Indonesia Tea Smallholders
Bandung
6 November 2014
Location of the Indonesia Tea Plantation
Tea Plantations
West Java Province
95,000 Ha
77%
Other 10 Provinces
29,000 Ha
23%
Area and Ownership of Tea Plantations in Indonesia
2010 - 2013
With about 100,000 smallholders, the average land
holding is only 0.6 ha per farmer.
Deployment location of the tea garden
owned by farmers (in ha)
Privately
owned
28,720 Ha
(22%)
Belongs to
the Farmers
56,670 Ha
(46%)
37,250 Ha
(32%)
State-owned
Enterprises
 Nearly half of Indonesian tea plantation owned
by farmers (46%), but individual ownership is
very low, averaging only 0.6 ha.
 individually is difficult to be a profitable venture.
 Tea estates owned by farmers, generally in bad condition, productivity is only 900 kg
per hectare, while the border economical productivity is 2,500 kg/ha/year.
Production in Ton
2010 - 2013
Tea estates owned by farmers, generally in
bad condition, productivity is only 900 kg
per hectare, while the border economical
productivity is 2,500 kg/ha/year.
Smallholders : Linked to the Bought Leaf Factor
 Smallholder sell its green leaf to the Bought Leaf Factories owned by
individuals and partly to a processing plants owned by large estates.
 Direct Sales only ± 8%
Generally, the transaction is not based contract, so farmers do not have certainty
at any time in selling his green leaf, especially in season "plus" where abundant
green leaf that cause prices to go down.
Smallholders: Connected to the value chain
 In fact, a lot of bought leaf factories less attention to the quality of its products.
 Unfortunately many farmers sell their green leaf to the factories like that, although the
price is relatively low.
Although the tea sector has a large number of small players, large
companies, predominantly in the packing part of the value chain,
play a highly significant role.
The pricing structure
It is a fact situation, exporting its tea in bulk tea is priced for $2,and then the local consumers are paying equivalent of $30 to $40
in value added forms.
To establish fairer price for tea farmers Indonesia Tea Board is proposing:
 Institutional strengthening to improve the bargaining position of farmers.
 Issuance of formal regulations regarding the minimum quality of tea leaf.
 The establishment of formula of tea leaf prices based on price at the
Auction Center.
Tea in Indonesia is not a prima-donna crop
 It contributes less than 0.5% of foreign currency earning.
 Having only 123,000 Ha nation wide, it’s negligible if compared to
millions of Ha of palm oil or rubber.
 At a steady rate of 3,000 Ha per year, conversion has taken place, shrinking
the tea land area,
 Tea plantations’ profitability is not attractive, unless somebody stands as
a guarantor, Banks are generally reluctant to finance tea growers.
While the smallholders,
due to lack of capital, convert
the land to vegetables, which
has no water holding capability.
Turning a threat into opportunity
 The low market price that happened during the last two decades had weakened
the income of the tea growers, and the smallholder was hit hardest
 Considering the bullish market prediction due to a higher internal consumption in
China and India fueled by higher buying power,
 the smallholders problem in Indonesia may represent an opportunity since
there is not much land area suitable for growing tea anymore.
 With the idea of turning a threat into opportunity, with the above reasoning,
 we have started to draw the Government’s attention including the Province of the
West Java Government where more than 75% of tea plantations is located in, to
jointly remedy the tea situation.
 We would like to invite ideas and draw experiences of the other producing
countries based on their success in establishing strong smallholders’
organizations,
 particularly the role and contribution of the Government and international
institutions, to enrich our proposal; and vice versa, hopefully they can pick
up something useful from ours.
Help from the CFC & Government
 DTI received funding from CFC / FAO of USD.1.2 million for the rehabilitation
and intensification for area of 787 hectares belonging to 1,000 farmers.
 The results in the 2-year average farm productivity rose 21%, and the
selling price of fresh leaf through quality improvement is also up 45%.
 We are to position the CFC project mentioned as the seed for further
smallholder development projects, to snowball to other areas.
 In 2014 the Government through the plantation Directorate General of
Plantation allocated funds for the improvement of farmers' tea gardens area
of ​3,200 ha of Rp. 50 billion in 8 regencies.
 DTI will facilitate partnerships between farmers group beneficiaries, with
the nearest plantation companies to conduct training and act as offtaker
Indonesian Tea Consumption
 Tea consumption was up 10% per year
 Domestic demand is potential as per capita consumption is only 0.4 kg.
Production
Import
Export
Consumption
160 ,000
120 ,000
140 ,000
90,953
120 ,000
100,073
98,409
Consumption
growth 10%/year
100 ,000
80, 000
100 ,000
74,781
80, 000
60, 000
60, 000
0
20,580
70,842
148,671
24,397
70,071
145,748
19,812
75,450
146,591
10,870
20, 000
87,191
40, 000
151,012
40, 000
20, 000
0
2010
2011
2012
2013
Indonesia Downstream Tea Industry
Loose Tea Package 50%
Indonesia Tea
Consumption
98.409 Ton
Black Tea
69%
Green Tea
Tea Bags 35%
31%
RTD Tea 15%
To enhance bottom lines through the increase value-additions,
the Indonesia Tea Board would open discussions and dialog to tap the lucrative
market of the said value addition tea in the international market jointly
Generic Promotion on Tea
Despite of the various reports say that tea
is the most consumed liquid after water,
the promotion budget for tea compared to
soft-drink, is very small
The cost of promoting the brands should not be passed on and
become an additional burden to the producers
Need to promote tea generically in an aggressive way, without
depending to anybody is now more relevant than ever
At the end of the day, this effort should improve the supply and demand equation
and bring more compensating price level to the tea farmers
National Agribusiness Rescue Movement
( Gerakan Penyelamatan Agribisnis Teh Nasional / GPATN )
To address the current condition, the Indonesia Tea Board had launched a national
movement to reverse it involving all stakeholders to improve quality and production and
obtain compensating price, supported by regulatory improvements to establish a
conducive business climate, and the smallholder group as the focal point.
