1
SUSTAINABILITY OF COCOA AGRIBUSINESS AT THE FARM
LEVEL IN INDONESIA
Introduction:
Cocoa is one of Indonesia's strategic commodities. Although not a staple food, cocoa
can be very profitable as an export commodity. Cocoa is a strategic and leading commodity
in international trade, along with rubber, palm oil and coffee. Demand for cocoa products is
huge in the international market, especially countries in Europe whose consumption accounts
for 50 percent of the total world consumption of cocoa products1 . The European continent is
one of the regions that cannot produce cocoa because the environment is not suitable for
cocoa plants to grow. This makes cocoa a strategic trading commodity for cocoa-producing
countries, such as Indonesia and other countries located in areas suitable for cocoa
cultivation.
In 2016, Indonesia was ranked as the third largest cocoa producer after Ghana and Ivory
Coast2 . Meanwhile, in terms of consumption, the consumption of processed cocoa products
in Indonesia is not as much as other countries. Until 2016, the consumption of cocoa products
in Indonesia only reached 0.5 kg/capita per year. This level of consumption is lower than
Southeast Asian countries such as Singapore and Malaysia whose consumption reaches 1 kg
per capita per year3 and is very different when compared to countries in Europe which reach
8 kg per capita per year. The low consumption, the high potential of the region for cocoa
cultivation and the high demand for cocoa in the international market make Indonesia one of
the potential cocoa exporting countries. Cocoa products exported from Indonesia were
originally primary cocoa products, namely cocoa beans. Since 2010, when the export tax or
export duty on cocoa beans was introduced, the export structure of cocoa commodities has
changed from cocoa beans to processed c o c o a products, especially semi-finished products
that a r e used as inputs for the production of other processed cocoa. Based on UN
Comtrade (2020) data on cocoa exports in Indonesia, it can be seen that a decrease in the
number of cocoa bean exports was accompanied by an increase in exports of several cocoa
processing products.
The imposition of export duty on cocoa beans is regulated in Minister of Finance
regulation no.67/PMK.011/2010. The regulation aims to develop downstream cocoa
agribusiness, namely the processing industry by utilizing domestically produced cocoa beans
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at the cocoa farm level. In trade, the processing industry plays a role in increasing the value
of domestically produced cocoa products before they are exported. The increase in exports of
several processed cocoa products (Figure 1), such as cocoa paste, cocoa powder and cocoa oil
shows that efforts to develop the downstream subsystem of cocoa agribusiness have been
successful.
Despite developments in the downstream side of agribusiness, when viewed from the
level of cocoa bean cultivation, namely cocoa farming, the export tax for cocoa beans, creates
market restrictions for cocoa products produced by farmers. Whereas in 2010, cocoa
production in Indonesia reached the highest cocoa production of 837 thousand tons (BPS
2018). The limited export market for cocoa beans and the nascent domestic processing
industry meant that domestic demand for cocoa beans was very low, while the supply of
cocoa beans in those years was abundant. High supply, accompanied by low demand, can
lead to a drop in the price of a product. In the case of cocoa, although there was no immediate
decline in domestic cocoa bean prices, according to Pusdatin (2016), there was a decline in
the development of cocoa bean prices starting in 2010. The average farm-gate price of cocoa
beans in the three years prior to the imposition of export duties, namely 2007-2009, increased
by 22.3 percent, while the average increase in cocoa prices in the three years after the
imposition of export duties, namely 2010-2012, was only 3.7 percent, even in 2012 there was
a 5 percent decline in prices from 2011.
The decline in domestic cocoa bean prices goes hand in hand with the decline in cocoa
bean production in Indonesia. Cocoa production initially continued to increase, as seen from
the average production in 2006-2010, which grew by 2.4 percent per year. Meanwhile, cocoa
bean production 5 years after the export duty was imposed, namely in 2011-2015, declined
with an average decline of 6.2 percent per year (Figure 2).
The decline in cocoa bean production is in contrast to the growing cocoa processing
industry. The development of the cocoa processing industry has increased the demand for
cocoa bean inputs. Until 2014, there was an increase in cocoa bean imports to meet domestic
cocoa bean demand (Figure 2). The increase in imports in that year was the beginning of the
increase in cocoa bean imports in subsequent years. The increase in imports has caused the
trade value of cocoa commodities to decline. As can be seen in Figure 3, the import value of
cocoa products has increased, while the export value of cocoa products, if not decreasing,
tends to stagnate. This then causes the trade value of cocoa commodities to decline.
A sustainable state of agriculture (agribusiness) is indicated by meeting the current
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needs of agricultural products without reducing the ability of the next generation to meet the
needs for the same products (Pretty 2008). In this concept, the demand for agricultural
products arises from the processing industry's demand for cocoa bean products, while farms
and imports are actors that have the ability to fulfill the demand for cocoa bean products.
Meeting the demand for cocoa beans should follow the purpose of the export duty, which is
to utilize domestic raw materials from farms. Another thing that is considered in
sustainability is the time dimension where the activities to fulfill the needs and the ability to
produce do not decrease and even get better in the future. The condition of declining trade
value due to increased imports of cocoa beans has led to the ability to f u l f i l l t he nee d s
of cocoa beans in Indonesia is not sustainable. Dependence on imports to meet the needs of
the processing industry for cocoa beans is clearly detrimental to the position of cocoa as a
trading commodity, where such dependence causes profits from cocoa commodity trading
activities to decline.
Based on the above explanation, it can be seen that farming has an important position in
the sustainability of cocoa agribusiness, although the products produced at this level, namely
cocoa beans, are no longer prioritized as export products. However, it cannot be denied that
changes in the trade structure, i.e. changes in export products from cocoa beans to processed
products, have an impact on cocoa agribusiness at the farm level. Given its role in cocoa
agribusiness, unsustainable cocoa farming will in turn impact the sustainability of cocoa
agribusiness. Therefore, it is important to analyze the level of sustainability at the cocoa farm
level.
1.1 Problem Formulation
Cocoa farming can be said to be sustainable if it has the ability to meet the needs of
cocoa beans, both now and in the future. However, currently, there are many issues and
constraints experienced by farms to fulfill this role. Declining production at the farm level is
a major constraint for farming to be sustainable. Cocoa farm production is directly related to
meeting the demand for cocoa beans from the cocoa processing industry. In the background
section, it has been shown that the decline in cocoa production may be caused by the decline
in prices, due to the limited market for cocoa beans since the export duty was imposed.
Regardless of these circumstances, the sustainability of cocoa farming is currently the result
of choices and circumstances made and experienced by cocoa farmers in their farming
activities.
In addition to prices, the current decline in production is also largely attributed to the
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age of cocoa plants in Indonesia. Plant age is often an issue in perennial agricultural
commodities, because as the age increases, plant productivity will decrease. Cocoa as an
annual crop also faces this issue. It is feared that the cause of the decline in cocoa production
is the age of cocoa plants that are old and no longer productive. Efforts to prevent the decline
in cocoa productivity caused by plant age have been made through the National Cocoa
Movement (Gernas) in 2009 until 2014. Cocoa plant productivity is maintained through
rejuvenation activities by replacing old cocoa plants with new ones. In addition to
rejuvenation, cocoa farming land expansion efforts are also carried out to overcome cocoa
bean production shortages (Nellson 2008). The results of the rejuvenation and land clearing
activities should have been felt in approximately 3-4 years when the land has started to
produce again, but in Figure 2 previously, it can be seen that the decline in production
continues to occur even though the Gernas program has been implemented and has passed
several years. According to BPS 2018 data, cocoa farming has not only experienced a decline
in production, but also in the area of cocoa land in production. The decline in production land
area occurred in plantations government-owned, private, and community-owned plantations
(Figure 4).
The decline in cocoa land area initially occurred in government-owned and private
plantations. Then the decline in land area also occurred in smallholder plantations since 2013.
Smallholder plantations cover more than 90 percent of the cocoa land area in Indonesia.
Average land tenure per farmer in smallholder plantations is smaller than other land holdings,
at less than two hectares. The large decline in smallholder plantation land may indicate tens
of thousands of cocoa farms that have stopped producing since 2013. This also indicates the
possibility that cocoa farming is no longer prosperous for farmers, thus reducing the interest
of cocoa farmers to continue their business.
Declining productivity in cocoa can also be caused by declining fertility of the planting
land, which is very likely to happen in annual crops. The status of cocoa as an annual crop
makes it difficult to maintain land fertility such as crop rotation or other efforts. As a result,
nutrient fulfillment for annual crops including cocoa is mostly done by adding fertilizers,
both inorganic and organic fertilizers. These two inputs can have different long-term effects
on the farm environment. The use of inorganic fertilizers, although clearly needed in
production, can damage the environment in the long run. In addition, old cocoa plants are
vulnerable to pests and diseases (HPT). Plants affected by pests and diseases will experience
a decrease in production, while handling using pesticides that are not in accordance with the
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recommendations will have a negative impact on the cocoa farming environment in the long
run. In this case, the use of inputs, especially inputs that can affect the environment, can
cause cocoa farming to be ecologically unsustainable.
