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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

Farmer sales decisions and the sustainability of the coffee

supply chain in Indonesia

N Rosiana1 and Feryanto2

1
Lecturer at Department of Agribusiness, Faculty of Economics and Management,
Bogor Agricultural University, Indonesia
2
Lecturer at Department of Agribusiness, Faculty of Economics and Management,
Bogor Agricultural University, Indonesia

E-mail: [email protected]

Abstract. The aims of this study: 1) analyze of Indonesian coffee farmers in determining the
purpose of selling coffee; 2) analyze the factors that influence the decisions of Indonesian
coffee farmers in determining coffee sales for improving the sustainability of the Indonesian
coffee supply chain. This study uses data from the Indonesian Plantation Business Household
Survey and multinomial logistic analysis methods. The number of respondents analyzed was
21 361 coffee farmers scattered throughout Indonesia. Coffee farmers in Indonesia sell to
collectors, markets, village unit cooperatives, and plantation companies. The percentage of
farmers coffee sales is through collectors due to distance, cost, ease of cash, and ease of
transaction. In contrast, farmers who deal with the company will tend to sell coffee to the
company because of the partnership. improvement of quality consistency and production
continuity is carried out such as with Geographical Indications (GI) of production center areas.
This can be done by various supply chain actors such as the Community Concerned for
Geographical Indications (MPIG) in conducting counseling and mentoring for farmers. This
can trigger the coffee supply chain in Indonesia.

1. Introduction
The competition in the international coffee market encourages coffee producers to increase production
and quality to meet consumer demand [1]. Improving the quality and increasing coffee production can
increase competitiveness and increase competitiveness in export markets [2]. In the period 2001-2008,
the growth rate of coffee production in Indonesia increased by 1.5 percent per year [3]. Factors driving
the growth of domestic production and exports [4]. Nevertheless, the amount of coffee production in
Indonesia is not proportional to the income of farmers obtained [5]. This is because most of the coffee
that Indonesia consumes still uses commercial coffee or low quality coffee.
Many actors are involved in the stages of coffee production activities, from farmers to final
consumers [6]. Farmers are the most important actors in coffee supply chain. However, the selling
price of coffee at the farm level tends to be low and fluctuating [7,8]. There is no certainty of price
until it is paid [9]. Farmers will get price certainty if they meet the specified quality [10]. Whereas, to
improve the welfare of farmers, it is necessary to improve prices[11]. Farmers find it difficult to
market low-quality coffee [12]. This is considered by the higher percentage of impurities (ash, horn
skins, logs) and water content of coffee beans, which will reduce the quality of coffee which is
increased at the time of farmer acceptance [13]. Need for information and education about the process

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

of planting and handling, so that coffee farmers can produce high quality coffee [14]. The
improvements in increasing farmers income not only in improving production but also in improving
coffee distribution channels [15].
In general, farmers expect the selling price of coffee to cover production costs and generate
reasonable profits [16]. The selling price of coffee is influenced by topography, factory location,
production, marketing, quality and capital [17]. The farmers in Indonesia sell coffee in the form of
green beans not in the form of logs (there are still horn skins). This is because selling in the form of
green beans is more profitable because the selling price is higher than selling in the form of logs [18].
This is in accordance by Nazaruddin et al (2020) that farmers inevitably choose to sell coffee in the
form of grains because there is no other choice [19]. According to Tuoi at al (2022) that coffee
farmers do not have market power [20]. Many farmers sell their coffee to collectors and other traders,
not to farmer organizations such as coffee processing units and cooperatives [21]. Farmers have close
relationships with collector traders, who are able to provide cash for as long as production process
without complicated loan procedures [22]. However, the prices for coffee processing units and
cooperatives are often higher than for other buyers. This is due to coffee sales through coffee
processing unit due to the large capital to buy coffee from farmers and cultural factors however the
prices for coffee processing units and cooperatives are often higher than for other buyers [23]. Farmers
generally need collectors as providers of tools and informants of coffee prices [24]. The distribution of
surplus income sharing among members act as an incentive to produce good quality coffee beans [25].
Limited market access is one of the problems faced by farmers. Distance, ease, attachment to
economic factors (borrowing capital), and kinship become the basis for farmers in choosing marketing
channels [26]. According to Asefaa et al (2016) distance has a positive an significant effect on the
preference of the farmers for market choice [27]. Meanwhile, differences in coffee marketing channels
in Indonesia are caused by several factors including differences in traditional marketing patterns,
adjustments in production systems, processing methods and the relationship between coffee farmers
and intermediary traders [28]. Beside that the factors that significantly influence the opportunities for
coffee marketing channel choices include land area, income, and land use [29]. While farming
experience, the amount of production and contractual engagement have no significant effect on coffee
marketing channel opportunities. The influence of coffee institutions about social relations of
production and management practices important role in the process of decision making [30].
According to Anh and Bokelmann (2019), factors that influence farmers in determining market
preferences include price uncertainty, market competition, transportation costs, speed of payment, and
agreed sales volume [16]. Education, proportion of land allocated to coffee, proportion of off farm
income to total income, cooperatives performance, satisfaction on cooperatives performance, and
second payment affected market outlet choice while age of the household head, proportion of off farm
income and access to training has positively influenced buyer selection decision [31].
Based on BPS data, coffee farmers in Indonesia sell these commodities in the form of green beans
to marketing actors such as the Village Unit Cooperative (VUC), markets, collectors, and plantation
companies. For example, cooperatives that have the ability to gain market share can be an incentive so
that farmers are willing to sell coffee to cooperatives [32]. But in selling to actors (VUC, markets,
collectors, plantation companies), farmers questioned lower prices, distance, transportation, and
quality requirements. Based on Table 1, the main consideration faced by farmers is lower prices. This
is related to the high level which is far higher than other problems such as distance, transportation, and
quality requirements. Whereas infrastructure such as transportation is needed by coffee producers in
order to be able to determine marketing channels efficiently[33].
High and low prices of coffee beans are determined by several things, namely: a) the price of
coffee on the world market, b) class (foreign objects, black beans, broken beans, water content), and c)
partnership [34]. It is different from Gelaw et al (2016) that when coffee sales transactions occur,
farmers prefer the characteristics of traders rather than the price offered. This means that the individual
bond between farmers and traders is a determining factor in coffee sales[35].

