped from interviews with traditional farmers.

Mostly, they do not keep a record on and fail to remember the amount of production cost

they have spent even though the researcher has helped give specific questions regarding

the cost. Moreover, they do not include themselves as workers even though the

researcher has tried to incorporate them into the analysis. Different from traditional

22

farmers (peasants), commercial (modern) farmers keep a record on the amount of

production cost.

The total cost for producing big chilli is higher than small chilli. Comparing

production cost based on topography, the cost for producing chilli in upland (applies for

both big and small chilli) is higher than in lowland. In upland, the cost for land

preparation and pesticide is considered higher than in lowland. Land preparation in

upland requires human workers, due to the tilt topography. According to farmers and

extension staff, Pesticide is overly used in upland. Detail description on production cost

of chilli both in upland and lowland is presented in Table 17 below.

Table 17: The Average Production Cost of Chilli (Upland and Lowland) in Kediri and

Blitar, Year 2012 (IDR/ha)

No. Activities Small chilli Big chilli

upland lowland upland Lowland

1. Land preparation 3,069,879 1,435,387 3,389,341 2,704,940

2. Labor 1,849,142 1,222,914 2,011,750 1,095,000

3. Pesticide 2,081,531 1,344,979 2,824,903 2,702,268

4. Chemical fertilizer 2,597,615 2,389,425 3,102,485 4,456,585

5. Organic fertilizer 1,714,654 1,528,544 1,571,528 2,898,019

6. Seed 1,665,076 1,303,211 1,336,739 1,308,237

7. Mulch 1,193,724 1,967,816 2,206,458 1,710,447

8. Irrigation 1,093,332 1,332,961 991,246 1,876,216

9. Transportation 134,011 363,744 45,579 616,019

10. Others 1,654,912 2,165,785 4,297,372 2,089,386

Total Cost*) 16,754,336 13,903,649 21,564,965 18,775,529

11. Land rent 12.500,000 12,500,000 12,500,000 12,500,000

TOTAL COST 29,254,336 26,403,649 34,064,965 31,275,529

Note: *) excluding land rent

Chilli productivity (ton/ha) in upland, both for big and small chilli, is higher than

in lowland. Based on the survey, the price of small chilli in upland is higher than in

lowland, thus the revenue of farmers in upland is higher than in lowland. In addition,

even though the price of big chilli in upland is slightly lower than in lowland, farmers of

big chilli in upland get higher revenue than farmers in lowland. This is because farmers

in upland could produce more chilli than farmers in lowland. Farmers in lowland send

their chilli to markets or collectors and spend more transportation cost, while farmers in

upland especially in Blitar do not. In general, R/C ratio of farmers in lowland is higher

23

than farmers in upland because farmers in lowland spend less cost than farmers in

upland.

Table 18: The Average of Chilli Production, Price, Revenue, Benefit, BEP, and R/C

Ratio in Kediri and Blitar (Chilli in Upland and Lowland), Year 2012.

No. Item Small chilli Big chilli

upland lowland Upland Lowland

1. Productivity (ton/ha) 6.71 6.56 8.74 7.61

2. Farm gate price (IDR/kg) 10,392 9,576 10,615 11,684

3. Revenue (IDR/ha) 69,730,320 62,818,560 92,775,100 88,915,240

4. Benefit*) (IDR/ha) 52,975,984 48,914,911 71,210,135 70,139,711

5. Benefit (IDR/ha) 40,475,984 36,414,911 58,710,135 57,639,711

6. BEP*) (IDR/kg) 2,496 2,119 2,467 2,467

7. BEP (IDR/kg) 4,359 4,024 3,897 4,109

8. R/C*) 4.16 4.51 4.30 4.74

9. R/C 2.38 2.37 2.72 2.86

Note: *) excluding land rent

3.6. Marketing Agency, Marketing Chain, and Product Flow

Chilli marketing in Kediri and Blitar is relatively convenient because all

marketing agencies such as middleman, collector, wholesaler, and retailer in both cities

perform their marketing function well. The marketing scope of small collectors is only in

the village and sub-district; while big collectors have wider scope that covers sub-district

or inter-district. In this case, wholesalers reach even wider scope not only inter-district

but inter-province as well.

The purchasing capacity of collectors is only some quintals (qu), with a

maximum of 20 quintals or 2 tons per day; and the purchasing capacity of wholesalers

and reaches 350 quintals (35 tons) per day. In collecting chilli, collectors use both ways,

either buying chilli directly from the field or waiting for farmers to drop their chilli in the

collectors’ house. Wholesalers collect chilli from farmers and collectors before

distributing it to local retailers, inter-province groceries, and industries. These purchasing

capacity and product flow apply for both big and small chilli.

Marketing chain and product flow of big chilli in Kediri are shown in the

following chart:

24

Figure 4: Marketing Chain of Big Chilli in Kediri

Farmers of big chilli in Kediri sell 70% of their products to wholesalers in Pare

market, Kediri. Only 30% of total farmers of big chilli sell their products to local

collectors. Collectors sell more than 80% of their products to wholesalers (a number that

equals to 25% of total chilli), and sell 17% of their products to local retailers in some

markets.

Marketing chain and product flow of big chilli in Kediri are shown in the

following chart:

Figure 5: Marketing Chain of Big Chilli in Blitar

In Blitar, 50% of big chilli farmers sell their products to collectors in local areas

(particularly for those who live far away from wholesalers). Those collectors sell the

products to big collector in Blitar and wholesaler in Kediri, and later the wholesalers

5%

30%

70% KEDIRI (BC)

FARMER COLLECTOR WHOLESALE WHOLESALE (sby, jkt)

RETAILER

25%

10%

85%

INDUSTRY

70%

3%

7% 17% 3%

37%

10%

50% FARMER COLLECTOR BIG COLLECTOR

(BLITAR) WHOLE SALE (JKT/ETC)

RETAILER

50%

WHOLE SALE

(KEDIRI)

BLITAR (BC) INDUSTRY

INDUSTRY

25

distribute the products to other cities such as: Surabaya, Jakarta, Jambi, Kalimantan, and

Pekanbaru.

There is no fundamental difference between marketing chain of small chilli and

big chilli in every district. The difference only lies in the number of product flow to

Jakarta or other big cities; big chilli outnumbers small chilli. Small chilli is mostly

distributed to some cities in East Java, especially Surabaya.

