If there’s someone who can explain the coffee production process from the farm, perhaps Derby Sumule is the right person to meet. The owner of Coffeewar (Kemang) told us his story of how an urban person has to live in remote coffee farms to ensure the production process meets the specification of the end user. Although he acted as green bean trader, at this moment Derby admit he’s focusing on his new role as Co-founder and Chief of Farmer Empowerment of Seeds, the first digital coffee traceability application with blockchain technology and using QR Coffee in Indonesia. With only scan, you can trace the whole coffee production process from downstream to upstream. In the future, the app will also turn into a special marketplace platform for the coffee industry
Please explain a bit about the production process in the coffee farm
On average, coffee farmers in Indonesia sell their coffee as parchment coffee to middlemen or collectors. Usually, they pick the coffee cherry, peel off the pulp, ferment it, wash, and let it dry for 2- 3 days and then sell it. Nowadays, some farmers also sell the cherry coffee, it’s a quite fast way for them to get some cash.
Just mention the price so we know the actual number.
Each region has different price, but for example, in Flores Bajawa, coffee cherry is worth Rp. 7.000-7.500/kg (2018’s price), meanwhile to get 1 kg of green bean coffee, you need approximately 6,2 kg of coffee cherry. In other words, the basic price of green bean may reach Rp. 46.500.
From there, you need to add the fruit shrinkage, labor cost, production equipments, profits, etc. After that, middlemen will sell the coffee to exporter, to roasteries in Jakarta or other cities. In other places, such as in Toraja, middlemen will travel around the market and village to buy coffee from farmers as wet coffee parchment, the price is ranging from Rp 18.000-20.000/litre (2018’s price). The price is changing overtime, and it will be 3 to 4 times (depending on quality) to convert it into kilogram. The middlemen will proceed the process into “asalan” coffee (15% water content, 15% defect) or into grade 1 green bean coffee, according to order. We always think middleman as evil person who screws farmers’ life, in reality, that’s not the case.
When the middlemen travel around from village to market, the transportation and the processing cost are on them. It’s a cost that will be added to the green bean selling price. The green bean price of Bajawa coffee varies from Rp 80.000- 85.000/kg, not including shipping fee. That will be the price for traders or roasteries. Not to mention other risks faced by traders during shipping, extreme weather or total loss. Most of the times, people never realize there are big efforts behind all the production process.
I knew you as an expert in coffee processing.
That’s not accurate.
So what’s the title of your job?
In the beginning, I knew an Australian coffee researcher who needed research assistant in 2010. Then, I, as an urban person came to the mountains and forests to live along with farmers to see and monitor the coffee production process there. Then, NGOs (Non-Governmental Organization) or any institutions who wants to conduct research in Indonesia are required to have local vendor, at that time, they use the service of Coffee and Cocoa Research Center in Jember, but you can also team up with ITB or IPB.
They use my service as a research assistant in Enrekang, South Sulawesi. What we’re actually doing is buyer linkage, we organize the whole process from purchasing, post harvest processing, setting up areas, actually it’s the exact same thing like what I do now with Seeds, it’s just that I’m doing it in digital platform. Back then, we partnered with 2 Australian
companies: one act as importer and another as end user. The term expert of coffee processing is a simplification, I’m just a research assistant. Basically, I had to stay with farmers for a few weeks and I had to monitor the whole production process from farm to the end product will meet the requirements of end customers.
I heard the local farm productivity is relatively low, what’s the cause?
If we’re talking about the production volume of the land per hectare, Indonesia is relatively low indeed. In Flores, they can produce 400-600 kg/hectare, meanwhile, the best one is in Gayo that can reach 800kg – 1 ton/hectare. Most Indonesian farmers grow rice, horticultural plants, coffee, clove, chocolate, etc
Most of Indonesian farmers are not monoculture (the practice of growing a single crop at a time), because this concept is riskier, when the crop failure, they’ll have no income. There are some exceptions, such as Gayo farm is monoculture farm. Farming culture in Indonesia is quite different from other countries.
Let’s take Enrekang farmers for example, they also plant some clove, cocoa, and horticultural plants to maintain their income. Most horticultural plants can be harvested within 2-3 months, meanwhile for plants such as coffee, chocolate, and clove, can only be harvested once a year. Why do we have such low production rate? Because, not all farmers are willing to give special treatment to their farms.
Special farm treatment, what do you mean?
Look, ideally, a hectare land should have 1.600 coffee trees with 1,5 x 1,5m space among them. Basically, coffee trees are stressed out during dry season, and during rainy season, they will absorb lots of nutrition. If you don’t regularly trim the tree, you’ll have new shoots and branches, with less fertilizer coffee trees wouldn’t be in good condition, we also need to maintain the tree height around 1,6 m. You also need to trim the weeds around the trees.
In Flores and Toraja farms, the trees are too high, there are also other trees, such as bamboos that stand between coffee trees and the sunlight, it actually halt the photosynthesis process, and as a result, the yield wouldn’t be optimum. However, if you go to monoculture coffee farm in Gayo, they’re willing to give extra care, the height of the trees are all the same, around 1,6 m.
How can Gayo has monoculture farm?
The coffee farm above equator line can be harvested 2 times per year, usually in March and October, such in Gayo and North Sumatra coffee farm. On the other hand, the farm in East Indonesia can only have 1 harvest per year. In addition, farmers in Gayo and North Sumatra has larger ownership of the land.
Why the price of Indonesian bean keeps increasing from year to year?
