When local customs meet the market: an analysis of coffee value chain in Tebat Benawa customary community, Indonesia

ABSTRACT

Using Tebat Benawa customary community in Indonesia as a case study, this paper aims to understand how non-specialty Robusta coffee value chain operates at the farmer-trader level and see if and how customary setting influences the relationships between actors. We employed a mixed-methods research design combining qualitative and quantitative analyses of primary and secondary data collected through group discussions, interviews, and participant observations. The social network analysis results showed that customary settings represented by clan-based familial relationships influenced farmer-trader relations, but it was not dominating. Coffee prices seem to be the major driver of the farmer-trader relations in Tebat Benawa. We argue that the relatively early stage of customary community consolidation indicates a weak social capital that makes economic rationale dominate farmers’ business decisions. This study contributes to the limited literature on the contemporary smallholder value chain of non-specialty Robusta coffee.

KEYWORDS:

• Customary community
• coffee farmers
• agricultural value chain
• social network analysis
• Robusta coffee
• Indonesia

Background

Coffee has been one of the major sources of livelihood for many rural communities across developing countries, including Indonesia. Between 2000 and 2020, global coffee production has seen an ever-increasing trend with an average growth rate of 1.5% annually (International Coffee Organization, 2020). As the fourth largest coffee-producing country with a 6.9% market share, Indonesia holds a crucial position in the global coffee value chain with a total production of 753.9 thousand tons in 2020 (Directorate General of Estate Crops, 2021). Of the 1.26 million ha coffee plantations in Indonesia, 98% are managed by 1.88 million smallholding families (Directorate General of Estate Crops, 2021). The well-established coffee market and its relatively good price were among the key reasons many rural farmers grow coffee for their livelihoods.

There has been a wide range of literature discussing the agricultural sector within the global value chain (Wahl & Bull, 2014). Although smallholder farmers’ inclusion in the global value chain could reduce poverty, they face challenges penetrating the systems due to various reasons, such as food standard requirements, demand for large volume, and high transaction costs (Markelova et al., 2009; Singh, 2014). These challenges then lead to the inability of smallholder farmers to benefit from the existing GVC. As a result, most farmers rely on the farmgate value chain, characterized by bulk sales of lower quality or a specialized coffee with a wide range of selections (Neilson, 2007).

Despite the importance of farmgate-level coffee value chain, most scholarly attention is given to third-wave coffee or relationship coffee¹ (see Manzo, 2010; Vicol et al., 2018) and the sustainability standard intervention in the coffee value chain (see Jeff Bray, 2019; Jeff Neilson, 2008; Neilson & Shonk, 2014; Ramirez-Gomez et al., 2022). The introduction of relationship coffee does not only provide new experiences for (middle class) coffee geeks who seek original taste and lifestyle (Manzo, 2010) but also change its value chain (Fischer et al., 2021). It gave rise to voluntary sustainability standards as a value chain intervention programme from governments, private sectors, and NGOs by providing farmers with training and access to a more niche coffee market with premium prices (Bray, 2019; Bray & Neilson, 2018). Such interventions have resulted in a structural change in the coffee value chain, which affects farmer-trader relationships as more multinational trading companies and coffee roasters engage directly with coffee farmers (Jeff Neilson, 2008; Quiñones-Ruiz, 2021).

Although relationship coffees and sustainability standards are gaining prominence in today's coffee value chain landscape due to their contribution to improving farmers’ welfare (Vicol et al., 2018), such a business model could result in farmers’ dependence on coffee roasters and other intermediate institutions to help produce high quality coffees (Edelmann et al., 2022; Ramirez-Gomez et al., 2022). Besides, relationship coffees only constitute a small part of the story as most coffees in Indonesia are non-relationship, Robusta type (Directorate General of Estate Crops, 2021). The existence of relationship coffee often reproduces inequality between relationship vs. non-relationship coffee farmers (Vicol et al., 2018). In areas where sustainability standard is not applied, the coffee value chain appears to be more traditional as characterized by farmer-trader relationship at the farmgate-level and big trading companies post-farmgate (Neilson, 2008).

The limited literature on how the present-day non-relationship coffee value chain operates at farmgate level has motivated us to conduct this study. South Sumatra Province in Indonesia presents an excellent case of how the coffee value chain works, as it is the largest coffee-producing province in the country (Directorate General of Estate Crops, 2021). To this end, we conducted a study in Tebat Benawa customary community or locally known as ‘masyarakat adat’ in Pagar Alam district, South Sumatra Province. ‘Adat’ or custom refers to the ‘locally rooted systems of social organisation’ that are developed over time to respond to the local conditions (Bettinger et al., 2014, p. 200). In this paper, we define ‘masyarakat adat’ or customary community as a community that has and adheres to the customs that are often reflected in customary rule or law applied locally in that specific community. Drawing from this definition, we argue that the existence of customary community partly explains the interaction between farmers and traders in the village, particularly on farmers’ decision to sell their coffee harvest to a particular trader.

We aim to provide a deeper insight into how customary community setting as a social capital influences the interaction between farmers and traders. We start by defining two relevant research questions: (1) who are the most influential actors in contemporary Tebat Benawa's coffee value chain?; (2) what are the influence of customary settings in Tebat Benawa on the relationships between actors in the coffee value chain? Using social network analysis, we argue that village-level traders still play a significant role in Tebat Benawa coffee value chain and customary community as a social capital has a certain degree of influence towards farmer-trader relations.

Data and methods

Site selection

We used a case study approach in this research where we looked at Tebat Benawa Customary Community, Pagar Alam District, South Sumatra Province, Indonesia. Our site selection was based on two reasons. First, South Sumatra is the largest coffee-producing province in Indonesia, with an annual production of 184 thousand tons of coffee or 25% of Indonesia's total coffee production in 2019. Along with the provinces of Lampung and Bengkulu, South Sumatra has become an integral part of the coffee triangle in Sumatra Island (Bennett & Godoy, 1992), which produced 49% of Indonesia's coffee (Directorate General of Estate Crops, 2021).