The marketing chain of small chilli in the research areas is presented below.

Figure 6: Marketing Chain of Small Chilli in Kediri

Marketing chain in Blitar is considered more complex than in Kediri. It is because Pare

market in Kediri plays a role as a sub-terminal that makes the marketing chain simpler.

This shorter marketing chain offers more benefit to farmers in Kediri as they could sell

their products with higher price compared to farmers in Blitar (IDR. 9,333 in Blitar, IDR.

10,192 in Kediri).

10%

60% 50%

30%

10%

70%

30 %

FARMER COLLECTOR WHOLESALE WHOLESALE (SBY/ETC)

RETAILER

RETAILER (DISTRICT EJ)

KEDIRI (SC) INDUSTRY

15%

35% 15%

20%

15%

25%

35%

75% FARMER COLLECTOR BIG

COLLECTOR WHOLE SALE (JKT/ETC)

RETAILER (EJ)

25%

WHOLE SALE

(KEDIRI)

BLITAR (SC) INDUSTRY

INDUSTRY

26

Figure 7: Marketing Chain of Small Chilli in Blitar

3.7. Market Margin.

Marketing agencies such as collector, wholesaler, and retailer perform their

functions in purchasing, sorting, grading, packaging, transportation, and selling. The cost

of each activity is shown below:

Table 19: Agency, Cost, and Marketing Margin of Big Chilli in Blitar and Kediri

Marketing Agency Function Cost or Price

(IDR/kg) Share (%)

Profit Share

(%)

Farmer

Production cost (IDR/kg) 4,200

Profit (farmer’s margin) 5,036 63.34*

Price at farmer gate (bep=4200) 9,236

Collector Purchasing 9,236

Transportation 518 10,50

Profit (5%) 488 9,90 6,15

Selling 10,242

Wholesaler Purchasing 10,242

Sorting 53 1,07

Grading 53 1,07

Packaging 253 5,07

Transportation 450 9,13

Shrinkage and damage (2%) 204 4,14

Profit (10%) 1,126 22,84 14,18

Selling 12,381

Retailer Purchasing 12,381

Shrinkage and damage (2%) 248 5,03

Transportation 250 5,07

Profit (10%) 1,288 26,12 16,23

Selling 14,167

Total 100 100 Note : Margin = retailer price – farmer price (IDR 14,167 – 9,236 = 4,931)

Total Profit = farmer’s margin + collector profit + wholesaler profit + retailer profit = IDR 7,938

Collectors of big chilli do not perform various functions but purchasing,

transporting, and selling to wholesalers or retailers. They only pay for transportation

cost. In this case, wholesalers perform some marketing functions such as purchasing,

sorting, grading, packaging, and transporting. Furthermore, wholesalers bear any damage

and shrinkage in storing activity. Transportation cost occupies the highest position in

marketing process (9.13%). Retailers pay for transportation cost and bear the risk of

damage and shrinkage. The risk of damage and shrinkage as a result of storing, sorting,

grading, packaging, and transportation is 2% per quintal per day.

27

Profit shares of retailer, wholesaler, and collector are 16.23%, 14.18%, and

6.15% respectively, and retailer occupies the highest position. Even though retailers earn

the highest profit share up to 16.23%, they bear higher risk of damage in the case of

failing to sell chilli within a few days. Moreover, the turnover of retailers is low, from 50

kg to 100 kg per day. Collectors get the profit share of 6.15% in a few hours. Different

from retailers and collectors, although wholesalers earn 14.18% profit share, in fact they

get higher profit because their selling volume reaches 10 – 35 tons per day.

There is no fundamental difference in marketing function between small and big

chilli marketing agencies. Some chilli traders offer both commodities together. Agency,

cost, margin, and profit share of small chilli in East Java is shown in the following table.

Table 20: Agency, Cost, and Marketing Margin of Small Chilli in Kediri and Blitar

Marketing Agency Function Cost or Price

(IDR/kg) Share (%)

Profit Share

(%)

Farmer

Production cost (IDR/kg) 4,272

Farmer’s margin (profit) 5,491 59.66*

Price at farmer gate 9,763

Collector Purchasing

Transportation 518 9.04

Profit (5%) 514 8.98 5.59

Selling 10,795

Wholesaler Selling 10,795

Sorting 40 0.70

Grading 40 0.70

Packaging 240 4.19

Transportation 450 7.86

Shrinkage and damage (2%) 216 3.77

Profit (10%) 1,178 20.58 12.80

Selling 12,959

Retailer Purchasing 12,959

Shrinkage and damage (2%) 259 4.52

Transportation 250 4.37

Profit (10%) 2,020 35.28 21.95

Selling 15,488

Total 100 100

Note : Margin = retailer price – farmer price (IDR 15,488 – 9,763 = 5,725)

Total Profit = farmer’s margin + collector profit + wholesaler profit + retailer profit = IDR 9,203

Profit shares of retailer, wholesaler, and collector of small chilli are 21.95%,

12.80%, and 5.59% respectively, and retailer occupies the highest position. However,

retailers bear high risk of damage and shrinkage which is 4.52% per day; it is because the

shrinkage and damage reach up to 2% from the original weight. With detail calculation,

wholesalers earn the highest profit share accounting for 12.80%, 10 – 35 tons per day.

28

Different from wholesalers, collectors only earn profit share 5.59%, ± 2 tons trade

volume per day. Retailers earn 21.95% profit share, 50 – 100 kg per day.

3.8. Chilli Processing

Chili is processed into some products such as pecel sauce and gado-gado sauce

(Indonesian vegetable salad sauce). Home industries of chili sauce have become either

main business or sideline business for some families. Some home industries employ 4-5

full-time workers; while some others hire part-time employees. Chili sauce is produced

daily.

The main ingredients for the production are big chili and “rawit” chili (small

chilli). In a day, the production capacity reaches around 100 kg to 2000 kg sauce. Chili is

not the only ingredient added into the dough. Other ingredients include peanut, kencur,

and tamarind. Chili occupies 30% of the total ingredients. It implies that the higher the

price of chili, the higher cost it will take to produce pecel sauce and gado-gado sauce.