In addition to issues arising from cocoa bean production at the farm level, other issues
also arise from cocoa's position as a trade commodity in Indonesia. The phenomenon of
changes in exported cocoa products since the implementation of export duty should have a
positive effect on cocoa farming. Cocoa farms that initially faced demand for cocoa beans from
the import market are now facing demand from the domestic cocoa processing industry. Such
a change can provide great benefits to farms, if the demand can be fully captured by farms.
However, the proximity in location between consumers and producers does not necessarily
lead to transactions between the two parties. In the case of cocoa, imports of cocoa beans
have increased with the issue that cocoa beans produced by domestic farms cannot meet the
demand of the processing industry, in terms of quantity, type, and quality4 .
In fulfilling the form and quality of cocoa beans demanded by the market, a constraint
that can occur on the farm is the absence of information on what the processing industry
demands. In addition, not knowing how to fulfill the demand (e.g. how to process cocoa
beans) can also be a constraint. To ensure that the market demand for cocoa beans can be
conveyed and fulfilled by the farm, it is necessary to participate in the social environment,
namely other parties who act as a conduit of information related to the demand for cocoa
beans to farmers, in addition to the active role of cocoa farms in the social environment is
also important. The existence of a third party can also function as a facilitator that helps
cocoa farms in providing a place and controlling cocoa farming activities to keep running
well.
2.1 Farm Sustainability Analysis
Agriculture is a very important sector for an agrarian country like Indonesia. Apart
from being a sector to fulfill people's needs in the food sector, agriculture is also included as
an important sector in trade and as a means to establish relations with other countries through
trade routes. The important role of agriculture causes agriculture in a country to be
sustainable. One of the components in agriculture, namely farming, plays a role in producing
agricultural primary products. Sustainability at the farm level guarantees the fulfillment of
domestic agricultural products without having to rely entirely on imports. In addition,
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sustainability also plays a role in maintaining the competitiveness of a commodity in trade,
for now and in the future. Therefore, research on sustainability has been conducted on various
agricultural commodities.
Sustainability Issues at the Farm Level
In general, problems or topics in sustainability relate to three aspects, namely
economic, environmental and social (ICCO 2007, Wardie et al 2011, Sari et al 2018,
Ustriyana and Artini 2018, Fitra 2019, Nainggolan 2019, Nurhadi et al 2019, Suryadi 2020).
Some other sustainability analyses add technology-infrastructure and legal-institutional
aspects to the sustainability analysis, in addition to these three aspects (Hidayanto et al 2009,
Terano et al 2015, Dzikrullah 2017). The analysis of agricultural sustainability usually starts
from the environmental problems of cultivation activities, as well as the problems of
declining yields and low production of agricultural commodities.
Sustainability analysis can be used to evaluate a way or method of cultivation, and
evaluate an ongoing agricultural program and activity, especially at the farm level. As
conducted by Sari et al (2018) who examined the sustainability of the certification program
on mangosteen commodities. The analysis was carried out to determine the feasibility of the
program to be held again. Research with similar objectives was conducted by Fitra (2019)
who wanted to see the sustainability of different farming methods, namely minapadi.
Meanwhile, Wardie et al (2011) looked at the sustainability of farming owned by farmer
households on tidal land in Central Kalimantan. This study also differentiated between farms
conducted by local farmers and farmers who were not natives or migrant farmers.
Other studies have mostly analyzed the sustainability of a commodity because of issues
related to the sustainability aspects of the commodity in question. Sustainability analysis
related to ecological aspects usually arises from environmental issues due to improper
cultivation methods. As conducted by Terano et al (2015) on the sustainability of rice
farming practices in general in Kelantan, Malaysia. This study aims to evaluate the
sustainability of rice farming practices looking at the use of fertilizers and pesticides that are
less concerned with environmental sustainability. Similar research was conducted by Saragih
(2019) who looked at the sustainability of palm oil along the supply chain. This research also
departs from the existence of environmental issues in the coconut agribusiness palm oil,
which is then addressed by certification. Certification is a form of more attention from the
international market to countries producing palm oil commodities, this is due to
environmental problems due to cultivation activities that tend to be exploitative, in addition to
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the large dependence of the world community on the role of palm oil. Some other
sustainability analyses depart from the problem of the availability of agricultural products
caused by declining production, seen from the narrowing of the production land of the
commodity farms concerned. As discussed in Astutik (2019) and Fairuzia (2019) who looked
at the sustainability of salt and cocoa commodities.
Farm Sustainability Analysis Method
Data commonly used in sustainability analysis can be both quantitative and qualitative.
Qualitative data is most commonly used in sustainability research. Each aspect that is
considered to have an effect on sustainability is broken down into several indicators which
are then rated using a Likert scale. The methods used also vary from simple to complex, but
most of the methods used aim to find a sustainability index value. Each farm is categorized
based on its sustainability level, namely low, medium or high and the like, depending on the
sustainability index value obtained. The calculation of the sustainability index is different in
each study. Sari et al (2018) and Wardie et al (2011) calculated the index by accumulating
the value of each aspect of sustainability then divided by the maximum possible score.
Meanwhile, the Sustainability Index calculation carried out by Ustriyana and Artini (2018)
uses a composite index, namely by transforming the ordinal Likert scale that has been
obtained into an interval scale.
Another study conducted by Maryono (2018) used a composite index to analyze
quantitative and qualitative data in the analysis of the sustainability of rice farming in
Tasikmalaya. Both types of data were combined to analyze each aspect of rice farming
sustainability. The quantitative data used is analyzed using the same methods as other studies
that use quantitative data to analyze sustainability such as technical efficiency which uses the
DEA method in its analysis and income to analyze economic aspects. While qualitative data
such as farmers' perceptions were used to capture sustainability in social aspects. The results
of the analysis using composite indicators are the same as studies that use composite
indicators to analyze sustainability using qualitative data, which can show the level of
sustainability of a farm from the aspects studied. The difference in units on each indicator is
overcome by the normalization or transformation step in the composite indicator analysis
stage.
Another method that is also often used to find sustainability indices is a non-parametric
multi-variable method called Multi-Dimensional Scaling (MDS). The MDS method uses the
Rapid Appraisal for Fisheries (RAPFISH) analysis tool. Some studies that use the MDS
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method modify the RAPFISH analysis tool, such as the research conducted by Hidayanto et
al (2009) who used RAP-SEBATIK (Rapid Appraisal for Fisheries). Cocoa on Sebatik
Island) and Dzikrullah (2017) who used RAP-Farm (The Rapid Appraisal of The Status of
Farming). Both analytical tools evaluate the RAPFISH analytical tool from the influence of
errors using Montecarlo analysis. In addition to assessing the index and status of farm
sustainability, MDS can be used to identify sensitive indicators (attributes) of each dimension
(aspect) of sustainability using leverage analysis.
Research conducted by Nianggolan (2019), in addition to analyzing the sustainability
status of areca nut commodity farms with a sustainability index, farm sustainability is also
associated with farm characteristics and communication behavior and farmer behavior. In this
study, a model of the relationship between these four things towards sustainability was made
using the Partial Least Square (PLS) test. Research with different analytical tools was also
used in the research of Terano et al (2015). The sustainability of rice farming in this study is
seen based on farming practices carried out by each individual farmer, so the analytical tool
used is the Paddy Farmer Sustainable Index (PFSI). PFSI is used to estimate whether
farming activities support sustainability efforts, especially in ecological aspects.
Suryadi (2020), Kou et al (2014), Sidhoum et al (2017) and Wang et al (2017) use
quantitative data to analyze sustainability at the farm level. In contrast to other sustainability
research, research by Suryadi (2020) examines the sustainability of shallots seen from the
efficiency of farms compared to other farms that are used as benchmarks using the
Sustainable Value Added (SVA) method. The SVA method does not show whether a farm is
sustainable or not, but shows how much the farm contributes to achieving sustainability.
Benchmarks are used to compare the efficiency of resource use so that it can be seen which
farms are more efficient (sustainable) in resource use. In this study, each aspect of
sustainability that will be studied is represented in the form of farm resources where the
economic aspect is represented by the use of capital, the social aspect is seen from the
amount of labor use, and the environment from the amount of fertilizer use and other inputs
that are considered to affect the environment.
Three other studies also used efficiency to analyze farm sustainability, the method used
was Data Envelopment Analysis (DEA). This method can analyze multiple inputs and
multiple outputs so that sustainability issues are not only seen from the various inputs used by
farmers but also the outputs generated from farming activities. The outputs produced are not
only desirable outputs such as the amount of production or income received by farmers, but
also undesirable outputs such as pollution, pollution and accidents in farming activities. This
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method can be used to identify inputs and outputs that can have a long-term impact on farm
sustainability. Kou et al (2014) and Wang et al (2017) used the DEA method in further
analysis to examine factors or inputs and outputs that play an important role in farm
sustainability.
