Empowering Farmers
Agriculture has great potential. However, farmers needed to work together in groups to be strong. In addition, by applying proper business methods, their welfare would improve.
That is the conviction of Luwarso, a farmer from Pemalang in Central Java who currently lives in Sukabumi, West Java. “The success of Indonesia’s leadership depends on its food politics,” he said.
The agriculture graduate from the University of General Soedirman (Unsoed), Purwokerto, has proven the resilience of the agriculture sector. Through the Arrahmah sharia cooperative and the community-owned enterprise PT Pangan Terhubung(BUMR), local farmers were empowered and their revenue began to improve. The company is run professionally and absorbs the farmers’ rice harvest. The company processes, packages and markets the rice.
From just 1 hectare, farmers can make around Rp 2 million (US$150.79) per month. This does not include sharing profits at the end of the year, which is divided according to the proportion of rice each farmer has produced.
Currently, 850 to 2,400 local farmers collaborate in running a 1,000-hectare farm. This does not include the 74 young adults that manage administration, marketing, design and farmers’ training at PT BUMR Pangan Terhubung.
The company applies modern marketing strategies, both offline and online. It manages a client database to ensure the orderly distribution of rice to all customers.
It takes only one day to process unhusked rice into prepackaged rice. Technology is used optimally. The rice is put into attractive packaging that will not lose out to the packages of premium rice typically found at supermarkets.
The supporting technology at the rice-processing factory was built at a budget of Rp 48 billion. Nevertheless, Luwarso said he believed in the sustainability of BUMR Pangan Terhubung, as it had achieved economies of scale. Every day, the factory processes the harvest yield from8 hectares of rice fields – about 40-60 tons of unhusked rice, or 20-30 tons of processed rice. The factory operates around the clock, and is thus highly efficient.
In order to maintain its efficiency, however, 8 hectares of rice fields must be planted every day. Rainand droughts are no longer a problem. Technology and innovation are the key factors: For the dry season, the farmers sow drought-resistant rice seeds, while for the rainy season, flood-resistant rice seeds are planted.
“The nation has great researchers and more than 150 national superior rice varieties, each with its own superior qualities,” said Luwarso.
He said that they worked with 10 research institutes and universities to procure seeds, fertilizers, natural pesticides and post-harvest machines, as well as to learn proper planting techniques, human resource management, marketing strategies and developing derivative products, as well as good packaging techniques. One of the universities that works with the company is Luwarso’s alma mater, Unsoed.
Through technology, innovation and professional management, Luwarso’s contribution has earned President Joko Widodo’s accolade.
“This is a good example of corporatizing farmers, which I speak of constantly,” President Jokowi said during his visit in early September to Arrohmah cooperative and BUMR Pangan Terhubung in Pasirhalang village, Sukaraja district, Sukabumi regency.
After his visit, the President invited Luwarso to a limited cabinet meeting at his office on Sept. 12. The hope is that Luwarso’s achievements can be an example to other regions.
Luwarso calculated that, with 65 business units similar to BUMR Pangan Terhubung, each managing 5,000 hectares, 2.5 million tons of rice could be produced each year. It would require Rp 15 trillion in funding, but this would be a one-time loan and no additional subsidies would be needed. The loan could be repaid in the fourth year. If the project was initiated in 2017, Luwarso estimated that an IPO would be possible in 2022.
He said that farmers could enjoy good profits just by managing the rice mills. If they managed all processes, including marketing their own rice, their profits would skyrocket. A shorter supply chain means lower distribution costs. This way, farmers would make much more money, so profits would be inevitable.
From nothing
His calculations are not empty talk. Luwarso proved it himself, starting his business from nothing in his younger days. After graduating from Unsoed’s Faculty of Agriculture in 1989, Luwarso, who was born in Pemalang on June 16, 1965, worked as an assistant driver on a truck transporting crops between Semarang and Bengkulu. In 1993, in search of better fortune, he joined a friend in Sukabumi selling fried rice. The fluctuating quality of rice on the market made Luwarso want to buy rice directly from the local mill.
After getting to know the mill’s owner, he tried to market the rice to hotels, restaurants, catering businesses and big companies. The business made a huge profit and he became owner of the PB Tunggal Jayarice mill in 1999.
To ensure the consistent quality and a steady supply of rice, Luwarso then established CV Indo Bangkit to provide seeds and training to farmers in 2001. Five years later, he established CV Buana Citra Lestari to distribute liquid fertilizer to farmers.
The Agribusiness Service Center Farmers Collective was formed in 2007 to develop the cultivation techniques and human resources of member farmers. The Baitul Maal Wat Tamwil Rohmah was established in 2008 and then the Arrohmah cooperative a year later to help farmers make use of financial institutions. The cooperative supports farming activities and provides funding to farmers to purchase seeds, fertilizers and other production needs.
In order to improve production and marketing, a holistic and IT-based farming system was implemented in 2012. It also conducts research and development in rice seeds, disease control and organic fertilizers and pesticides.
It was only in 2016 that the Agribusiness Service Center was empowered as a community-owned enterprise and renamed PT BUMR Pangan Terhubung. The hope is to empower farmers as economic agents the equal of other business entities, so as to improve their welfare.