Cost of production and processor’s margin for pecel sauce can be seen at table below.

Tabel 21: Cost of Production and Margin Pecel Sauce Processor (per 1 kg Small Chilli)

at Home Industry.

Ingredients Price (IDR)

2 kg peanuts 30,000

1 kg small chilli 10,000

Big chilli (only for natural dyes) 1,000

1 kg brown sugar 11,000

½ kg sugar 5,000

1 ounce onion 1,400

10 lime leaves (daun jeruk purut) 100

4 unit kencur 100

2 tablespoon of salt 100

1 teaspoon terasi (shrimp) 150

Palm oil (for peanuts frying) 1000

Gas 1000

Tamarind (asam jawa) 200

labor 1000

TOTAL 62.050

Amount of Pecel Sauce Products = 4.5 kg

Cost of Production for 1 kg Pecel Sauce 13,789

Price per kg = IDR 22,000

Gross sales = 4.5 kg x IDR 22,000 99,000

Processor’s margin (profit) (IDR) 8,211 Note : (1) It’s for hot level (pedas)

29

Chili for sauce production is bought daily or weekly from the wholesalers in

Kediri. Generally, chili sauce producers set the quality standard of chili they are using as

the main ingredient. The chili should meet the requirements such as: big in size, with

quality number II or I, not less than 8 cm in length, and with extra hot taste. This

indicates that most chili sauce producers concern on quality tradition.

The products are sold in 50, 100, and 200-gram packages. There is also 170-gram

package. Pecel sauce is offered for IDR 20,000 – 22,000/kg and gado-gado sauce is for

IDR 26,000/kg. Not only are the products sold in Kediri but in some other cities as well,

such as Jakarta, Semarang, and Surabaya. Occasionally, customers order specific tastes:

extra hot, hot, and less hot.

The producers declare that they are strictly aware of Regulations of National

Agency for Drug and Food Control about proper procedures for home industry.

However, some of whom, based on field observations, do not strictly obey the

Regulations. For instance, they fail to provide information on chemical composition, no

expiring date, etc. It is because there is no direct supervisory from external parties, such

as related departments or parties. Therefore, it is necessary that producers are facilitated

with continuous supervisory that covers packaging aspects, chemical substance analysis,

raw material standardization, product standardization, accounting, and business analysis.

It is expected that less consumers will complain and that the selling income significantly

increases.

Rapid fluctuation of chili price and difficulties in marketing are common problems

in this industry. During Fasting month and Eid Mubarak celebration, chili price

skyrockets to IDR 30,000/kg. However, in other time, the price drastically drops to IDR

3,000/kg. High demand on chili for consumption during Fasting month and Eid Mubarak

celebration is a contributing factor for its high price. When chili reaches its highest price,

pecel and gado-gado sauce producers decrease the production volume to minimize great

loss. Another way to avoid this problem is by processing fresh chili into dry chili or chili

powder during its normal price; therefore, chili sauce producers could retain their

production volume in all seasons. However, this is only possible for producers with high

capital and those who have proper storage rooms to preserve the products (large and

30

hygiene storage rooms). Besides the fluctuation of chili price, the other problems faced

by pecel and gado-gado sauce producers include the difficulties in marketing and the

rarity of raw materials for productions, particularly kencur and tamarind.

Farmers cannot process fresh chilli to dried chilli because price of dried chilli

lower than fresh chilli. The comparation is shown at table below.

Table 22 : The Price of Fresh Chilli and Dried Chilli per Quintal at Blitar and Kediri

Gross Sale of Fresh Chilli

Gross Sale of Dried Chilli

IDR 500,000/qu

(if the lowest price of chilli IDR 5,000)

IDR 400,000

(100 kg fresh chilli = 20 kg dried chilli; the

maximum price of dried chilli = IDR

20,000/kg)

3.9. SWOT Analysis and The Strategies for Developing Chili Value Chain in Blitar

and Kediri

SWOT analysis is used to analyse Strength, Weakness, Opportunity, and Threat

of chilli value chain in Kediri and Blitar. The entire data and information for SWOT

analysis are collected from structured interviews by means of questioners and deep

interviews with key informants. Chilli farmers and sellers were the informants for

structured interviews; and the key informants for deep interviews were staff of

Department of Agriculture, Association for Horticultural Farmers (IPPH), and

Association of Indonesian Chilli Agribusiness (AACI). There are two aspects in SWOT

analysis, internal and external factors. SWOT analysis in Kediri was separated from the

analysis in Blitar because the results from the two districts were different in some

aspects. The result of SWOT analysis is to formulate the strategy of developing chilli

value chain.

A. Analysis on Internal Factors

The analysis on the internal condition of chilli value chain found the strength and

weakness factors. The quality of factors implies the priority or urgency level, while

31

scores are made based on Likert 1-5 scale. The result of multiplying the quality and score

is summed up to figure out which one is higher, the strength or weakness.

The analysis result indicates four strength and weakness factors as shown in

Table 21. In Blitar, the strength and weakness scores are 3.7 and 3.5 respectively. While

in Kediri, the strength score is 3.9 and the weakness score is 3.75. It is shown that both in

Kediri and Blitar, the strength factor is higher than weakness factor, but with a slight

difference between the two scores. Every internal factor is further described to confirm

the analysis result.

Table 23: Internal Factor Analysis (IFAS) of Chilli Value Chain in Blitar and Kediri

Internal Strategic Factor

Blitar Kediri Weight (%)

Score

Weight x

score

Weight (%)

Score

Weight x

score Strength

1. Chilli farm-business productivity

2. Chilli farm-business profitability

3. Human resource (farmer, seller)

4. Agency activity

30

30

20

20

3

4

3

5

0.9

1.2

0.6

1.0

30

30

20

20

4

3

4

5

1.2

0.9

0.8

1.0

Total 100 3.7 100 3.9

Weakness

1. Over intensive cultivation resulting in

ineffective cultivation

2. No planting arrangement among clusters

3. The dependence of farmers on traders

4. The lack of technical irrigation facilities

(upland) and lack of chilli processing

activities.

25

25

25

25

3

4

4

3

0.75

1.0

1.0

0.75

25

25

25

25

5

4

3

3

1.25

1.0

0.75

0.75

Total 100 3.5 100 3.75

A.1. The assessment on Chilli Farm-business productivity

Chilli productivity per hectare in Kediri (7.74 tons/ha) is higher than in Blitar

(7.05 tons/ha). It is the result of two aspects, land suitability and cultivation intensity.

