Capacity building for research: Reviewing the role of extension programs to address challenges facing dairy value chains in Indonesia

Capacity building for research in dairy, Final workshop 17 February 2015: Participants and instructors

Global Food Studies’ Associate Professor Wendy Umberger and Dr Risti Permani collaborating with Bogor Agricultural University under the leadership of Dr Arief Daryanto and Dr Sahara recently organised the final workshop “Capacity Building for Research: Promoting Inclusive Development of Agricultural Value Chains” on 17 February 2015. This event was funded by ACIAR through Project AGB/2014/033. This final workshop was a follow up to the first and second workshops held on 1-3 September 2014 and 27-30 October 2014, respectively that had an aim of enhancing participants’ research capacity to assess the success and effectiveness of dairy and horticultural value chain upgrading in Indonesia. Dr Desianto Budi Utomo from Charoen Pokphand Indonesia and Secretary General, Indonesian Feedmills Association (GPMT), Dr Brad Granzin from Australasian Dairy Consultants and Ms Zita Ritchie (Department of Environment and Primary Industries) also presented at the workshop.

In this final workshop, participants had opportunities to present their findings from field activities in October 2014, that was part of the second workshop. Participants visited two dairy cooperatives – KUD Cianjur Utara (previously known as KUD Mandiri Cipanas) and KUD Giri Tani – and a dairy processing and agro tourism company, Cimory that is supplied by the two focus cooperatives.

Presenting their findings from field activities in October 2014, Group 1 highlighted the importance of improving coops’ business skills through training and assistance to develop product diversification, while Group 2 added breeding and land availability to the discussion as two crucial aspects in dairy development. Both groups agreed that the quantity and quality of production is significantly constrained by high feed costs, farmer’s lack of economies of scale and limited adoption of innovations. Looking at the farm level, using data from a dairy household survey Dr Permani in her presentation explained that small, young and innovative dairy farms on average are growig faster than larger, older and less innovative farms. She also pointed the importance of considering farmers’ heterogeneity when looking at the percentage change in herd size in the last five years.

Dr Brad Granzin facilitated a session on factors affecting profitability and efficiency of dairy value chains. Group 1 pointed out some factors affecting value chain efficiency. They defined three aspects: 1) farm characteristics; 2) infrastructure and facilities; and 3) price information. In regard to profitability, Group 1 identifies a number of profit determinants: 1) marketing channel (where shorter is more efficient); 2) price on inputs and outputs; 3) economies of scale (as indicated by number of cows and milk production; 4) the use of an integrated farming system using clean development mechanism (ie. zero waste, using biogas); 5) knowledge and skills to adopt technology; 6) quality of milk; and 7) the use of communal farming system. Class discussions suggested that other factors (especially moving beyond the farm gate) that might affect profitability include investments and capital.

Participants worked as a team to discuss factors affecting profitability and efficiency in dairy value chain

Group 2 suggested that value chain efficiency and profitability are interrelated. Some factors that affect profits include milk price, input costs, farm productivity, milk production quantity and quality, scale of production, ability to process milk, waste processing and support from relevant institutions. In addition, other factors affecting efficiency include breeding and feeding management, animal husbandry practices, transaction costs (including transport, costs of searching information, negotiating costs, monitoring costs, etc), marketing aspects (eg number of buyers, etc), transportation (eg road quality), and other costs. Class discussion suggested that at the moment there is no signal sent to farmers to incentivise them to produce more and pay less transport costs.

Ms Zita Ritchie and Dr Desianto Budi Utomo presented some strategies to develop integrated extension programs to address the above challenges. Zita introduced ‘Bennett’s hierarcy’ to participants highlighting the needs to systematically consider the following aspects: inputs, activities, people involvement, reactions, KASA (Knowledge-Attitudes-Skills-Aspirations) change, and Practice change before achieving end results. Dr Utomo explained that there has been a change in the delivery of extension programs in Indonesia. ‘Decentralisation’ has happened where extension programs that were used to be managed by the central government are now taken over by private sector. Class discussion suggested that public-private partnership in less vertically integrated industry such as dairy as compared with poultry industry is needed in Indonesia eg PISAgro.

Overall, the participants have demonstrated a significant increase in their capacity assessing challenges and opportunities for dairy value chains in Indonesia by using dairy sector in Cisarua areas as a case study through the application of value chain research methods, primary data collection methods (in particular focus group discussions and questionnaire-based survey interviews) and methods to design an integrated extension program.

Congratulations to all participants and we thank Bogor Agricultural University especially Dr Arief Daryanto and Dr Sahara for their excellent support and ACIAR for this funding opportunity.

Visit this link to read more about our series of workshops on dairy sector in Indonesia.

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