Based on previous research, agricultural sustainability can be analyzed and concluded
from a combined assessment of all aspects of sustainability studied, and seen whether they
meet certain values depending on the method used. Each aspect studied in the sustainability
analysis does not always show sustainable results, although accumulatively the farm is said to
be sustainable. The existence of aspects that are not yet sustainable can be a benchmark for
formulating efforts that can be made to improve the sustainability of the commodity
concerned. In addition, although the problems in each commodity have different issues, the
analysis of commodity sustainability is still carried out thoroughly. The sustainability value
of each aspect can be seen and used as a consideration for commodity development to be
more sustainable. In the end, some studies continue to discuss one aspect because it adapts to
the problems that are considered more important in the commodity under study.
Indicators for each Aspect of Farm Sustainability
The analysis of sustainability always considers the three main aspects of sustainability:
economic, ecological and social. Each aspect is analyzed by considering various parts of the
farming implementation. Economic aspects are usually analyzed by considering farm income
and productivity (Maryono 2019). Past research has also used income per hectare of farmland
as an indicator of economic aspects (Martnez et al 2011).
In relation to the welfare of cocoa farmers, activities to increase the value of cocoa
products produced are considered to increase farmers' income. In line with this, ICCO (2007)
mentioned that it is necessary to increase the processing of cocoa beans into more added
value so that cocoa farming is more sustainable, especially in the economic aspect. However,
according to the research results of Nurhadi et al (2019), adding value to cocoa by processing
cocoa into food and beverages is not suitable at the farm level, because it is prone to failure
and too risky. Therefore, the most likely effort at the farm level to increase the value of cocoa
is to improve the quality of cocoa beans, one of which can be done by fermenting or
certifying. Improving the quality of cocoa products will increase product competitiveness so
that farmers can get better prices (Hidayanto et al 2009).
Efficiency, especially technical efficiency, is also often part of analyzing economic
aspects, but because of its close relationship with optimizing input use, efficiency is also
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often used to analyze environmental or ecological aspects (Kou et al 2014, Maryono 2019,
and Suryadi 2020). Optimizing input use can simultaneously reduce the negative impact of
farming activities on the environment due to inappropriate input use, such as excessive use of
chemical fertilizers and pesticides.
The analysis of farming efficiency in some studies uses physical fertilizer inputs as the
variable used, grouping the types of fertilizers into inorganic fertilizers and organic fertilizers.
In several other studies, fertilizer variables were grouped based on the amount of fertilizer
chemical content used in farming activities, namely the amount of nitrogen (N) content,
phosphorus (P) content, and potassium (K) content to analyze efficiency (Fatmawati 2017,
Muhammad 2018, and Yohana 2020). This may aim to reduce the vacancy of the fertilizer
variable. Farms use a uniform type of fertilizer, farms use different types of fertilizer, even
some farms do not use one type of fertilizer, either organic or inorganic fertilizer, so it is
prone to cause vacancies in the fertilizer variable. This can cause over-estimation or under-
estimation in the efficiency analysis.
In addition to efficiency, ecological aspects are often analyzed by looking at unwanted
farm outputs that may impact the environment such as pollution and contamination. Some
studies use the whole amount of such unwanted output, while others look at the excess output
produced through slack analysis with the DEA method (Kou et al 2014). This stems from the
use of inputs that, despite their impact on the environment by causing pollution or pollution,
are still required in the production process. The slack value indicates the amount of excess
pollution or pollution from input use that can no longer be tolerated. The results of this study
show that pollution is an urgent problem in the region, because the position of the pollution
variable as an output shows that production efficiency in the region can be achieved by
increasing the pollution produced, while on the other hand pollution has a negative impact on
the environment. In other studies, the ecological aspect is not seen from the negative output
but from the perception of farmers towards the use of inputs that can have a negative impact
on the environment, namely chemical fertilizers, whether their use is appropriate according to
recommendations or not (Ustiyana and Artini 2018), besides that the ecological aspect is also
seen from the amount of input use that is in line with environmental sustainability, such as
the use of organic fertilizers (Maryono 2019).
The social aspect of farming is seen from the social activities carried out by farmers and
related to farming activities such as participation in extension services (Maryono 2019) and
participation and activeness in farmer groups (Ustriyana and Artini 2018, Maryono 2019). In
addition, other things outside the core farming activities that facilitate farming activities are
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also included in social aspects such as the availability of information and access to
information (Maryono 2019).
2.2 Sustainability of Cocoa Farming
Sustainability is a complex issue, and there has not been much research on
sustainability, especially for cocoa. Therefore, in order to understand cocoa sustainability
issues from the perspective of existing research, it is necessary to look at research that is
related to issues surrounding cocoa farming, which are included as sustainability issues for
this commodity. The problem with cocoa farming in Indonesia lies in low productivity. This
is caused by several things, namely the large number of pests that attack cocoa plants
(Hidayanto 2019, Damanik et al 2010, Fairuzia 2019, Wijaksono and Asmin 2016, and
Muhardi et al 2020), and the old age of cocoa plants (Hidayanto 2009). The high incidence of
pests on cocoa plants needs to be addressed so as not to cause crop failure in cocoa farming.
However, the steps taken by farmers in dealing with these pests need to be done
appropriately in order to remain sustainable. Excessive use of pesticides to deal with pest can
affect sustainability, especially in the ecological aspect.
Cocoa's position as an annual crop means that the age of cocoa can affect cocoa
productivity. Research by Gemilang (2019) showed that cocoa at the age of 15 to 20 years
should be rejuvenated to maintain cocoa productivity. Cocoa rejuvenation will keep the
economic value of cocoa farming profitable because production remains high. Another way
to maintain cocoa productivity is through the application of technology, such as side-grafting
technology, as a rehabilitation effort to overcome the declining productivity of the main plant
(rootstock). The application of side grafting can overcome the decline in cocoa productivity
by maintaining cocoa technical efficiency. Effendy (2015) showed that farms that apply side
grafting have higher technical efficiency than farms that do not apply side grafting. In
addition, when compared to rejuvenation which requires cutting down trees and thus stopping
production, the application of side grafting is more practical and saves expenses, cocoa can
also continue to produce when the technology is newly applied.
In addition to low productivity, Indonesia's overall cocoa production is also declining,
which is caused by a decrease in cocoa production land area (Fairuzia 2019). Low cocoa
production and productivity lead to low income received by farmers from their cocoa farming
activities (Fairuzia 2019 and Muhardi et al 2020). The low incentives have caused many
cocoa farmers to convert their cocoa land to other more profitable commodities such as palm
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oil, rubber, pepper and coffee (Witjaksono and Asmin 2016 and Muhardi et al 2020). This
clearly shows that cocoa farming is not sustainable.
Low cocoa farmer incomes are also found in other cocoa producing countries. Ghana
and Ivory Coast, the two largest cocoa producing countries, have low cocoa farmer incomes
(Laven 2012, Sostizzo 2017, and Ingram 2018). Unlike farmers in Indonesia, cocoa farming
activities in Ghana are directly controlled by the government through the institution Cocobod
(The Ghana Cocoa Board) in order to produce cocoa in the quantity and quality that is
demanded, and the price of cocoa produced is also stable because it is fixed. However,
Ghanaian farmers are not free to do their farming.
Hidayanto et al (2009) in their research showed that information sources are an
important part of cocoa sustainability. This is related to infrastructure and technology as well
as social aspects of sustainability. Information related to the latest cultivation technology,
innovations, guidelines for implementing farming activities, information related to cocoa
product markets and quality standards for agricultural products need to be conveyed to
farmers so that farming activities can run well. In line with Damanik's (2010) research on
sustainable cocoa development strategies, some of the factors determining the sustainability
of cocoa farming are the presence of advisors and training as a medium to convey
information to farmers evenly. Hidayanto (2009) also pointed out another important thing in
the social aspect of farm sustainability, namely community empowerment and role in
agricultural activities.
There has not been much research on cocoa farming related to ecological sustainability
in Indonesia. This may be due to The ecological issues of cocoa farming are not as big as
those of other commodities, such as palm oil farming, where ecological and sustainability
issues are generally discussed internationally. However, environmental issues of cocoa
farming are discussed in other countries, especially in Ghana as the largest cocoa producing
country. Ecological issues are discussed apart from the use of inputs and chemicals that can
affect the environment, biodiversity on the land is also discussed, especially for cocoa
farming from land clearing. Ecology-related issues also discuss the presence of shade plants
(canopy) in cocoa cultivation, the presence of shade plants is actually needed in cocoa
farming, it maintains the biodiversity of organisms, and the fertility of cultivated land.
However, many farmers do not use canopy because it requires taller plants than cocoa
(Franzen and Mulder 2007, Tondoh et al 2015, and Tetteh et al 2018).
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3.1 Theoretical Framework
3.1.1 Concept of Farm Sustainability
Farm sustainability consists of two words: "sustainability" and "farming". Farming is
the organization of nature, labour, and capital aimed at production in the agricultural field.
Farming activities show the existence of actors (farmers) who organize resources, namely
nature, labor and capital to produce agricultural products (Hernanto 1989). Nature, labor and
capital are the conditions required for farming to produce. These factors along with
management factors are considered by farmers in making decisions (Suratiyah 2006).
Sustainability arises from the term sustainable development, which refers to
development on the basis of meeting the needs of the present generation without
compromising the ability of future generations to meet their needs (WCED 1978). Thus, the
term "sustainable" in sustainable development is the end point to be achieved from efforts to
meet current needs without compromising the ability to meet the needs of future generations.