For local market, it’s correct. Actually, from quite a long time, Indonesian coffee price is always above the global coffee price, because our basic price is already high, we can’t deny it. The global coffee price is around 97.75 cent/pound (Bloomberg)
If the global price is low, why our local coffee price keeps escalating?
Because of the local consumption keeps increasing. You can see for yourself, we have so many new coffee shops and roasters. Of course, the price will follow, now coffee is a trendy thing, it seems everyone’s doing coffee business. The escalating price has also caused some producers focus only to domestic market, because of its higher price, compared to the export.
In one of coffee auction in South East Asia, the price for Indonesian coffee is around $10/kg, compared to other coffee which are ranging form $6-7. Therefore, now we have many coffee shops and roasters that prefer to use imported bean, like from Brazil or Ethiopia, because of the sufficient demand.
The question would be, if the price keeps escalating, do the farmers have better life?
It’s a bit difficult to talk about the issue, as livelihood has its own standards and I never conduct any research on that matter. However, I did a buyer linkage project in Sulawesi, what we actually see, is that their livelihood doesn’t get better. Farmers aren’t automatically get rich, because they don’t have too many products. So the conclusion is, of course, the farmers have positive impact because of the escalating price, but about getting rich, I don’t think so.
Who enjoys the rise of Indonesian coffee price the most?
According to a research I read, roasters are the one who enjoy the biggest margin. Of course, we have so many closed down coffee shops, and roastery business isn’t as easy as it seems. Many roasters aren’t conducting feasibility study. For example, how can you reach BEP when you buy roasting machine worth Rp 1,2 billion when you only roast 50 kg -100kg coffee per month? You need to calculate the depreciation and some other things.
Why did you quit the green bean trading business?
I want to focus in this digital technology. It will be crucial, because my dream is, from all the journey I had in the past, I’m looking for a way to give back to the farmers. If Seeds is growing according to plan, we’ll have feature to tip the farmer. So, when you love coffee from certain farmers, you can give them tip, directly, exactly like we have in Go-Jek or Grab. How many people are willing to give a tip? Based on our research, there are so many. The number may depend on those who want to give the tip, but we’ll have the 360 effect, farmers supply the bean to downstream, while downstream can give the money back to the farmers.
President Jokowi seems to give special attention to coffee. Have you seen the realization?
From the last time we met, I haven’t seen any implementations. It’s good to give some production equipments to farmers, as long as, they meet the farmers’ needs. Don’t give farmers roasting machines, I mean, what for?
Does it actually happen?
Many times, it happens for quite a while. Imagine, a group of farmers in 1.400 metres above mean sea level on the foot of Mount Latimojong, South Sulawesi received a roasting machine with 10 kg capacity, that’s huge! It happened in 2007-2008. Roasting has its own discipline, it’s not as simple as turning green bean into roasted bean. You know what happened? I saw lumps of jet black coffee bean laying down there, because actually, after roasting, the fan broke down, and they have the self-roasting process and the coffee beans were over roasted
We need to re-evaluate the objective of giving such equipments, do they actually need them? Perhaps they need pulper machine or huller that can be connected to diesel machine. What’s the use of roasting machine for farmers when they’re having hard time to access electricity and gas?
However, I still believe that we need to maintain the current production chain, from farmer, middleman, exporter, roastery, and café. When you think of a middleman, you’d think about a person who lend money to farmers with high interest rate, along with threatening bodyguards if the farmers failed to pay the loan. It’s an old narration that’s been around for a long time. However, from many farms I’ve visited, the reality isn’t like that, what often happens is the contrary.
It’s a real story of a woman from Surabaya who wanted to trade commodities in Flores, perhaps because she was born and raised there. She also has courage and capital to do trading business. Then, she built warehouse, but it was abandoned soon after. The story was, a village with 50 farmers received down payment from the woman so they would sell their products to her. You know what happened next? After getting the payment, the farmers sold their products to other people because the lack of relationship. Then, what can the woman do? Did she bring any bodyguards? The bodyguards would also be member of the very same village.
Smarter middlemen will go another route. For example, when the farmers need fertilizer, they would give them. Or when the farmers’ children went to school, you can give them the uniform, so they feel indebted. Without strong relationship, middleman may actually dies.
So middleman isn’t necessarily evil?
Middlemen play some important roles, they can help farmers, such as when they need some loan or other things, they are partners in some ways. If middlemen weren’t good to farmers, it would be difficult for them to get coffee from the farmers.
From your story, coffee production in farm sounds very complicated. On the other hand, we have many coffee shops and roasters who claimed that they do direct trade. Is it actually that easy to do so?
It is complicated. Look, direct trade is a gimmick that can raise the selling price, even though they don’t necessarily understand what they’re talking about. We have farmers who have production equipments, and farmers who don’t have one, the end result would be different. The products from farmers are not necessarily ready to use. When coffee shop or roaster requests farmer to process coffee with certain specification, are they willing to provide the necessary equipment? I don’t think so
This recent trend is not without Problem. In reality, a sporadic growth of smallholder farms, along with a similar growth of cafes in the cities, has created uncoordinated coffee supply chains with inconsistent product quality and quantity. In the end, this situation backfires on farmers’ reputation, creating distrusts among actors and compromised coffee prices
Coffee shop and roaster that demands certain green bean spec from farmer and producer is a common story, I wouldn’t mention any brands. We have some stories when the products are ready, the buyers cancelled their order. And then we have coffee shop which only buy 10 kgs, what should the farmers do with the rest of the products? Actually, what are you trying to save the farmers from? What happens is, you actually exploited farmers job.