The Design of a Contract Farming Model for Coffee Tree Replanting

Abstract

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