It can be said that if sustainable development is the maximum achievement or end point, then
there should be a term 'development sustainability' that refers to the points of achievement to
achieve sustainable development. In line with this, agriculture emerges as part of sustainable
development efforts, where agricultural sustainability is related to the need and fulfillment of
needs for agricultural products.
The concept of agricultural sustainability is meeting the needs of current agricultural
products without reducing the ability of the next generation to meet the needs of the same
agricultural products (Pretty 2008). The issue of sustainability initially emerged when
environmental issues were a concern, hence many definitions of agricultural sustainability are
related to the environment. The definition of agricultural sustainability is largely determined
by its values, priorities and objectives (Pretty 1995 in Zhen and Routray 2003). This is due to
the complexity and breadth of sustainability related to the agricultural sector. A fairly short
and concise definition is provided by Sananayake (1991) who mentions agricultural
sustainability as an agricultural system that will continue to produce over a long period of
time.
The definition may seem short but it is very deep, especially to explain 'how' an
agricultural system can always produce. By looking at the concept of sustainability, this
question can be answered, namely by an undiminished 'ability' to produce. In this case,
farming acts as one that has the ability or as an actor that is expected to have the ability to
meet the needs of the product. Sustainable farming can be defined as farming that has the
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ability to meet the current and future needs of agricultural products.
Based on the various definitions of sustainability that have been conveyed to
researchers, it can be concluded that there are three important points in the concept of
sustainability, the first is meeting needs, the second is The ability to fulfill needs, and the last
is the time dimension associated with these two activities. The need for an agricultural
product does not only come from the final consumer, but also intermediary consumers to
industries that require an agricultural product to be reprocessed, a sustainable farm is defined
as a farm that has the ability to meet these needs. The ability in question relates to the
resources (conditions) of the farm to be able to produce, namely natural conditions, labor and
capital. When linked to sustainability where the time dimension is also an important point,
farm resources in production must be able to be utilized to meet the needs of these
agricultural products now and in the future, without any decrease in the performance of each
of these production requirements.
Pretty (2008) writes in his article that sustainability in agricultural systems
(agribusiness) combines resilience (tenacity, referring to the ability of the system to
withstand shocks and stresses) and persistence (persistence, referring to the ability to
continue operating for a long period). Thus, the focus of farming to be sustainable is not only
on the production outcome, but also the process and components involved in the production
process (nature, labor and capital). As with sustainability in general, the focus in achieving
sustainability can be grouped into three aspects, namely environmental (ecological),
economic and social aspects. Farming will be sustainable if farming activities fulfill these
three aspects.
Each aspect of sustainability has its own indicators that are used for measurement in a
sustainability study. Indicators in sustainability measurement are referred to as sustainability
indicators. Braat (1991) defines sustainability indicators as indicators that theoretically
provide information, either directly or indirectly about future sustainability. A sustainability
indicator is a social object at a certain level that reflects each aspect of sustainability.
Sustainability indicators are a method that can produce many analytical results so as to
capture the complexity of sustainability in sustainability studies (Zhen and Routray 2003).
Evaluation of the sustainability of farming is carried out with the suitability of the
ability of farming in meeting the needs of sustainability aspects. it is seen based on indicators
on farm production activities that reflect aspects of sustainability. Indicators of sustainability
in farming or agriculture are widely discussed in the literature on development, economics, or
ecology (Zhen and Routray 2003). The discussion of sustainability is sometimes made
15
specific, such as discussing only ecological aspects, only economic aspects, or only social
aspects. A summary of sustainability indicators that can be used to identify farm
sustainability from previous researchers is as follows:
a) Economic Aspects - from the micro point of view of production actors, the sustainability of
economic aspects shows the ability to maximize production as a contribution to meeting
needs, in addition to the existing capabilities can also provide economic benefits, ensure
welfare and availability of capital for farm-level production actors. Indicators used in
identifying sustainability in this aspect are by
b) The evaluation of production can be seen from the amount of production (Chen 2000) and product
productivity (Stocklee et al 1994). In addition, capital and farming motives are also important
components in the economic aspect of sustainability (James 2006) where both are related to income
from farming (Tisdell 1996).
c) Ecological aspects - ecological aspects are closely related to one of the conditions for farming
to produce, namely nature. In addition to uncontrollable natural factors such as seasons, there
are other natural factors whose conditions are strongly influenced by farming activities. The
core concern in ecological aspects is everything in farming activities that can affect the
environment. Starting from land clearing to the output produced from farming activities that
can affect the environment, both positively and negatively. In relation to land, ecological
aspects can address land degradation as indicated by soil erosion (Tisdell 1996 and Chen
2000) and land carrying capacity (Senanayake 1991). Other things such as the use of local
resources, and maintaining biodiversity (Pretty 2003) can also be used as indicators of
sustainability in this aspect. The simplest indicators of ecological sustainability are the use of
inputs that can affect the environment such as the use of fertilizers (organic/inorganic),
pesticides (Chen 2000) and the use of renewable resources.
In farming, there is the term LEISA (Low External Input Sustainable Agriculture) which is
one approach that can be used in evaluating the ecological aspects of farm sustainability. This
approach sees external inputs or non-renewable inputs, which can negatively affect the
environment, as necessary in the production process but their use needs to be limited (Kessler
and Moolhuijzen 1994). Under this approach, excess external inputs, or a number of external
inputs that are not useful for production activities, are undesirable and have a negative impact
on sustainability, as opposed to internal inputs, or inputs that are renewable and have a
positive effect on the environment. The LEISA approach can be coupled with the DEA (Data
Envlopment Analysis) analysis method because it can identify excess input use, i.e. the slack
16
value obtained from the technical efficiency analysis of production activities.
d) Social Aspects - seen from the farm as a production actor, sustainability in social aspects
shows how the social environment supports production activities to meet the needs of a
product, and how active the farm is in utilizing the existing social environment. In this case,
there is the concept of Inclusive Value Chain, which refers to the involvement of small-scale
producers in the value chain of a product. This concept emerged because of the awareness of
the importance of small-scale producers in realizing product value, but on the other hand
small producers often do not benefit from these activities, therefore interventions are carried
out so that small-scale producers can be involved in the value chain (Devaux et al 2018).In
agribusiness it refers to the involvement of small farmers in the production of agribusiness
products. In agribusiness, it refers to the involvement of smallholders in the production of
agribusiness products. The small scale of the business causes the need for external
intervention so that the farm can be involved in a value chain. The existence of intervention
in this case is indicated by the role of a third party, which can be in the form of institutions or
institutions around production actors. The involvement of these third parties prevents farming
from instututional void, a situation where a party (small-scale producer) is disadvantaged but
there are no institutions, or there is no meaningful role of institutions in overcoming the
situation. But on the other hand, the role of institutions or institutions also needs to be
followed by the participation of production actors, so that the role of institutions or
institutions can be felt.
When viewed based on the production actors themselves, the indicators used in identifying
sustainability in this aspect are participation in the social environment (Barbier 1987), the
availability of a knowledge base and skills at the farm level (Smith and McDonald 1998), and
participation in decision making (Chen 2000).
In connection with these matters, the marketing environment for cocoa commodities has
changed since the implementation of the export duty on cocoa beans, plus farms are
dominated by smallholder plantations with an average land ownership of less than 2 hectares,
which causes the position of farms in the cocoa market to be very weak. This should be
overcome by the presence of institutions around the farm environment, namely by the
distribution of information, both information about the demand of the new cocoa bean market
and the latest information related to cultivation and so on.
The number of indicators of each aspect of farm sustainability raises the question of
how to measure the sustainability of the farm. Senanayake (1991) shows that composite
17
indicators can be an option in measuring sustainability because the measurement can take
into account the many indicators that reflect each aspect of sustainability. Indicators obtained
from the composite indicator method can be strengthened in identifying sustainability using
the Partial Least Square-Path Modeling or PLS-PM method (Cataldo et al 2017 and Lauro et
al 2018).
3.1.2 Factors Affecting Sustainability
Agricultural sustainability is dynamic because it balances current needs with future
needs (Nurmalina 2017). Dynamic sustainability also refers to the ability to meet needs that
can change, changes that can make the ability to meet needs not only have to survive, but also
better. Pretty (2008) states that any activity or condition that can have a positive effect on one
aspect of sustainability will have a positive effect on (total) sustainability, and vice versa.
This means that the differences in conditions indicated by the different activities or
conditions of each object studied for sustainability cause the sustainability results of each
object to vary (Allen et al 1991).
The influence of a factor on an object can be said to be only coincidental if the
estimation of the relationship between a factor and the object is not based on theory. The
theoretical basis for factor estimation needs to be elaborated. However, In factor analysis of
sustainability, theories that address the direct relationship between a factor and sustainability
are rare. Sustainability is not explained by a certain amount of value, sustainability is
explained by aspects of sustainability, each aspect of which is explained by other indicators.
The indicators in these aspects of sustainability each have a value and can be observed.