Land suitability is the superior aspect based on the evaluation of both indicators. Land

suitability (agro-climate) becomes the comparative superior aspect of chilli value chain

compared to other areas with less suitable agro-climate. The over intensive chilli

cultivation in Kediri is an additional aspect; it is indicated by the usage of production

facilities (land preparation, chemical fertilizer, pesticide) and human resources. In the

32

analysis, farm-business productivity becomes the strength factor in both districts; Kediri

scores higher than Blitar. That score is not maximum (3 and 4) because of limited water

availability especially in upland with less rainfall.

A.2.The assessment on farm-business profitability

The benefit of chilli farm-business per hectare in Kediri (IDR. 41,900,520/ha) is

slightly higher than in Blitar (IDR. 40,318,155/ha). It is the result of two aspects: chilli

farm-business productivity and chilli price in Kediri which is higher than in Blitar. The

profitability is the strength for both districts compared to other places with less suitable

agro-climate condition and market. However, comparing the efficiency in Blitar and

Kediri, Blitar (4.17) is more efficient than Kediri (3.78). In agribusiness aspect, the

assessment on efficiency value reinforces the assessment on benefit nominal value. Blitar

is considered more efficient in cultivation because there is over intensive cultivation in

Kediri, indicated by the usage of production facilities (land preparation, chemical

fertilizer, and pesticide) and human resources. In the analysis, farm-business profitability

is the strength factor in both districts; Blitar (4) scores higher than Kediri (3). That score

is not maximum because there is limited productivity in Blitar and over intensive

cultivation in Kediri.

A.3.The assessment on human resources

There are three indicators of human resource: farmers’ education background,

farmers’ experiences, and farmers’ ability in marketing access. In terms of education

background, most chilli farmers have low education background (Elementary School –

Junior High School) although some group leaders are graduates of Senior High School or

Vocational School. In terms of farm-business experiences, they are highly experienced;

they have run farm-business for 20 years. In terms of marketing access, most farmers

have respectable ability. They benefit a lot from joining farmer associations. Regular

meetings build strong network among farmers and enable them to share market

information. The assessment on human resources is considered as strength even though

Kediri only scores 4 and Blitar scores 3. Compared to farmers in Kediri, farmers in Blitar

have less ability in marketing access, so they are more dependent on collectors and get

lower price in selling their products.

33

A.4. The assessment on agency activities

Farmer agencies are well organized under the Association for Horticultural

Farmers (IPPH) and Association of Indonesian Chilli Agribusiness (AACI). IPPH

actively participates in bi-monthly meetings, in national meetings under the coordination

of Ministry of Agriculture, and in various chilli farmer association forums that discuss

problems of production, marketing, and high fluctuation of chilli price. Institutionally,

IPPH and AACI are very independent; even the Department of Agriculture in Kediri

treats them as partners to consult particularly when chilli problems occur. They also

become the sources of information for mass media, interviewed up to 4 times in a year.

The independency of these associations is proven by the independency of member

farmers who no longer need agricultural supervisory, as they have more knowledge and

experience, from cultivation to marketing strategies. In this SWOT analysis, farmer

agency is considered as strength with maximum score 5 for both districts, Kediri and

Blitar.

A.5. The assessment on chilli farm-business

Chilli farm-business in Blitar and Kediri is respectably good, and its productivity

is considered as strength. However, in details, there is weakness - over intensive

cultivation especially in Kediri. The comparison on the average usage of production

factors between Blitar and Kediri in IDR/ha shows a contrast; the usage of pesticide

(Blitar IDR 2,005,574 and Kediri IDR 2,498,619) and chemical fertilizer (Blitar IDR

1,536,660 and Kediri IDR 2,498,619). Farmers in Kediri tend to use more chemical

substances due to their intensive business orientation and more capitals they own;

farmers in Kediri have higher welfare level in farming business (not only on chilli farm-

business).

The other factors are the employment of more workers and higher wage in

Kediri. In total, the cost for more employment in Kediri is IDR 2,503,285/ha, higher than

in Blitar (IDR 605,403). The over intensive cultivation results in less efficient farm-

business; therefore, in this analysis, it is indicated as weakness. The weakness score for

Kediri is 5, which is higher than in Blitar (3).

34

A.6. The assessment on agency: no planting management among clusters

Some farmers, either joining farmer associations or not, complain that there is no

planting management among chilli clusters in various regions. This triggers farmers from

various regions to earn more profit from chilli farm-business, especially when the chilli

price is up high. Consequently, when chilli price drastically drops or even lower than

breakeven price (IDR 3,665/kg in Blitar and IDR 4,584/kg in Kediri), farmers suffer

from great loss. This issue is frequently discussed in inter-association meetings (IPPH) in

many regions. However, still there is no agreement in planting management among chilli

clusters in different regions such as Banyuwangi, Jember, Lumajang, etc. This no

planting management among clusters is included as weakness in this internal factor

analysis, with score 4.

A.7. The assessment on farmer access to market

Farmers in Blitar and Kediri remain with their traditional marketing strategy,

selling their products to local markets. Some farmers in Blitar sell their chilli to Pare

market in Kediri before distributing to other cities, especially Surabaya and cities in

other provinces. In East Java, some industries buy chilli from suppliers and growers; they

are Heinz ABC, Indofood, Wingsfood, Unilever, Sasa, and some pecel sauce industries.

Some industries prefer buying chili from groceries to growers because they have limited

access to growers. Market access of farmers in Blitar is lower than farmers in Kediri.

Farmers in Blitar depend their selling on traders visiting their houses.

The dependency of chilli farmers on traders is due to some aspects: limited

transportation access, marketing access, and less effort in broadening marketing areas.

Farmers often borrow a large sum of money to traders due to limited capital for the

business and high farming cost. In this internal factor analysis, farmer dependency is

considered as weakness, weakness in Blitar (4) scores higher than in Kediri (3).