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

In general, coffee sold by farmers in the form of carelessly of poor quality. This original coffee has
been obtained through the process of harvesting that does not make select "red cherry" coffee fruit. In
addition, the drying process that is not in accordance with the optimal water content is 12 percent
which is considered to be a low selling price. Another problem faced by farmers besides the low price
is the quality requirements. However, if farmers can improve the quality of coffee sold, the problem of
low prices can be overcome.

Table 1. Percentage of problems faced by farmers in selling coffee.

Farmers problems Marketing actors
when selling coffee VUC Market Collectors Plantation Companies
Transportation 18% 16% 17% 40%
Quality requirements 3% 4% 4% 3%
Low price 73% 55% 67% 55%
Distance 6% 25% 11% 3%
Source: Statistics Indonesia [36], processed.

Furthermore, another problem faced by farmers in selling coffee to VUC, markets, collectors or
plantation companies is transportation problems. The problem is generally faced with farmers who use
fuel oil, wherein some coffee producing centers there are still difficulties in obtaining the fuel. This is
due to access to get fuel at a distance of farmers. In general, coffee is planted in the highlands so
distance is also a problem for farmers in selling coffee. In conducting marketing activities, coffee
farmers use various modes of transportation including motorized vehicles (motorcycles and cars), non-
motorized vehicles (carts and others), and river transportation (boats and ships). Even in some
locations still use animals as a means of transportation. In addition, if farmers sell in small quantities,
they can still be transported using human labor. According to Chander (2017), farmers also tend not to
have their own transportation and have to pay the cost of sending green coffee beans to the
factory[37]. The problem of coffee supply chain is important for coffee farmers because of the large
number of livelihood dependencies, the large number of farmers are involved in coffee farming and
lack of incentives for farmers [38]. So, farmers who have access to market information will be able to
sell their crops for more profit [39,40]. According to Warnaen et al (2020), indicators of farmer
empowerment in coffee farming the weakest management is in the ability to market coffee.
Importance farmers in deciding coffee sales to support the sustainability of the coffee supply chain in
Indonesia [41]. Based on these problems, the objectives of this study are 1) analyze of Indonesian
coffee farmers in determining the purpose of selling coffee; 2) analyze the factors that influence the
decisions of Indonesian coffee farmers in determining coffee sales for improving the sustainability of
the Indonesian coffee supply chain.