Therefore, factor analysis is conducted on each aspect of sustainability so that the theoretical
basis for the influence of these factors on sustainability is more focused and can be accounted
for. Factor analysis of sustainability aspects can also capture the possibility of trade-offs
where a factor has a positive effect on one aspect and the opposite effect on another aspect. In
cocoa farming, differences in farmer and farm characteristics can cause differences in the
level of sustainability between cocoa farms. Therefore, factors that are suspected to influence
sustainability are taken from cocoa farmer characteristics and cocoa farm characteristics.
There are characteristics of cocoa farmers that show the level of knowledge of cocoa
farmers. Knowledge will affect the way farmers think in running their farms, both in making
short-term decisions and in thinking critically to run the farm in the long term. The farmer's
level of knowledge on general knowledge is indicated by the level of formal education
18
attained by the farmer, while the farmer's level of knowledge related to cocoa farming
activities is indicated by the farmer's experience in cocoa farming. Farmer's experience in
cocoa farming.
Generally, experience and a high level of education have a positive effect on the
sustainability of cocoa farming. In the economic aspect, a high level of education and
experience will encourage farmers to be more productive in order to get higher farm income.
High knowledge, especially education level, should also encourage farmers to be more aware
of the environment and prioritize the use of inputs that do not negatively affect the cocoa
farm in the long run. Similarly, in the social aspect, farmers become easier and more active in
participating in social environment activities to obtain the latest information related to cocoa
prices and farming. However, in cases where the business environment no longer provides
benefits to farmers, farmers with high levels of education and experience can choose to work
on other activities that are more profitable and productive. Farmers' level of education and
experience has a negative effect on the sustainability of cocoa farming.
Another characteristic of cocoa farmers, namely farmer age, shows the potential energy
that cocoa farmers can devote in carrying out activities, including cocoa farming activities. In
general, age can be divided into three stages, the early age stage (<15 years old) the potential
for labor is still low. Productive age or working age according to the Organization of
Economic Co-operation and Development (OCED) is in the age range of 15-64 years5 , at this
age range the potential for devoting energy to carry out activities is at its highest level.
Beyond the productive age range, the potential energy that can be devoted decreases, the age
range is no longer productive. Seeing the differences in the potential for energy outlay in the
human age range, the age of farmers can affect sustainability in two circumstances, the first
situation is that the age of farmers can have a positive effect on sustainability from any
aspect, because the age range of farmers is at a productive age, the other situation is that the
age of farmers has passed the productive age so that age has a negative effect on
sustainability.
Differences in cocoa farming characteristics are also expected to influence the level of
sustainability of cocoa farming. Farm characteristics that are expected to influence the
sustainability of cocoa farming are age of cocoa plants, land size, application of cultivation
technology and farm characteristics related to the use of inputs, partnership or the existence
of an institution's auspices for the farm, and marketing of farm products, namely the purpose of
selling cocoa beans, and the value of cocoa beans produced by the farm.
The characteristics of cocoa farming that have been used as an issue causing declining
19
cocoa productivity is the old age of cocoa plants. Plant age affects the physiology and
morphology of the plant which in turn affects the growth of the plant (Ryan et al 1997). In
annual crops, plant age is differentiated like human age, which has three phases related to its
productivity potential. The process of plant growth and maturation occurs rapidly in young
plants, while in old perennial plants, the shape and function of plant organs are no longer
optimal in working. Some examples can be seen from the reduction of leaf area, decreased
photosynthesis, and increased fine roots in old plants, which causes the availability of plant
nutrients to decrease. The lack of nutrients in the plant causes the productivity of annual
crops, especially fruit crops, t o decrease. Looking at the issues surrounding cocoa
commodities where cocoa plants in Indonesia are already at an unproductive age, the age of
cocoa plants is thought to have a negative effect on sustainability from an economic aspect.
To the environment or ecology, the age of the plant is also thought to have a negative impact,
because the decline in productivity will be responded by farmers by adding external inputs in
the form of inorganic fertilizers which can negatively affect the environment, because the
addition can increase production faster. In older plants, the morphology and physiology of
plant stems are different from younger plants, where the process of stem growth of older
plants is slower, resulting in decreased production. One of the cultivation technologies that
can be used to overcome the decline in plant productivity is side grafting technology.
Side
grafting technology is a cultivation technology by grafting the rootstock, i.e.
cocoa plants with unproductive clones or unproductive cocoa plants, with a side grafting
technology scion that comes from a superior cacao clone. The rootstock acts as a support for
the cocoa plant, while cocoa pods will be produced from the scion. The application of side
grafting is strongly correlated with the photosynthetic ability, age, and growth stage of the
plants (Suryani 2021). Thus, the productivity of the plant can be increased again.
Another farming characteristic that is expected to affect the level of sustainability of
cocoa farming is farm size. Land area as one of the production inputs shows the
characteristics of cultivation carried out in farming in general. These cultivation
characteristics are intensive cultivation and extensive cultivation (Ellis 1988). Intensive
cultivation is indicated by a narrow land area combined with the use of many other resources,
to produce a lot of output. While extensive cultivation is indicated by a large land area
combined with the use of few other resources, to produce a lot of output. However,
researchers often expect intensive land use, so that the more land used in farming is expected
to increase productivity, coupled with more efficient use of inputs.
The type of cocoa farming input that is expected to affect farm sustainability is the use
20
of labor from farmer's family members. The effect of the use of labor from the farmer's family
can be seen from the Nakajima model as written by Kusnadi (2005) which shows the
existence of income effects and substitution effects on the effect of prices on the use of labor
in the family. In the income effect, an increase in product prices will reduce the use of family
labor, because the income earned in farming can be used to hire labor from outside the
family. Meanwhile, according to the substitution effect, an increase in product prices will
increase the use of family labor, so that the farm profit obtained will be higher. Based on the
same model, if the product price is considered unchanged, the use of family labor can
increase the income from production activities, although the profit of production activities
from the use of family labor or the use of labor outside the family will be the same. Besides
economically, the use of family labor shows the closeness of the relationship between the
labor and the farm 'manager', namely the farmer, thus family labor can be functioned in
activities that are usually specifically done by the farmer as a farm manager, such as
participation in social activities related to cocoa farming.
Farm characteristics that refer to cocoa bean marketing are indicated by the value of
cocoa bean products produced and the destination of cocoa sales to one buyer. Based on the
value of the product, the value of the product produced by the farm can be increased in many
ways, namely by cleaning, cooling, packaging, processing, distributing, cooking, mixing,
stirring, maintaining, grinding, extracting, drying, smoking, labeling, and so on (Born and
Bachman 2006). The addition of value to agricultural products will increase the price of the
product and make the price of agricultural products tends to be stable, value-added
agricultural products usually also have a specialized market share, resulting in less
competition. Although producing value-added products increases the price of the product,
value-adding activities also require time and money. For example, in cocoa farming, value
addition of cocoa beans is done by drying and fermenting the cocoa beans. The drying
activity is used as the basis for determining the grade of the cocoa product produced.
Although these activities require additional time and costs, it is expected that value addition
activities on cocoa beans will have a positive influence on the sustainability of cocoa
farming. This shows that the costs and time sacrificed are covered by the economic benefits
obtained by farmers from the value addition activities undertaken. In the social aspect, value
addition activities are also expected to have a positive effect because farmers who have done
value addition will be more active in the social environment in order to continue to get
information related to it.
There are three approaches to marketing agricultural products (Breimyer 1973 in Davies
21
2001). The first approach is the simplest marketing approach: marketing is whatever happens
to the product after it is produced at the farm gate. With this approach, marketing considers
all the motives that occur between farmers and their consumers until agricultural products
change hands, even if these motives are outside of the economic motives of farming. In the
second approach, marketing as a place of economic activity, the most important role in this
approach is price. While in the third approach, marketing shows the development of the
market, where the important role in this approach is the consumer of agricultural products, so
that between producers (farms) and consumers there needs to be interaction. Based on these
approaches, farming will be more sustainable if it follows the third approach and more
unsustainable if it follows the first approach.
Referring to the farmer's choice of marketing destination, the farmer can be tied to one
type of buyer or the farmer can be more flexible in selling their products. A farmer's
attachment to a single buyer can be good or bad. A farmer's attachment to a single buyer
based on consumer attachment indicates marketing from the third approach while attachment
to non-economic motives such as debt bondage and capital attachment makes farming
unsustainable. Meanwhile, farmers who are more flexible in determining their sales
destinations indicate the second marketing approach, where the diversity of sales destinations
shows that cocoa farmers can find the market with the best price for cocoa beans produced.
Thus, this factor has two states where flexible marketing objectives may indicate that farmers
are free to market their products and can find the best market for their cocoa beans. While
selling cocoa to only one buyer can also mean sustainability if the motive is based on the
farm having a fixed market, with demand from consumers that can only be met by the farm.
On the other hand, attachment with one buyer may also indicate unsustainable farming if the
attachment is not based on economic motives.