A.8. The assessment on irrigation infra-structure

Irrigation infra-structure, especially in upland, is considered poor. In uplands with

less rainfall, it is only possible for farmers to plant chilli in 6 months of the year (during

rainy season). They start planting on September/October every year. Some farmers even

35

irrigate water from their houses to their farms. In this SWOT analysis, the lack of

irrigation infra-structure is included into weakness, with score 3.

B. Analysis on External Factors

Opportunity and Threat factors are discussed based on the analysis on external

condition of chilli value chain. The quality of factors implies the priority or urgency

level, while scores are made based on 1-5 scale. The result of multiplying the quality and

score is summed up to figure out which one is higher, opportunity or threat.

The analysis result of external factors shows five opportunity and threat factors,

as noted in Table 22. In Blitar, the total score for opportunity is 4.15, and the total score

for threat is 4.3. In Kediri, the total score for opportunity is 4.15, and the total score for

threat is 4.1. The analysis shows that in Blitar threat factor is higher than opportunity

factor. In contrary, in Kediri opportunity factor is higher than threat factor, but with a

slight difference between the two scores. Every external factor is further described to

confirm the analysis result.

Table 24: External Factor Analysis (EFAS) of Chili Value Chain in Blitar and Kediri

External Strategic Factor

Blitar Kediri

Weight

(%)

Score Weight

x score

Weight

(%)

Score Weight

x score

Opportunity

1. Market demand trend (traditional)

2. The availability of production factor

3. Technology support

4. Support from social institution

5. Access to Funding institution

20

20

15

30

15

5

3

3

5

2

1.0

0.6

0.45

1.5

0.45

20

20

15

30

15

5

3

3

5

3

1.0

0.6

0.45

1.5

0.45

100 4.00 100 4.00

Threat

1. Inter-region competition

2. Insect threat

3. Domination of marketing agents

4. Price fluctuation

30

30

20

20

4

5

4

4

1.2

1.5

0.8

0.8

30

30

20

20

4

5

3

4

1.2

1.5

0.6

0.8

Total 100 4.3 100 4.1

B.1 The assessment on market demand trend (traditional)

Specifically, data on chilli demand is not available in secondary data taken from

Blitar and Kediri district offices as well as IIPH and AACI. However, based on direct

information collected from staff in AACI, IPPH, and Department of Agriculture in both

36

cities, farmers do not encounter marketing problem. Accordingly, it is assumed that the

total production of farmers predicts the amount of demand. However, in massive harvest

period, the total production does not represent demand.

Another way to predict market demand trend is by chilli consumption approach.

Statistical data in 2011 showed that Indonesians consumed big chilli 1.59 kg per capita

per year and small chilli 1.21 kg per capita per year. In the approach, the increasing

number of people is a way to predict the increasing market demand trend. The analysis

with these two approaches is empirically controlled by the experiences of farmers and

traders. Therefore, in this analysis the trend of traditional market demand is considered

as opportunity factor, with score 5.

B.2 The assessment on the availability of production factor

The analysis on the availability of production factor is conducted on the

availability of seed, fertilizer, and chemical substances. Even though seed producer is not

available in Blitar and Kediri, farmers in the two districts find it easy to get the seeds.

Not only the seeds, but the seedlings of chilli are also available for farmers. Chilli

farmers skillfully plant and cultivate their farming areas to ensure that their plantations

are free from diseases. Fertilizer and chemical substances for chilli are also easily

accessible. Fertilizer industries proactively facilitate farmers with group discussions.

However, there is no strict agreement stating that farmers are to use specific products

from the industries. In SWOT analysis, the assessment on the availability of production

factor is considered as opportunity in chilli agribusiness, with the score 3.

B.3 Technology support

Technology development in chilli plantation contributes to the development of

chili value chain. Various certified chili seeds are available with various brands, often

with high price. In detail calculation, the price of one seed is IDR 100, a way too

expensive compared to the price of one chili product. However, with a high orientation

on production development, farmers are motivated to plant the best seeds. The

technology on chilli seedling is rapidly improving. Some farmers build green houses for

seeding and chilli seedling as their specific business. Simple green houses do not hinder

farmers to produce quality chilli seedling. In addition, local farmers prefer chilli seedling

37

produced in green houses. Producers of top brand seeds support farmers by sending field

practitioners to explain technical matters as well as to handle plantation diseases. In

terms of technology aspect, there is a continuous mutual collaboration among

Department of Agriculture, farming consultants, and seed producers to support chilli

farmers. Some farmers have implemented the technology and techniques, while some

other have not. In this analysis, technology support is included into opportunity factor

with score 3.

B.4. Support from social institution

There are some bottom up growing institutions among chilli farmers in Kediri,

Association for Horticultural Farmers (IPPH) and Association of Indonesian Chilli

Agribusiness (AACI). Growing from the direct need of agribusiness and with high

experiences in farming industries (of minimum 20 years), these institutions play major

roles on price fluctuation, its causes, and impacts. Moreover, these institutions are

considered more capable of conducting commodity analysis than other related

institutions with more structural responsibility to supervise farmers. Therefore, social

institutions plays a positive role in the business, and are considered as opportunity with

score 5.

B.5 Access to Funding Institution

Farmers didn’t access Bank or Cooperation. Only farmers in Kepung Subdistrict

accessed funding institution. Some of their accessible bank products are Small Business

Credit (KUR) and Credit for Food Security and Energy (KKPE). In order to get KUR,

farmers are not required to propose any assets security, as it has been subsidized by

Government. Different from KUR, KKPE offers low interest subsidized by Government,

with interest rate <6%. These funding institutions are accessible with easy administrative

procedures. This easy access is expected to avoid farmers’ dependency on traders in

terms of capital. However, farmers do not take advantage from these institutions and

remain trapped in capital problems. In this analysis, access to funding institutions is

included into opportunity with score 2 (Blitar) and 3 (Kediri).

38

B.6. The assessment on Inter-region competition

Chili markets in Blitar and Kediri have competitors from other districts: Tuban,

Sampang, Lamongan, Mojokerto, Pamekasan, Ponorogo, Trenggalek, Malang,

Lumajang, Jember, Banyuwangi, Probolinggo, Nganjuk, and Bangkalan. The

competition on chilli plantation is considered tight because there are some periods when

farmers massively plant chilli due to a high price of it (in 2010). The lack of commodity

management results in perfect market competition where farmers freely decide whether

to plant chilli or not. Massive chilli production results in over supply in the coming

season and the low price of chilli. Market competition and price fluctuation of chilli is

out of control and makes it difficult to support farmers in Blitar and Kediri.