2. Materials and methods

The type of data used is secondary data using of Plantation Enterprises Household Survey issued by
the Statistics Indonesia, Republic of Indonesia. The number of respondents analyzed was 21 361
coffee farmers scattered throughout Indonesia. The limitations of this study are a) the analyzed coffee
is coffee beans/green beans with no difference in the type of arabica or robusta coffee and b) the
intended marketing activity is the activity of selling coffee to marketing actors after farmers.
The analytical methods used in this study are qualitative and quantitative. The qualitative method
was analyzed descriptively to analyze the characteristics of Indonesian coffee farmers in determining
marketing actors. While the quantitative method was used analyze the factors that influence the
decision of Indonesian coffee farmers in determining marketing actors. Processing is carried out using
multinomial logistics analysis. The equation is as follows:
( ) (1)

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

P (x) = Marketing of plantation commodities

(0 = If farmers choose village unit cooperative/plantation cooperatives)
(1 = If farmers choose to market)
(2 = If farmers choose to collect traders/collectors)
(3 = If farmers choose to plantation companies)

e = Exponent
α = A constant
βi = Regression coefficient i
X1 = Age (years)
X2 = Amount of harvest (kg)
X3 = Get information about marketing / selling crops (1 = yes, 0 = no)
X4 = Membership in village unit cooperative / plantation cooperatives (1 = yes, 0 = no)
X5 = Membership in farmer groups (1 = yes, 0 = no)
X6 = Plantation farmer association membership (1 = yes, 0 = no)
X7 = Partnership with plantation companies (1 = yes, 0 = no)
X8 = How to transport coffee (1 = modern, 0 = traditional)
X9 = Difficulties in marketing (1 = yes, 0 = no)
= Error

3. Results and discussion

3.1. The characteristics of Indonesian coffee farmers in determining the purpose of selling coffee
Coffee farmers in Indonesia generally sell coffee in the form of green beans to four marketing actors
including collectors, markets, village unit cooperative, and plantation companies. Based on Figure 1,
generally, farmers sell green beans to collectors with a percentage level of 82.25 percent. Collectors
generally come to the farmers place so that the farmers do not bear the transportation costs. Unlike the
case with farmers who carry out the exchange function in marketing activities, namely selling green
beans to markets where farmers incur transportation costs to reach the intended buyers. The
percentage of farmers who sell coffee to the market is 13.65 percent.
Another marketing actors is headed by farmers in selling their coffee, namely companies that
produce a percentage reaching 0.67 percent. The farmers who are members of the company partners
will sell green beans to plantation companies. For example, coffee processing companies such as
Nestle and Indocafco in Lampung Province are pushing for partnerships between the private sector
and farmer groups to apply global sustainability standards [42]. At present, there is a world coffee
certification that carries out control of production, trade, and consumption [43]. This encourages
companies to improve the quality of coffee starting from the cultivation process to processing. Ask
farmers who partner with the company to get assistance to get the quality of coffee harvested. For
example, farmers who sell green beans to Nestle must meet the requirements requested. If the quality
is fulfilled, farmers will get a higher selling price compared to asalan coffee (low quality coffee).
‘Asalan coffee’ has a low quality with relatively highwater content and uses a method or facility that is
still simple [44].
In addition to the three actors, there is one other actor that accommodates green beans from
farmers, namely VUC with a percentage level of only 0.43 percent. Compared to other marketing
actors, the percentage of farmers selling coffee to the VUC is the smallest compared to the others. This
is because not all farmers are included in the VUC membership. Less involvement of farmers in
cooperatives shows a positive correlation with cooperative performance [45]. Although farmers are
included in the VUC membership, the membership has not been seen its influence on improving the
welfare of these farmers [46]. Even though, farmers follow the cooperative to get a fair and profitable
price [47]. The resulting of research of Ntimbaa and Akyoob (2017), that the coffee farmers won’t sell

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

coffee to cooperatives because they were well informed about cooperative misconducts in terms of
corruption, delay of payment, malpractices in measurements, and unfair deductions[48].

Plantation Companies 0.67%

Collectors 85.25%

Market 13.65%

KUD 0.43%

Coffee sales from farmers (%)

Figure 1. Percentage of farmers selling coffee.

Based on Figure 2, the average age of Indonesian coffee farmers are 49 years old, whereas farmers
who sell their coffee to VUC are on average almost 51 years old. Unlike the case with farmers who
sell their coffee to plantation companies and collectors who are almost 48 years old. In general,
although the age of Indonesian farmers is still productive, in some areas of the coffee center in
Indonesia, there are now many young farmers who are interested and seeking coffee as their main
livelihood. This is because the cultivation of arabica coffee produces an average revenue of IDR
15,083,063.00/ha [49]. While the cultivation of Robusta coffee received an income of IDR
8,417,600.00/ha [50]. This will certainly increase along with increased production and quality of
coffee has an impact on increasing farmers income [51]. In addition, improving quality through farmer
certification will increase economic benefits and fairness in the transaction process [52]. This is
indicated by the average income of certified farmers amounting to IDR 10,920,999.00/ha while non-
certified farmers are only IDR 8,962,978.00/ha.