In the social environment of cocoa farming, there are various social institutions that
oversee a farm. The relationship between farms and social institutions can be through
programs organized by social institutions, membership with these social institutions, or
through partnerships. From the farming perspective, linkages with social institutions or
agencies aim to reduce uncertainty and ambiguity (North 1991). Linkages with a sector, like
farming linkages with an institution, should result in benefits for all parties involved. The
linkage is a means of interaction, communication and conveying and obtaining information
that is very important for the continuity of individual activities in a system (Bassi 2016), in
this case, individuals refer to farms in the agribusiness system. Functionally, it is expected
that farm involvement with institutions or social institutions has a positive influence on the
22
sustainability of cocoa farming. However, the involvement of external parties cannot be
denied, it could have the opposite effect on the sustainability of farming, this depends on the
objectives of the institution concerned. The effect of farming linkage with an organization or
institution is conducted to see the effect of the relationship on sustainability.
3.1.3 PLS-PM Analysis Method
The application of the PLS-PM method is briefly explained in this framework, in order
to help in understanding the analytical method used to measure the sustainability of cocoa
farming in this study. PLS-PM (Partial Least Square Path Model) is an analytical method
that can explain a complex phenomenon such as sustainability. It is said to be complex
because the phenomenon or concept cannot be explained by only one particular aspect or
field. Sanchez (2013) in his writing, calls a concept or phenomenon with these characteristics
in science referred to as latent variables or latent variables while other things that can be
measured and can explain or shape the concept as manifest variables or measured variables. In
sustainability, sustainability itself is a latent variable that is explained or reflected by other
measurable variables.
There are conditions in determining the relationship between latent variables and
measured variables, these variables cannot form a loop or form a rotation. The relationship
between variables must be recursive or unidirectional. The relationship between latent
variables and measured variables can be explained in two relationship options, namely
measured variables as variables that reflect latent variables (reflective way) or measured
variables as variables that form latent variables (formative way), both relationships are
arranged linearly.
In this equation, the symbol b indicates a latent variable construct, where each latent
variable is composed / reflected by several blocks, each of which has several measured
variables with similar objectives denoted by k. The coefficient i is the number of LVs used in
prediction or the number of objects studied. The coefficient i is the number of LVs used in
the prediction or the number of objects studied. Meanwhile, the λ coefficient is a loading
value that refers to the magnitude of the relationship between the block or measured variable
and its latent construct. The higher the loading value means that the block or measured
variable used can explain the latent variable.
The limited equation shows the relationship between latent variables and measured
variables, the value of latent variables that are usually expected from research has not been
23
obtained. While it is known, latent variables are complex and abstract. In this case, the score
of the latent variable can be obtained by utilizing the weight relation formed between the
measured variables.
PLS-PM is a component-based approach where latent variables are calculated from the
sum of the weights (weighted) of one or more constituent indicators. Although in the case of
latent variables with measured variables can be connected reflectively and formatively, the
identification of latent variable scores does not distinguish between the two ways so that the
equation used to find the latent variable score above can be used for reflective or formative
relationships.
3.2 Operational Framework
Cocoa farming plays a major role in cocoa agribusiness in Indonesia. Developments in
the downstream of cocoa agribusiness cannot be met with imports because they make cocoa
agribusiness economically unsustainable. Therefore, the development of downstream
agribusiness needs to be supported by sustainable cocoa farming.
Farming is said to be sustainable if it fulfills at least three aspects of sustainability,
namely economic, ecological and social aspects. There are many issues related to
sustainability at the farm level, related to production activities, production results, and the
environment around the farm. Declining production and low welfare of cocoa farmers are
sustainability issues that occur from the economic aspect, the use of farm inputs that can
affect the environment is an issue in the ecological aspect, and farm participation and social
environmental support in the social aspect of sustainability. This study analyzes the
sustainability level of cocoa farming by looking at these issues.
It is important to analyze sustainability from a farming perspective given the many
sustainability issues that arise from this perspective. This study also analyzes whether
sustainability at the farm level can be described through the farming perspective alone. The
analysis of sustainability from the farming perspective and the analysis of the level of
sustainability of farms were conducted using the Partial Least Square-Path Modeling (PLS-
PM) method.
Considering the importance of farm sustainability in cocoa agribusiness, identification
of factors that can influence farm sustainability needs to be done. The factors are related to
farmer characteristics, namely farmer education level, cocoa farming experience, farmer
family involvement in farming activities, cocoa sales to one buyer, and farming relationships
24
with social institutions related to cocoa farming, as well as farm characteristics, namely tree
age, land size, application of cultivation technology, namely side grafting, value of cocoa
beans produced by farmers (in terms of price, shape, and grade), and livestock ownership by
cocoa farmers. Analysis of the influence of factors on sustainability aspects can be used as a
basis for recommendations to achieve sustainable cocoa farming.
1.2 Analysis Method
The methods used to analyze the sustainability of cocoa farming are the composite
indicator (CI) method and the PLS-PM (Partial Least Square-Path Model) method. The
composite indicator method is used to summarize complex and multidimensional problem
solving such as sustainability issues. The use of composite indicators can facilitate the
interpretation of multidimensional problems, even with the use of various indicators that
appear to be separate. The PLS-PM method in this research is used to statistically test the
relationship between dimensions (aspects) in sustainability and identify sustainability scores.
Furthermore, PLS-PM analysis was also used to analyze factors that are thought to
influence the sustainability of cocoa farming. These factors generally consist of farmer and
farming characteristics as well as farming-related activities undertaken by cocoa farmers.
Each factor is examined for its influence on the three aspects of sustainability, namely on
economic, ecological and social aspects.
1.2.1 Sustainability of Cocoa Farming
The level of farm sustainability was analyzed by combining two analytical methods,
namely using composite indicators and using the PLS-PM method. The composite indicator
method is used to determine the indicators of each aspect of sustainability that will be
processed to identify the level of sustainability. The composite indicator method is carried out
in several stages. The main or basic stages of compiling a composite index are first compiling
and determining indicators, the second stage is data preparation, then the third stage is data
quality testing and the last stage is compiling the index. More details can be seen in Figure 7.
This research did not carry out all stages of composite indicators. The stages of index
compilation are only carried out up to the normalization or transformation stage. Weighting
and aggregation carried out to identify the level of sustainability were not carried out. Instead,
the identification of the level of sustainability was carried out using the PLS-PM method.
25
This is so that the sustainability analysis in this study can be explained statistically. The
explanation of each stage conducted to identify cocoa sustainability at the farm level in this
study is as follows:
Indicator determination and data collection
This session will explain stage one and stage two of the composite indicator method. In
the indicator determination stage, the indicators used in this study were selected by
considering the aspects of sustainability, namely economic aspects, ecological or
environmental aspects and social aspects. Each indicator represents one aspect of
sustainability. The determination of indicators was carried out by looking at theoretical
guidelines and literature studies on existing sustainability cases and adjusted to the conditions
and data obtained.
This research uses secondary data, namely from the results of a survey conducted by
NICHE, so that the second stage of data collection is no longer carried out. Data from these
sources are used as best as possible to answer the problems in this study. Data quality testing
is carried out in several steps, namely filtering data, completing data and conducting follow-
up on certain data to meet the required indicators such as completing data, performing
calculations, and conducting a screening process. Each indicator used requires a calculation
and adjustment stage, both indicators on economic, ecological and social aspects. Data
quality testing at the composite indicator stage is carried out with the aim of completing and
homogenizing data groups, not seeing the suitability of the data used to measure
sustainability. The suitability of the data used to analyze sustainability was evaluated using
the PLS-PM method.
a. Economic Aspects
The economic aspect of cocoa farming in the study is seen from the performance of
cocoa farming, namely in producing cocoa and in providing welfare for cocoa farmers.
Therefore, the indicators used to analyze sustainability in this aspect are as follows.
Ecological or Environmental Aspects
The ecological aspect in this study uses the LEISA concept, so that the ecological
aspect is identified from the use of cocoa farming inputs that can affect the environment. The
inputs used to identify sustainability from the ecological aspect are fertilizers and pesticides,
because the use of both inputs can affect the environment. Unlike pesticides, the use of
fertilizers, especially inorganic fertilizers, is one of the essential inputs in farming, although
26
excessive use can have a negative impact on the environment. Therefore, identification of the
sustainability of inorganic fertilizer use is seen from the amount of excess use of inorganic
fertilizer which is relatively no longer useful for the cocoa production process. Meanwhile,
other inputs that can also affect the environment, namely organic fertilizers and pesticides,
use the amount of use of these inputs to identify sustainability from the ecological aspect. In
this case, the use of organic fertilizer has a positive impact on the environment while
pesticides have a negative impact.
Evaluation of the use of inorganic fertilizer inputs is shown by looking at the excess use
of these inputs in cultivation activities. In this study, the use of fertilizer inputs is shown by
the amount of nitrogen (N), phosphorus (P) and potassium (K) elements in the fertilizer, both
from inorganic fertilizers and from organic fertilizers used. The identification of excess input
use is obtained from further analysis of technical efficiency calculations using DEA (Data
Envelopment Analysis), namely from the resulting slack value. The slack value shows the
amount of excess input use relatively, because it is the result of comparison with other
samples (other farms) from the calculation of technical efficiency using DEA. The calculation
of technical efficiency using DEA is shown by the following mathematical model:
The calculation of efficiency is input oriented. Farms or in efficiency using DEA are
referred to as DMU (Data Mearusement Unit) denoted by i, output is dry cocoa bean
production per hectare of farmland denoted by q, input is denoted by p and input type is
denoted by j, while µ is the output matrix and v is the weight of the input matrix. The
mathematical description above shows that an input used on each inefficient farm (pji)
contains slack value or excess input usage. Pα shows the amount of input use if production is
done efficiently, so the value of pji=Pα if input use is efficient and the value of sji-=0.