Movement to improve the
productivity and quality of 57,000
ha plantation owned by farmers.
Indonesia Tea
Board as
Coordinator
Movement for effective promotion
and marketing activities
Better Welfare of
Tea Producers,
particularly the
Small Tea Growers
Movement to improve the
regulation to establish a
conducive business climate
The issues were mapped along the value chain.
- Input price rises - Relatively lower productivity - Business climate - Finance mechanisms - Lack of opportunities for value added activities –
- Lack of market information - Various standards confusing for producers - Lack of farmer organisation - Lack of land title deeds
Farmers Owned Companies
Badan usaha Milik Petani (BUMP)
To strenghen profitability of tea farmer, Indonesia Tea Bord is working
to propose formation of Farmers Owned Companies in Cooperatives
Tea
Farmers
Forming
Self Help Group SHG)
with an area of 10-50 ha
Forming
Cooperatives as Farmers
Owned Companies
(BUMP)
with an area of 300-500 ha
SHG formation is highly recommended as a basis for the
establishment of farmer-owned enterprises, Cooperative
as its legal form
Partnerships with
reputable Tea
Processing Unit
as off-takers
Forming a new
company with
potential investors
Forming
Indonesia Tea Incorporated (PT. ITI)
As Holding Company
Indonesia Tea Board would propose an exchange of comparative study with other
countries to achieve the objective in improving the welfare of tea farmers.
Key Sustainability Issues
As a basis for setting the strategy of sustainable development of tea industry
•
•
Two tier
industry :
Smallholders
and Estates
•
•
•
•
•
Productivity of smallholders, including access to information
Institutional barriers: lack of civil society, land deeds, farmer organization,
infrastructure
Workforce issues: transient labor; labor shortages; living wage; unions
Energy for tea processing – deforestation and reliance on eucalyptus
Pesticide use – which chemicals and how used
Monocroping – soil erosion, biodiversity loss
Role of government – willingness to act on issues such as water, carbon,
deforestation.
Tea is a
cheap
beverage
•
•
•
•
Tea is a cheap beverage - average consumer not discerning, input price increasing.
Value added not covered in country of origin.
Impact of climate change of the future supply of tea
Risks at producer end of chain, opportunities and power at other end.
Will tea
drinking
increase or
decline ?
•
•
•
•
•
•
Opening up of new markets – worldwide tea consumption up 2% pa
Future of certification
Confusion of standards for both producers and consumers
Health benefits/dis-benefits: low calorie drink, caffeine product
Demand for traceability
Competition from food crops/biofuels
Terms of Reference
1
Study and document contribution of tea smallholder sub sector to the economy
of each country viz.a.viz. tea industry as a whole over the last twenty years.
2
Study and document the contribution of net income from tea to improvement in
living standards of tea smallholders.
3
Collate information on profile of smallholders including extents under cultivation
with size class categories, age profile of tea lands, yield levels etc.
4
Collate demographic data on smallholders in each country.
5
Identify and assess roles played by related stakeholders in the value chain.
6
Study and document available mechanisms for development of smallholders
sector in each country.
7
Study and document existing challenges and issues in the smallholdings sector.
8
Develop recommendations on the future road map for the sustenance of the sector.
Who should be doing all these and its financing ?
Thank You
There is no doubt, we need to realize the so far only in slogan to establish :
“The Socially acceptable, Environmentally sustainable,
and Economically viable tea industry from field to cup.”
 The ‘business as usual’ way of doing it will be bring the small tea growers
toward the cliff, and is disastrous the economy of the tea producing in the
developing countries categories.
 The value chain distribution of margin has for so long been
disadvantageous to the producers, it now has brought to a situation that if
we fail to remedy the problem it may ruin the tea industry as a whole.
 There is a strong positive efforts to remedy the situation involving not less
than the FAO through the IGG on Tea to create harmony within the global
tea industry to achieve a more acceptable margin distribution to enable the
small tea growers particularly toward better prosperity.
The WG meeting yesterday
5 November 2014
 Was lively and we have come to a common platform of thoughts that to
achieve the goal,
 The smallholders should be able to sell their product direct to the consumers,
particularly in the countries whose consumers sincerely would like to see that
the small tea growers live better lives.
We therefore would propose the followings to the meeting
Next page
We therefore would propose the followings to the meeting.
Formimg a
Confederation of
International
Small Tea
Growers
The small tea growers in producing countries need to establish a forum to
facilitate active communication. Proposed by the President of Indian Tea
Confederation of Small Tea Growers (CISTA) to form a Confederation of
International Small Tea Growers (Organization) initially as a platform of
communication.
Establishing
brands in the
consuming
countries
To work with the established brands in the consuming countries to market
showing a strong and visible logo of small tea growers in the producing
countries. Alternatively, independently enter the market working together
with the various Certification Bodies, Supermarket, Hotels, Restaurants,
Communities, Social Clubs etc.
Establishing a
road map
To work or appoint a strong international business consultant to establish
a road map toward its achievement, involving institutions such as the
World Bank, and media to promote it.
The organization
is open to
participation
The Organization is open to big producers participation, and can chip in
fund which later can be treated as equity. The same is also applicable to
local packers or international.
Present: Sri Lanka, Kenya, Tanzania, Indonesia