The age of the farmer who sells coffee

51
50
49
48
47
46
To VUC To Market To Collectors To Plantation
Age (Years) Companies

Figure 2. Average age of farmers selling coffee to marketing actors.

Other results show that the involvement of Indonesian coffee farmers in VUC membership, farmer
groups, and associations is still relatively low. This is indicated by the percentage of farmers involved
in associations, VUC, and farmer groups only reaching 0.86 percent, 1.43 percent, and 15.87 percent
(Table 2). The percentage level of farmers selling coffee to collectors is still far higher than selling to
other actors even though the farmers are included in associations, VUC, or farmer groups. Other

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

results show that Indonesian coffee farmers who received counselling about marketing activities only
reached 3.41 percent. The percentage shows that although farmers have received marketing
counselling, coffee sales activities still mostly choose to collectors. Very high dependence on
collectors due to cash needs that are needed by farmers when they are urgent to weaken the bargaining
position of farmers[42].

Table 2. Percentage of farmer involvement in membership and marketing counselling (%).

Membership Marketing
VUC Farmers Associations Counseling
Farmers Sell to Group
Yes No Yes No Yes No Yes No
Village Unit Cooperative (VUC) 0.16 0.25 0.23 0.18 0.05 0.35 0.07 0.33
Market 0.06 13.35 2.44 10.97 0.13 13.28 0.72 12.69
Collectors 1.19 84.33 13.00 72.52 0.66 84.86 2.53 83.00
Plantation companies 0.02 0.64 0.20 0.46 0.02 0.64 0.08 0.57
Total 1.43 98.57 15.87 84.13 0.86 99.14 3.41 96.59

3.2. The factors that influence the decision of Indonesian coffee farmers in determining coffee sales
for improving the sustainability of the Indonesian coffee supply chain
Based on the analysis of the results that influence farmer decisions factors in selling coffee to the VUC
when compared to selling coffee to the market include membership in the VUC, membership in farmer
groups, farmers partnership with plantation companies, how to transport harvests to the market, and
difficulties in marketing (Table 3). The biggest opportunity factor that influences farmers in selling
coffee to VUC when compared to selling coffee to the market is VUC membership. Farmers who are
members of VUC will sell coffee to VUC with an opportunity value of 17.8 times greater than selling
coffee to the market. Cooperatives can support the sustainability of the coffee business and the
partnerships formed through cooperatives can benefit farmers. While non-cooperative farmers have a
strong partnership so farmers do not have a good relationship with customers [53]. Therefore, the need
for a mechanism to enhance the role of cooperatives to be able to improve member benefits to more
meaningful, attractive, and sustainable[54]. Cooperative optimization can be done through the delivery
of market price information both local prices and world prices to farmers [55]. In addition,
cooperatives can act as providers of cash needs so that they can provide loans to farmers when needs
are urgent [56].

Table 3. Results of estimated opportunities farmers for selling coffee to VUC if compared for selling
to the market.
Coef* Z P>|z|
Age 0.995 -1.29 0.196
Amount of harvest 1.000 1.06 0.288
Marketing counseling 0.887 -0.68 0.498
Village Unit Cooperative (VUC) 17.876 9.39 0.000***
member
Farmers group member 1.265 2.36 0.018**
Association member 1.525 1.25 0.210
Partnership with plantation companies 0.346 -2.33 0.020**
How to transport coffee 0.858 -1.91 0.056*
Difficulties in marketing 0.785 -2.93 0.000***
Number of observations 21.361
Prob > chi2 0.000
Pseudo R2 0.1225

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

Other results show that the greatest opportunity for farmers to decide to market coffee to collectors
compared to marketing it to the market is membership in the VUC (Table 4). This shows that although
farmers belong to the VUC membership, farmers prefer collectors to sell their coffee rather than sell it
to the market. In general, farmers sell coffee to collectors because they do not need to pay expensive
transportation costs and if they meet the 20 percent water content quality criteria and defect 225 can be
sold to collectors [28]. In addition, the main factors that cause farmers to sell coffee to collectors
include distance factors, ease of lending money, and no special treatment of coffee sold [57]. Farmers
who sell small amounts of coffee are too large a cost if they have to sell them to the market [58].
Farmers find it easier to sell to nearby traders or farmers who can accommodate a small amount of
harvest. Collectors generally provide loans to farmers to meet their daily needs or farming needs on
the condition that coffee beans are sold to the middlemen [29]. In general, farmers who sell to the
market are farmers who sell coffee in large quantities so that they can afford to bear the transportation
costs [58]. Therefore, more primary cooperative formation is needed in rural areas and other coffee
purchasing centers to reduce transportation costs [48].