The identification of ecological sustainability is generally carried out using 2
components, namely the use of inputs that can positively affect the environment and the use
of inputs that can negatively affect the environment. In the sustainability analysis using PLS-
PM, these components will be used as the basis for determining indicators to identify the
sustainability of cocoa farming in the ecological aspect. In summary, the components used
can be seen in Table 2.
The use of inputs that can positively affect the environment is seen as an indicator that
is in line with environmental aspects. While the use of inputs that can negatively affect the
environment is not in line with environmental aspects, therefore the assessment of input use
components that negatively affect the environment is assessed in reverse. The lower the use
27
of pesticides and the lower the excess use of inorganic fertilizers in cocoa farming, the more
sustainable the farm is from an ecological aspect. Based on these considerations, the indicator
used to identify sustainability from the ecological aspect is from the comparison of the level
of use of the two types of inputs, where the level of use of inputs that have a positive effect
occupies the numerator position and the level of use of inputs that have a negative effect on
the environment is in the denominator position.
b. Social Aspects
Indicators for social aspects are taken from qualitative data, namely farmers' opinions
about farming activities towards the role of the social environment for cocoa farming and
farm participation in the social environment. Some of the data used to identify social aspects
of sustainability appear to have roughly the same function for cocoa farming. Data that are
assumed to have similar functions towards the sustainability of social aspects of farming are
grouped and used as indicator components for indicators of social aspects of farming.
Measurement of cocoa farm sustainability
The level of sustainability of cocoa farming is measured using the PLS-PM method.
Farm sustainability in this study is connected to aspects of sustainability in a reflective
manner, as well as the relationship between aspects of sustainability and its preparation
indicators, where farm sustainability and aspects of farm sustainability as latent variables in
the PLS-PM model. Sustainability aspects as first order constructs and farm sustainability as
second order constructs. As a latent variable with a higher costruct, in addition to being
reflected by other latent variables, namely sustainability indicators (Xx), farm sustainability
must also be linked to other measurable variables (manifest variables) in order to be
processed by the PLS-PM method (Sanchez 2013). This research uses a repeated indicator
approach so that the measured variable that reflects farm sustainability (Y) is the entire
measured variable that reflects the sustainability indicator (Xxc). The PLS-PM model of the
relationship between sustainability variables is shown in the following figure:
Before proceeding to identify the level of sustainability of cocoa farming, in Figure 9 it
can be seen that the indicators used to identify social aspects of sustainability are oval-shaped
which characterizes the variable as a latent variable or not a manifest variable, while the
indicators used for economic and ecological aspects are square-shaped because they are
measured variables. Unlike the economic indicators and ecological indicators, the indicators
28
used to analyze social aspects in this study are also latent variables. The aspect indicator
value used for sustainability analysis is the indicator score value obtained by the PLS-PM
method for social aspects. PLS-PM analysis for social aspects is carried out separately
because the PLS-PM method with R cannot be used to analyze models that have more than
one latent variable of two orders of latent variables. The explanation for obtaining the value
of each social aspect sustainability indicator in more detail has been explained previously
(Table 3 and Figure 8).
Evaluation of indicators used to reflect the sustainability of farming both in total and
per aspect of sustainability is seen from the Cronbach alpha value obtained from the PLS-PM
results. The Cronbach alpha value indicates the accuracy of the indicators used to reflect
sustainability, in total and per aspect of sustainability, where the indicators used must be
recursive in reflecting sustainability. A Cronbach alpha value of >0.6 indicates that the
indicators used are appropriate.
1.2.2 Factors affecting cocoa farm sustainability
The level of sustainability of cocoa farming can be influenced by various factors in
cocoa farming activities such as the characteristics of cocoa farmers and the characteristics of
cocoa farms they run. These factors can be analyzed for their influence on farm sustainability
through statistical analysis between factors and the sustainability score obtained previously.
Any activity, condition or other factor that can have a positive or negative effect on an
aspect of sustainability will also affect the level of sustainability (Pretty 2008). However, the
effect of a factor on each aspect can be contradictory. Factors in cocoa farming are not always
in line in influencing the sustainability aspects of farming, it is possible that there is a trade
off where a factor increases sustainability in one aspect and the opposite effect in another
aspect. Analysis of factors that can affect sustainability needs to be done comprehensively so
that the steps taken can really improve the sustainability of cocoa farming.
The analysis method used to analyze factors affecting farm sustainability also uses the
PLS-PM method. Each factor in the analysis with PLS-PM also acts as a latent variable. The
determination of the factors used departs from the circumstances, activities, and conditions of
cocoa farming found around cocoa farms in Indonesia. In general, the factors consist of two
groups: cocoa farmer characteristics and cocoa farm characteristics. The factors will be
examined for their influence on the sustainability of cocoa farming from each aspect, namely
economic, ecological, and social aspects.
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Farm units are denoted by i and each aspect is denoted as presented in Table 3. Other
than the marketing factor (PMSRN), all factors are latent variables reflected by one
component as described in the description of the factor analysis model used. The marketing
factor in this study is a latent variable reflected by three components, namely the price of
cocoa beans, the shape of cocoa beans, and the grade of cocoa beans sold by farmers.
5.1 Location and Geographical Situation of the Research Location
This study uses secondary data from the NICHE program cocoa farming survey in
2017. Based on the data, cocoa farms used as the object of this study are spread across three
provinces, namely West Sumatra, Bali and West Sulawesi. In West Sumatra province, the
cocoa farms studied are spread across 12 villages in four sub-districts in two regencies in
West Sumatra, namely Limapuluh Kota regency and Payakumbuh City. While in Bali
province, farms are scattered in five villages in three sub-districts in Jembrana Regency. And
in West Sulawesi province, farms are located in eight villages in Kalukku sub-district,
Mamuju district.
West Sumatra Province was the highest cocoa producing province on the island of
Sumatra in 2017 (Directorate General of Plantation 2018). In terms of plantation area and
production, West Sumatra was the region with the largest farming area and the highest
production on the island of Sumatra. However, in terms of productivity, the productivity of
cocoa plantations in West Sumatra is 0.35 tons per hectare, which is lower than that of
Lampung province whose production reached 0.48 tons per hectare. Cocoa plantations in
West Sumatra are dominated by smallholder plantations, amounting to 98 percent. Although
government-owned plantations are few, the government in that year can be said to be more
involved in cocoa farming than i n other regions. This can be seen from the implementation
of programs focused on assisting smallholder cocoa farms such as increasing the productivity
and quality of cocoa products produced by smallholder cocoa farms (de Boer et al, 2019).
Bali province, when compared to other provinces in the Nusa Tenggara islands, is lower
in both area and cocoa production compared to East Nusa Tenggara. In general, the
productivity of each province in the N u s a Tenggara islands is lower when compared to
West Sumatra, which i s below 0.3 tons per hectare, Bali province has slightly higher
productivity compared to East Nusa Tenggara, which is 0.26 tons per hectare compared to
0.24 tons per hectare. Sulawesi is the island with the largest cocoa farming area in Indonesia.
The four regions with the highest production and the largest farming area are located on the
island of Sulawesi. West Sulawesi is the fourth region with the largest cocoa farming area in
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Indonesia. The land productivity of cocoa farming in West Sulawesi is better than the other
two provinces, at 0.37 tons per hectare.
It should be emphasized that the analysis in this study was not conducted separately in
each province. The analysis of farm sustainability uses a combination of cocoa farming data in
the three provinces. However, differences in cocoa farming regions are still analyzed as one
of the factors that can affect the level of sustainability of cocoa farming. In addition, in the
description of farm characteristics, farmer characteristics and indicators used in this study, the
statistical description of these components is still differentiated between regions in order to
illustrate the variation of characteristics and sustainability indicators in each region.
5.2 Farmer Characteristics and Cocoa Farming
This study used samples from three cocoa-producing provinces. The distribution of
farmer characteristics and cocoa farming is differentiated according to the three provinces.
Previously, the distribution of the number of farmers and gender of farmers sampled in this
study was as follows.
Cocoa farms are mostly run by male farmers. West Sumatra Province is the province
with the most female farmers at 48.7 percent of the total farms used as samples in the region.
The data source used in this study has a total of 270 farm data where each province is
represented by 90 cocoa farms. However, in this study, only 212 farm data were used because
other farm data did not have complete inputs used to analyze the technical efficiency of cocoa
farming.