Consequently, this aspect is considered as weakness, with score 4. If chilli farmers in

Blitar and Kediri survive, it might be because Pare market is still capable of buying chilli

produced by farmers in the Blitar and Kediri considering a close distance between the

districts.

B.7. The assessment on pest and disease threat

Pest and disease remains a threat in chilli farming industry. The low plantation

area realization and virus threat in 2010 resulted in low production and high price of

chilli. Pest and disease will always remain a threat in the industry, especially for open-air

farming areas where insects easily infect other locations. Pest and disease threats are

considered high, with the score 5.

B.8. Domination of marketing agents

In marketing, chilli farmers tend to wait for traders to visit and buy their products

at their houses/farms. The lack of transportation facility is a factor that hinders chilli

farmers from selling their products to groceries or traditional markets. Marketing agents

are dominating in Blitar. Most chilli farmers in Blitar are only offered lower price than

farmers in Kediri. Big collectors and groceries are price makers in Blitar. This aspect

threatens chilli value chain; Blitar (4) scores higher than Kediri (3).

39

B.9. The assessment on price fluctuation

Chilli price fluctuates along with market mechanism. The lowest price is IDR

4,000/kg, and the highest price (in normal condition) reaches IDR 30,000/kg. In the

worst condition, the price skyrockets to IDR 100,000/kg. This anomaly condition

happens only in extreme condition such as during the widespread of Gemini virus in

2010 with limited farming areas. In a normal condition, with price ranging from IDR

4,000 to IDR 30,000, there is an existing contrast between profit and loss of farmers.

Therefore, price fluctuation is a threat for chilli cluster in Kediri, with score 4.

Summing up from the slight differences between strength and weakness, between

opportunity and threat, even from the fact that Blitar has more threat than opportunity,

chilli agribusiness is a speculative business. The chance of profit and loss is 50% each.

IPPH and AACI along with farmers strive their best to avoid great loss. Chilli value

chain in Blitar and Kediri and many other places leaves a room for a risky condition,

amid the success of chilli business.

Base on the above explanation, the strategies for developing chilli value chain

prepared at table of strategic’s matrix below.

40

Table 25: The Strategies for Developing Chili Value Chain in Blitar and Kediri

External Factors

Internal Factors

Opportunity Threat

Tra

dit

ion

al

mar

ket

dem

and

tren

d

Th

e av

aila

bil

ity

of

pro

du

ctio

n

fact

or

Tec

hn

olo

gy

sup

po

rt

Su

pp

ort

fro

m

soci

al i

nst

itu

tio

n

Acc

ess

to

fund

ing

inst

ituti

on

s

Inte

r-re

gio

n

com

pet

itio

n

Inse

ct t

hre

at

Imp

ort

ed

pro

du

ct t

hre

at

Pri

ce f

luct

uat

ion

1 2 3 4 5 1 2 3 4

Strength SO Strategies 1. The appropriate land and experienced

human resources are considered as the

strengths to tap traditional market trend

along with technology support and the

availability of production factors with the

introduction to off season plantation

technology (S 1,3 ; O1,2,3)

2. Chili farm-business profitability and

agency activities are considered as the

strengths to build an access to funding

institutions via cooperation of chili

farmers to support farmers financially (S

2,4 ; O 5)

ST Strategies 1. Chili farm-business profitability

and agency activities are

considered as the strengths to

establish cooperation of chili

farmers in effort to bargain some

industries and hinder imported

chili (S 2,4 ; T 3)

2. Institutions activities reduce inter-

region competition and imported

products, as well as price

fluctuation by establishing

Communication Forum for Chili

Cluster that involves farmers

(IPPH/AACI), Agricultural

Department, BKP3, BMKG (S 4 ;

T 1,3,4)

3. Experienced human resources and

institutions activities are

considered as the strengths to

handle plant diseases (S 3,4 ; T

2)

The appropriate land for

growing chili

1

Chili farm-business

Profitability

2

Human Resources

(Farmer, Seller)

3

Agency Activities 4

Weakness WO Strategies 1. The less dependency of farmers on traders

by utilizing an access to financial

institutions is expected to financially

support farmers by providing business

capital (loan) (W 3 ; O 5)

2. The improvement of access to industrial

market with the support from social

agencies which establish manufacturing

industry (W 2 ; O 4)

3. Technical irrigation facilities to tap

traditional market trend along with

technology support and the availability of

production factors with the introduction to

off season plantation technology (W 4 ;

O1,2,3)

WT Strategies 1. Organized pattern of inter-

cluster chili plantation to reduce

inter-region competition and

imported products (W 1 ; T 1,4)

2. The improvement of access to

industrial market to hinder

imported products via the

bargaining of communication

forum or via manufacturing

industries conducted by social

agencies (W 2 ; T 3)

Institutions: No planting

arrangement among

clusters

1

The limited access from

farmer to market

2

The dependence of

farmers on traders

3

The lack of technical

irrigation facilities

4

41

3.10. STEER Analysis and Needs Assesment of Technology

STEER analysis used to complete the SWOT analysis. STEER analysis results

and the action to overcome the problem can be seen in the following table.

Table 26: Some Necessary Actions to Develop Chili Value Chain

Problem

Action

SOCIO-CULTURAL

1. Planting chili is farmers’ habit; they learn from

their family (39%), from family and extension

agents (21%), from extension agents only

(21%), and from others (19%).

2. Social capital which is low in capacity to

cooperate and to coordinate in the

arrangements of chili cultivation areas.

3. Consuming fresh chili is popular; however,

consuming processed chili is predicted to be a

trend in the near future.

SOCIO-CULTURAL

1. Continuing and intensifying the roles of

extension agents in improving the quality of

chili business and processing

2. Facilitating periodical meetings of chili farmer

organizations to regulate chili cultivation areas

and to solve farming problems

3. Conducting trainings on processing chili as

well as entrepreneurship in effort to develop

small industries in chili processing

TECHNOLOGY

1. The seeds produced from the seedling is not

guaranteed Gemini virus- free.