Table 4. Results of estimated opportunities farmers for selling coffee to collectors if compared for
selling to the market.
Coef* Z P>|z|
Age 0.994 -3.33 0.001***
Amount of harvest 1.000 8.39 0.000***
Marketing counseling 0.544 -6.05 0.000***
Village Unit Cooperative (VUC) member 3.943 4.85 0.000***
Farmers group member 0.889 -2.08 0.037**
Association member 1.247 0.98 0.327
Partnership with plantation companies 0.640 -1.88 0.060*
How to transport coffee 1.310 6.43 0.000***
Difficulties in marketing 0.680 -9.07 0.000***
Number of observations 21.361
Prob > chi2 0.000
Pseudo R2 0.1225

In marketing activities, farmers sell coffee not only to VUC, collectors, and markets but also can
sell coffee to plantation companies. The factors that influence farmers decisions in selling coffee to
plantation companies compared to selling to markets include partnership factors with plantation
companies, marketing counseling that farmers have obtained, farmers membership in farmer groups,
and the amount of harvest (Table 5).
Based on the results of the analysis, farmers who partner with plantation companies will sell their
coffee to the company compared to the market. This shows that the partnership has a positive impact
on farmers. This is in line with research by Supriatna and Dradjat (2012) that marketing partnerships
can improve coffee quality and marketing efficiency [59]. The selling price of coffee at the farm level
that sells through partnerships increases by 13.1 percent compared to selling to collectors. The selling
price of coffee at the farm level through partnerships is IDR 9,670/kg while through traditional
channels (traders) IDR 8,550/kg. Therefore, need ways to improve the extension component through
training and knowledge transfers to smallholder farmers [25].

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2nd International Conference on Environmental Ecology of Food Security IOP Publishing
IOP Conf. Series: Earth and Environmental Science 1107 (2022) 012083 doi:10.1088/1755-1315/1107/1/012083

Table 5. Estimated results of opportunities for farmers to market coffee to plantation companies when
compared to selling to the market.
Coef* Z P>|z|
Age 0.991 -1.12 0.263
Amount of harvest 1.000 2.61 0.009***
Marketing counseling 1.840 2.05 0.040**
Village Unit Cooperative (VUC) member 2.303 1.12 0.264
Farmers group member 1.722 2.62 0.009***
Association member 0.587 -0.69 0.490
Partnership with plantation companies 2.708 1.72 0.085*
How to transport coffee 0.883 -0.70 0.487
Difficulties in marketing 0.744 -1.56 0.119
Number of observations 21.361
Prob > chi2 0.000
Pseudo R2 0.1225

4. Conclusion
Coffee farmers in Indonesia generally sell coffee in the form of green beans to four marketing actors
including other collectors, markets, Village Unit Cooperatives (VUC), and plantation companies with
the highest percentage to collectors. This is due to a very high dependence on cash needs at an urgent
time. Factors that influence farmers' decisions to sell coffee to VUC when compared to selling coffee
to the market include membership in VUC, membership in farmer groups, farmer partnerships with
plantation companies, how to transport their crops to the market, and difficulties in marketing.
Meanwhile, the biggest opportunity factor that influences farmers in selling coffee to VUC and
collectors when compared to selling coffee to the market is VUC membership. Even though there are
farmers who are members of the VUC, they prefer the collectors to sell their coffee rather than selling
it to the market. In addition, the factors that influence the decision of farmers to sell coffee to
plantations compared to selling to the market are between partnership factors with plantation
companies, marketing counselling obtained by farmers, farmer membership in farmer groups, and the
number of harvests.
The need to strengthen the role of VUC and farmer groups in coffee marketing activities to
improve the bargaining position of farmers which has an impact on increasing coffee selling prices. In
addition, the need for the involvement of farmers with plantation companies can encourage the
sustainability of the coffee supply chain. improvement of quality consistency and production
continuity is carried out in line with Geographical Indications (GI). This can be done by supply chain
actors such as the Community Concerned for Geographical Indications (MPIG) in conducting
counselling and mentoring for farmers. The continued strengthening of access to market information
for farmers will be able to influence the sale of crops to earn more profits. Another suggestion,
increasing the selling price of farmers can be done through improving the quality of coffee, including
picking, reducing the percentage of impurities (ash, horn bark, logs) through sorting, and drying to a
moisture content of 12 percent.

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