5.2.1 Characteristics of Cocoa Farmers
Information on cocoa farmer characteristics obtained are data on farmer age, experience
or length of cocoa farming, the last level of education attained by cocoa farmers, information
related to the number of family members and the number of family members involved in
farming activities, farmer's occupation other than cocoa farming, and farmer's relationship
with institutions that provide support related to cocoa farming activities.
a. Age of cocoa farmer
The age distribution of cocoa farmers can be seen in Table 6. Cocoa farmers are mostly
in the middle adult age group (41-60 years) at 67.9 percent, with an average age of 49.5
years. Cocoa farmers who are no longer productive are 8 percent (Table 6).
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When viewed by research region, namely West Sumatra, Bali, and West Sulawesi
(Table 5), the average age of farmers in West Sumatra is relatively older with an average age
of 52.8 years, followed by Bali with an average age of 51.2 years, and West Sulawesi with an
average age of cocoa farmers of 41 years. Through a one-way ANOVA test, there is a
significant difference in the average age between the regions, namely between the age of
farmers in West Sulawesi and in other regions, where the age of cocoa farmers in West
Sulawesi is lower. The average age of cocoa farmers in the sample as a whole is 49.5 years.
Age is related to the ability of cocoa farmers to allocate their energy to cocoa farming.
The older the age of the farmer, especially if the farmer has reached the age of advanced
adulthood (>60 years), the ability of the farmer will decrease and the age of the farmer can
cause cocoa farming to become unsustainable, both in terms of economic, ecological, and
social aspects.
b. Cocoa farming experience
Cocoa farming experience can reflect farming skills in cocoa farming. Most cocoa
farmers who became respondents have been engaged in cocoa farming activities in the range
of 6 to 10 years, namely 40.6 percent (Table 7), with an average farming experience of 14
years. Cocoa farmers who have been farming for more than 20 years account for twenty
percent, namely, 20.3 percent.
When viewed from the cocoa farming region, cocoa farmers in Bali have a longer
average cocoa farming experience of 19.3 years, followed by West Sulawesi with an average
of 14.5 years and the last cocoa farmers in West Sumatra with 8.3 years. Based on one-way
ANOVA test, the difference in average cocoa farming experience between these regions has a
significant difference.
c. Farmer education level
Most cocoa farmers who are respondents have completed formal education up to the
primary school level, which is 35.8 percent. Meanwhile, when viewed based on the
distribution of farmer education levels, it is quite diverse. Farmers in West Sumatra are
dominated by farmers who have studied up to senior high school level, while farmers in West
Sulawesi are dominated by farmers who have studied up to elementary level, and the
distribution of farmers in the Bali region varies from elementary, junior high and senior high
school. Characteristics of Cocoa Farms
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Information related to cocoa farming characteristics obtained are information on land
area, age of cocoa plants, types of cocoa products produced from farming activities, livestock
ownership, and technology application in cocoa cultivation and processing activities, namely
side grafting and fermentation techniques. Some cocoa farmers who became respondents in
this study have more than one cocoa farm. The following grouping of farming characteristics
shows the total cocoa land owned by each farmer.
a. Land area
Most smallholder cocoa farms in Indonesia are small, as can be seen from the
distribution of farm size of respondent farmers, 45.3 percent of whom own less than 0.5
hectares of land. The average size of land owned by respondent farmers is almost one hectare,
namely 0.93 hectares. When viewed by region, the land area in West Sumatra has the
narrowest average cocoa farming land area of 0.7 hectares. The region with the largest
average land area is Bali which reaches 1.09 hectares while West Sulawesi reaches 1.00
hectares.
Based on the ANOVA test results, the average cocoa farm size in Sumatra is
significantly different from the average farm size in Bali. The average farm size in West
Sumatra is lower than that in Bali. The cocoa farm size is part of the total farm size owned by
farmers. It is not uncommon for cocoa farmers to also cultivate other cocoa commodities.
According to the data used in this study, the distribution of farm size allocated to cocoa
farming is as follows.
Cocoa farmers who allocate all of their farmland to cocoa farming account for almost
50 percent of the total respondents. This means that there are quite a number of cocoa farmers
who focus on cocoa farming only. Meanwhile, farms that allocate less than twenty percent of
their farmland to cocoa account for 20 percent. The overall average land allocation for cocoa
in respondent farms is 73 percent, which can be said to be quite high. When viewed by
region, the average farm land allocation for cocoa in West Sumatra is the lowest compared to
other regions, at 59 percent, followed by Bali at 79 percent, and the highest is West Sulawesi
with an average land allocation of 84 percent.
The size of a cocoa farm not only shows the high welfare obtained by farmers from
farming activities, but also shows that cocoa farms are more efficient in production when
compared to cocoa farms with a small area. The larger the cocoa farming land area, the more
it can encourage farmers to develop their farms, such as by applying technology so that the
land continues to produce and be profitable. Large land area increases farmer losses if the
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farm is not cultivated properly.
b. Cocoa plant age
Cocoa plant age is rumored to be the cause of low cocoa farm production, thus the
possibility of plant age negatively affecting the sustainability of cocoa farming. Based on the
age of cocoa plants, most cocoa plants are in the age range of 6 to 10 years, reaching 32.5
percent. In terms of region, cocoa plants in West Sumatra are younger with an average age of
9 years, followed by West Sulawesi at 16.7 years and Bali at 21.8 years. From the ANOVA
test, the difference in the average age of cocoa is significantly different. When viewed from
the experience of cocoa farmers, land area and age of cocoa plants, it can be concluded that
compared to the other two regions, the West Sumatra region is relatively more experienced
new to cocoa farming. On the other hand, the Bali region has the longest history of cocoa
farming.
c. Marketing of cocoa beans by farmers
The value of each type of cocoa product marketed by the farm differs depending on the
type of cocoa product produced. In general, apart from processed products in the cocoa
agribusiness, the type of cocoa product with the highest value that farmers can produce is
fermented cocoa beans, while the cocoa product with the lowest value is cocoa that does not
undergo a drying process or wet cocoa. In addition, the value of cocoa bean products
produced by farmers is also determined by the grade of cocoa beans produced. The grade of
cocoa beans is determined by the moisture content of the beans and the wholeness of the
beans. The highest grade of cocoa beans has a maximum moisture content of 7%. Wet cocoa
beans do not go through a drying process and therefore have a high moisture content. Thus,
wet cocoa beans have the lowest grade in cocoa marketing by farmers. The difference in the
value of cocoa beans produced by farmers can most simply be seen from the price of the
cocoa beans.
5.3 Overview of Cocoa Farm Sustainability Indicators
Sustainability is an abstract and complex matter, the measurement of which cannot only
take one thing into account, as well as measuring sustainability at the farm level. On the other
hand, this study used farm survey data at the farm level, which was not specifically
conducted to identify farm sustainability. Realizing this, the author tries to utilize the existing
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data from the cocoa farm survey that was conducted in 2017 to be used in identifying the
sustainability level of cocoa farming in Indonesia.
The complexity of sustainability is due to the large number of indicators that can reflect
sustainability. At first glance, these indicators appear to be separate and unrelated to each
other, however, each indicator can actually linked to a single issue in sustainability. This
research categorizes the sustainability indicators according to the relationship between
indicators and the common issues or aspects of economic, ecological and social. The
indicators that make up each aspect and their data distribution are described in this section.
a. Economic Sustainability Indicators
Cocoa farm sustainability from the economic aspect in this study is based on the theory
of production and welfare, so the indicators used to identify farm sustainability in this aspect
are productivity, farm revenue and the ratio of benefits and costs of cocoa farming per hectare
of farmland. Productivity evaluates farm sustainability in terms of farm performance in
meeting cocoa demand, while revenue and the ratio of benefits and costs evaluate farms in
providing welfare to farmers. Revenue shows the results that farmers get from farming
activities, while the benefit-cost ratio (B/C ratio) considers the costs that farmers bear from
these activities.
Cocoa Productivity
Cocoa beans are the expected output of cocoa farming activities, as they are used to
fulfill domestic cocoa demand. Therefore, production indicators are very important in the
sustainability of cocoa farming.
Cocoa is an annual crop, harvesting can be done one to two times a year. In equalizing
production units in each farm, production indicators are seen from cocoa productivity per
hectare in one year. The distribution of cocoa farming productivity and the average
productivity of each region can be seen in Table 17.
7.1 Conclusion
The sustainability of cocoa farming in terms of farm productivity and welfare of cocoa
farmers (economic aspect), use of inputs that can affect the environment (ecological aspect),
and involvement of the social environment and involvement of cocoa farmers in the social
environment related to their farm (social aspect) are not sustainable. The majority of cocoa
farms are not sustainable in every aspect of sustainability.
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Cocoa plant age, which was initially feared to be the cause of low farm sustainability
because it was thought to be the cause of low cocoa plant productivity, did not affect the level
of sustainability from any aspect. The application of cultivation technology, namely side
grafting, which has a positive effect on the sustainability of cocoa farming is likely to be the
cause of cocoa plant age not reducing the sustainability of cocoa farming, especially from an
economic aspect.
Farm sustainability can be improved by involving farmer family members in cocoa
farming activities and increasing the value of cocoa beans produced by the farm. The support
of an institution to cocoa farming also increases the sustainability of cocoa farming,
especially in the social aspect. However, the support of social institutions has not been
utilized to improve farm sustainability from other aspects, namely economic and ecological
aspects.