2. Imbalance fertilizing techniques

3. Over usages of pesticide

4. On-season plantation techniques

5. Less developed chili processing technology due

to the lack of access to the market of processed

chili

TECHNOLOGY

1. The importance of healthy seedling training to

the farmers ( especially seedling nursery

owners).

2. GAP (The use of proper fertilizers)

3. GAP (safe pesticide on pest control)

4. Introducing off season plantation

5. Conducting trainings on processing chili as

well as entrepreneurship in effort to develop

small industries in chili processing

ECONOMIC

1. The long marketing chain in Blitar and the

dependency on big collectors

2. Insufficient location in Pare Kediri sub-market

(vegetable market)

3. Less developed chili cooperation

4. Limited access to bank/financial institutions

5. The price of dried chili is only IDR 20,000/kg,

and dried chili production is 20 kg per one

quintal of fresh chili.

ECONOMIC

1. Developing sub-market (vegetable) in Blitar

2. Enlarging Pare Kediri sub-market

3. Supporting the establishment of chili

cooperation (vegetable) and developing the

existing chili cooperation.

4. Facilitating the access to banks to get financial

supports

5. Processed chili is not in the forms of dried chili

and chili powder but in the forms of pecel sauce,

gado-gado dressing, chili sauce, chili ketchup,

etc)

ENVIRONMENT

1. Over usages of pesticide

2. Limited irrigation in upland

ENVIRONMENT

1. Reducing the use of pesticide and using more

organic pesticide (GAP)

2. Introducing various irrigation techniques in dry

land (upland)

REGULATION

1. Designing quota of cultivation areas and

regulating planting schedules

2. Extension agents only contribute 40% in

developing chili value chain

REGULATION

1. Conducting periodical meetings among

Agricultural Department, extension agents, and

chili farmer organizations

2. Conducting trainings for extension agents in

effort to develop chili value chain

42

3.11. Strategy Recommendation for Value Chain Development of Chilli

Base on all analysis and description above, the proposed action plan can be seen

at table below.

Table 27: Action Plan for Developing Chili Value Chain

Recommendation

Upland Lowland

Big

Chili

Small

Chili

Big

Chili

Small

Chili

PRODUCTION

Organizing inter-cluster chili plantation √√ √√ √√ √√

Introducing off season technology through the use of

green house

√ √ √ √

Regulating inter-region production stability √ √ √ √

Developing irrigation infra-structures and introducing

specific techniques for irrigating dry land √√ √√

Training on helthy seedling for chilli nursery (the

owners) √√ √√ √√ √√

FINANCIAL

Providing financial support and building an access to

banks (KKPE: Kredit Ketahanan Pangan dan Energi =

Credit for Food Security and Energy)

√ √ √ √

CHILI PROCESSING

Establishing small industries (or home industries) in

chili processing that utilize simple technology

√ √ √ √

MARKETING

Building an access to industrial markets in Blitar √ √ √ √

Building vegetable markets in Blitar √ √ √ √

Enlarging vegetable markets in Pare Kediri √ √ √ √

INSTITUTIONS

Building an access to financial institutions through chili

farmer cooperation or farmer groups √ √√ √√ √√

Activating and facilitating communication among parties

in chilli value chain √ √ √ √

Conducting periodical meetings among Agricultural

Department, extension agents, and chili farmer

organizations to regulate cultivation areas

√ √ √ √

TRAINING

Conducting trainings on pest control (GAP) √√ √√ √ √

Conducting trainings on GHP √√ √√ √√ √√

Conducting trainings on entrepreneurship and chili

processing √ √√ √ √√

Training extension agents to develop chili value chain √√ √√ √√ √√

Note : (1) (√) recommended; (√√) strongly recommended

43

(2) GAP (Good Agricultural Practices)

(3) GHP (Good Handling Practices)

IV. CONCLUSION AND RECOMMENDATION

4.1. Conclusion

1. The farmers in Kediri Regency and Blitar may plant chilli all year, however, the

farmers avoid planting the chilli on January and February since pests and diseases

attack mostly at these months. In addition, the risk of plant failure is also high.

2. 60% up to 85% of fresh chilli from Blitar and Kediri is sent to supply markets at

big cities such as Jakarta and Surabaya

3. Comparison between upland and lowland for both small and big chilli farm

shows that the productivity, cost, revenue, and benefit of upland are slightly

higher than the lowland. The upland chilli farmers used more pesticide than the

lowland chilli farmers because they have more pest and disease problem.

4. Chilli marketing is conducted by market institutions. The farmers depend on

collectors to sell the product. Moreover, retailers take the highest percentage of

their profit per kg, however, the big collector and the wholesalers take the highest

total profit because of their high volume of marketed chilli.

5. The common problems of chilli marketing is the high and rapid fluctuation of the

price, normally it can be ranged from IDR 3,000 up to 30,000. The highest risk of

these problems is taken by the farmers when the price is drop to the breakeven

price. Moreover, when the price increases significantly, it becomes more difficult

for home industries since it is impossible for them to raise their product’s price.

6. Chilli processing in Blitar and Kediri is still limited, it is conducted by home

industries who produce sauce, a special seasoning for Indonesian beverage such

as pecel and gado-gado. Moreover, the marketing of these products are also still

locally. They receive profit; however, they still have to face several problems in

developing their business. In addition, dried chilli is not profitable, hence, the

farmers didn’t produce it.

7. Many farmers join the farmer group and association. Therefore, strengthening

activities can be done in these institutions, however, it may include those who are

not the member of the institution.

44

4.2. Recommendation

1. It is recommended that inter-region production stability is organized in ordered

cultivation pattern; therefore, off-season cultivation and green house should be

introduced.

2. It is necessary that production improvement is supported by producing the

healthy seedling nursery, building irrigation intra-structures, and introducing

various irrigation techniques in dry land.

3. It is suggested that the farmers receive a financial support in terms of capital and

bank access. In addition, the farmers may also employ the food security and

energy credit which interest is subsidized by the government.

4. The central and regional government need to work together to build the

vegetable,markets in Blitar Regency as well as to expand the vegetable markets

in Pare Kediri. In addition, the marketing contract between the farmers and the

chilli processor industry (especially in Blitar) is needed in order to expand the

chilli marketing. The decay of the chilli in the process of transporting and

unloading may be minimized by changing the bags with ventilated bags.

