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Coffee cooperative creates fair prices and resilient forests

Akar Tani, a coffee cooperative in Indonesia, has raised the quality and price of coffee for local farmers in Indonesia’s South Sulawesi Province while protecting the environment.

Ramli has known about coffee his whole life. In 1986, his father planted the first trees on the family’s land in Indonesia’s South Sulawesi Province. But by the time Ramli started growing his own coffee in the hills of Bantaeng District, it seemed the price had not improved despite its high value on the global market.

The problem lay with the two buyers who dominated South Sulawesi’s coffee market.They would use intermediaries to purchase coffee from the farmers, at times resorting to predatory tactics and tricking farmers into harvesting their coffee too soon. This would damage the beans’ potential and lower the price. 

Brewing local entrepreneurship
 

Many of Bantaeng’s communities rely on coffee and other crops for their income.The communities are therefore vulnerable to climate change and land degradation, which threatens to exacerbate the district’s already high poverty rates. 

“The dominance of these two big players means that the price of coffee can never go up,” says Adam Kurniawan, director of the Balang Institute in South Sulawesi, which works with local communities.

Ramli saw an opportunity to increase the price in 2016 when he joined the newly formed Akar Tani Cooperative. 

“The reason I wanted to join the cooperative is because it agreed to buy the red beans only,” says Ramli. “The importance of picking red beans is that the coffee is not damaged, and the coffee is good.”

Bantaeng district
Akar Tani works with farmers from Bantaeng District, pictured above, to harvest and sell high-quality coffee using agroforestry models.

The cooperative provides an alternative market for local coffee farmers while also improve the highland’s land-use practices. 

“Akar Tani cooperative is unique because it supports the improvement of upstream land by using coffee-based agroforestry schemes,” says Hasri, director of Akar Tani. “It always pays attention to the environment and how to improve its condition.”

Initially, Akar Tani struggled to compete with more experienced traders. The cooperative was new to business development and lacked financial support. It also needed help with its sustainability initiatives. RECOFTC, which had worked in the region for almost 10 years on tenure security and agroforestry, was well positioned to assist.

“RECOFTC has been a great partner and has continuously supported us by facilitating meetings with the government and conducting training on business planning and financial management,” says Hasri. 

He explained that RECOFTC’s support helped the cooperative obtain a five-year loan for US$130,000 from the Ministry of Environment and Forestry to improve local coffee production. 

By 2017, Akar Tani was close to achieving its mission. Agreements had been secured with several coffee shops to supply local coffee, and prices for farmers had increased. The cooperative’s price for 2017 was 3,000 Indonesian rupiah, or US$0.20 more per kilo than the price given by the intermediaries.

"There are a lot of benefits for the community. If there is some profit with the cooperative, it will be returned to the farmers.”

Ramli

Akar Tani, however, had hoped to expand the business with the new loan. The international specialty coffee market was one option, according to their research. But it was difficult for farmers and Akar Tani to meet the quantity required for this overseas market, which also emphasized quality.

RECOFTC held trainings with farmers on agroforestry land management, coffee harvesting and processing to help them increase the quality of production. 

Akar Tani has also been working with financial management tools introduced by RECOFTC and with an external evaluator (link). Farmers took part in a training in 2019 using the Green Value Tool, which provides guidelines for community enterprises. 

Akar Tani now works with 95 farmers and is profitable, with a 31 percent rate of return. Members can use the Green Value Tool to assess the viability of future business decisions as they work to improve their livelihoods.