Therefore, the decay and the shortening number may be decreased.

5. To support the production of processed chili, it is important to establish small

industries (or home industries) in chili processing by using a simple technology.

The farmers need to be trained to produce various sambal, gado-gado, pecel, and

other chilli-based products.

6. In the area of agency activities, it is necessary to activate and facilitate the

communication among parties in chilli value chain to build an access to financial

institution and to conduct periodical meetings among Agricultural Department,

extension agents, and chili farmer organizations in order to create the cultivation

area regulation.

7. It is recommended that some trainings are conducted; including the healthy

seedling nursery, qualified Agricultural Practices, Handling Practices,

entrepreneurship, chili processing, and trainings for extension agents. These are

needed to develop the chili value chain.

45

REFERENCES

Badan Pusat Statistik. 2006. Statistik Indonesia. Jakarta.

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www.bkpjatim.com/.../4-luas-tanam-luas-panen-produksi-dan-produ...

47

Annex 1: Production Cost of Big Chilli Paid by Farmer (Commercial Farmer) in Kediri

and Blitar (IDR/ha), Year 2012.

Note: HKP = hari kerja setara pria; HKW= hari kerja setara wanita

No Activities Amount Unit cost/ unit Total (IDR)

A Land preparation, fertilizer, and mulch

land rent 1 Ha 12,000,000 12,000,000

Tillage or plow 120 HKP 25,000 3,000,000

Beds for cultivation (bedengan) 165 HKP 25,000 4,125,000

Organic fertilizer 16 Ton 500,000 8,000,000

ZA 400 Kg 1,400 560,000

NPK 1,000 Kg 6,000 6,000,000

SP36 300 Kg 2,000 600,000

KCL 200 Kg 5,000 1,000,000

Labor for fertilize 50 HKP 25,000 1,250,000

Mulch 200 Kg 25,000 5,000,000

Labor for mulch install 15 HKP 25,000 375,000

SUBTOTAL 41,910,000

B Seed and Cultivation

Polybag 15 Kg 20,000 300,000

Seed 20 pack 100,000 2,000,000

Plastic 75 meter 7,000 525,000

Plastic (tarpaulin) 25 meter 10,000 250,000

Labor for seeding 20 HKW 12,500 250,000

Labor for cultivation 50 HKW 12,500 625,000

SUBTOTAL 3,950,000

C

Maintenance:

Bamboo stick 18,000 stick 200 3,600,000

Labor for maintenance (rompes) 25 HKW 12,500 312,500

Labor for bamboo stick install 50 HKP 25,000 1,250,000

Insecticide 20 liter 200,000 4,000,000

Fungicide 50 Kg 100,000 5,000,000

Adhesive 10 liter 25,000 250,000

Labor for spraying 50 HKP 25,000 1,250,000

Labor for weeding 150 HKW 12,500 1,875,000

SUBTOTAL 17,537,500

D

Harvest and Post Harvest

Labor for Harvest 18,000 plant 250 4,500,000

labor for sorting 18,000 plant 100 1,800,000

Packing 18,000 plant 100 1,800,000

Packaging 18,000 unit 50 900,000

SUBTOTAL 9,000,000

48

Annex 2: Total Cost, Production, BEP, Revenue, Benefit, and R/C ratio of Big Chilli

(Commercial Farmer) in Kediri and Blitar, Year 2012.

Total Cost (A+B+C+D) IDR 72,397,500

Bank Interest (1,5% x 4 month) IDR 4,343,850

Total Cost (include bank interest) IDR/ha 76,741,350

Production 18,000 Kg/ha 0.93 16,794

Breakeven Price IDR/ha 4,570

Revenue 16,794 Kg 9,071 IDR 152,338,374

Benefit IDR/ha 75,597,024

R/C ratio (revenue/cost ratio) 1.98

49

Annex 3: Production Cost, Revenue, Benefit, BEP and R/C ratio for Small Chilli in

Kediri and Blitar (Data Base On Commercial Farmer), Year 2012.

No Activities Amount Unit cost/ unit Total (IDR)

A Land preparation, fertilizer, and mulch

land rent 1 Ha 12,000,000 12,000,000

Tillage or plow 120 HKP 25,000 3,000,000

Beds for cultivation (bedengan) 165 HKP 25,000 4,125,000

Organic fertilizer 16 Ton 500,000 8,000,000

ZA 400 Kg 1,400 560,000

NPK 1,000 Kg 6,000 6,000,000

SP36 300 kg 2,000 600,000

KCL 200 kg 5,000 1,000,000

Labor for fertilize 50 HKP 25,000 1,250,000

SUBTOTAL 36,535,000

B Seed and Cultivation

Polybag 15 kg 20,000 300,000

Seed 20 pack 100,000 2,000,000

Plastic 75 meter 7,000 525,000

Plastic (tarpaulin) 25 meter 10,000 250,000

Labor for seeding 20 HKW 12,500 250,000

Labor for cultivation 50 HKW 12,500 625,000

SUBTOTAL 3,950,000

C Maintenance

Labor for maintenance (rompes) 25 HKW 12,500 312,500

Insecticide 20 liter 200,000 4,000,000

Fungicide 50 kg 100,000 5,000,000

Adhesive 10 liter 25,000 250,000

Labor for spraying 50 HKP 25,000 1,250,000

Labor for weeding 150 HKW 12,500 1,875,000

SUBTOTAL 12,687,500

D Harvest and Post Harvest

Labor for Harvest 18,000 plant 250 4,500,000

labor for sorting 18,000 plant 100 1,800,000

Packing 18,000 plant 100 1,800,000

SUBTOTAL 8,100,000

Total Cost (A+B+C+D) 61,272,500

E Bank Interest (1,5% x 4 month) 3,676,350

50

Annex 4: Total Cost, Production, BEP, Revenue, Benefit, and R/C ratio of Small Chilli

(Commercial Farmer) in Kediri and Blitar, Year 2012.

Total Cost (include bank interest) IDR/ha 64,948,850

Production 18,000 Kg 0.70 12,600

Breakeven Price IDR/kg 5,155

Revenue (gross sale) 12,600 kg 10,192 IDR 128,419,200

Benefit IDR 52,822,176

R/C ratio (revenue/cost ratio) 1.97