Second, the existence of a customary community whose livelihood depends on coffee production becomes an interesting meeting plot whereby social settings which are supposedly strengthened by customary rules interfere with the traditional coffee value chain (see Fafchamps & Minten, 2001). Such an intersection between social settings and non-relationship, Robusta coffee value chain, which dominates smallholder coffee farming sector, has yet to gain appropriate attention in the literature (Lowitt et al., 2015). It thus necessitates a more empirical approach in unraveling the agricultural value chain, making Tebat Benawa a good fit for the purpose of this study.

Study area

For most people living in Tebat Benawa, the first customary community in South Sumatra who just secured their land rights over a customary forest from the government in 2018 (Wijaya, 2019), the coffee plantation has been their primary source of livelihood. As of 2018, Tebat Benawa customary community consisted of approximately 350 households who lived in Penjalang village, particularly in the sub-villages of Tebat Benawa (250 households) and Rempasai (100 households) (Figure 1).

Figure 1. Research location in Pagar Alam District, South Sumatra. Source: Global Administrative Areas database (GADM), version 3.6.

As a traditional agrarian community, most households in Tebat Benawa relied on rice cultivation for food and livelihood. Yet, coffee has gradually replaced most rice fields since the 1970s due to the spike in coffee prices and the depleting water supply required for rice fields (Martin & Winarno, 2015). As was common among customary communities across South Sumatra, farmers in Tebat Benawa cultivated coffee inside of the customary forest area with a swidden method (Brechin et al., 1994; Heydir et al., 1990). The trend had shifted to planting in private lands by converting the vast majority of rice fields into the coffee plantation. Since the Customary Forest license was issued to Tebat Benawa forest in 2018, the farmers started to leave the plantation inside the forest. Forest conversion for coffee plantations has since been forbidden.

Regardless of where the coffee tree is planted, Robusta coffee from South Sumatra has been widely known to supply much of domestic and global demand (Bray, 2019). To get a steady supply, traders play a critical role in collecting coffee beans from the farmers and selling them in bulk to bigger buyers and factories. In November 2019, Pagar Alam's Robusta coffee received geographical indication, making Tebat Benawa coffee eligible to benefit from it. However, the available literature is quite limited when it comes specifically to the South Sumatra coffee value chain.

One of the first accounts on the agricultural value chain in Southern Sumatra was written by Gwyer and Avontroodt (1974), who found that farmers typically had access to two types of buyers, i.e. broker and agent. The former is the same as what we term here as ‘First and Second Trader,’ while the latter is a representative from a factory that purchases coffee directly from the farmers. Through these two channels, coffee beans were then sold to the factories that would process and export them. However, Mcstocker (1987) argued that the role of broker or trader was diminishing as transportation facilities had improved, which enabled factories to source coffee directly from farmers. A later study by Bennett and Godoy (1992) in Lahat District,² South Sumatra, confirmed the critical role of traders in the coffee value chain. We will consistently use ‘first, second, and third traders’ terms throughout the paper to refer to the multiple layers of farmer-trader relations in the coffee value chain.

Data gathering

We employed multiple data gathering methods in this study to obtain both primary and secondary data. Desk study, which includes literature review, statistical data collection, and actor mapping, forms the secondary data gathering methods we employed. We conducted scoping interviews between January-February 2019 in Jakarta and South Sumatra, where we reached out to all actors involved in the coffee value chain, ranging from farmers to roasteries. Yet, we could not gather primary data from some actors, including the third traders and some off-takers or buyers. To deal with this limitation and improve our internal validity, we interviewed actors who directly work with big off-takers, such as certification companies and coffee associations, to gauge the perspectives of big off-takers.

Further, we collected primary data through three rounds of fieldwork in South Sumatra in February, May, and October 2019. We employed semi-structured interviews, focused group discussions (FGDs), and direct observation methods. We conducted all the fieldworks before the geographical indication of Pagar Alam's Robusta coffee was issued in November 2019. In total, we collected primary data from 46 informants comprising of 17 women farmers and 13 men farmers, five traders, three government agencies, two certification organizations, four NGOs, and two coffee shops and roasters. The interviews and FGDs involved a wide range of stakeholders from the national to village levels, including government, private sectors, coffee associations, certification bodies, NGOs, and coffee farmers. The interview was delivered in a semi-structured fashion, in which the informants were asked a list of pre-defined questions related to their role in the coffee value chain and the nature of engagement with other actors in the coffee value chain. We used these interview results to map out the actors outside South Sumatra who were involved in coffee value chains, including off-takers and buyers, and whether they have an established network with actors in Pagar Alam or South Sumatra in general.

The first and second authors complemented the interviews with the data gathered through four focus group discussions (FGDs) with the communities in Tebat Benawa. During our scoping study in February 2019, we observed that women in Tebat Benawa tended to be reluctant to speak up when men were present. This observation prompted the authors to conduct gender disaggregated FGD and interview sessions to ensure safe environments for the respondents to freely speak up.

We carried out two separate FGDs for each gender, inviting 10 participants from each gender, so in total, there were 20 participants. These FGD participants were selected by the Tebat Benawa Community's management team based on the criteria we have set, including (1) a member of the customary community, (2) managing or owning a coffee plantation, and (3) understanding of coffee production and marketing in their household. The FGD aimed to map a network of actors involved in the coffee value chain at Tebat Benawa Community and Pagar Alam District levels. Before each FGD session, we asked for verbal consent for note- and photo-taking while informing them that the data would be solely used for this research.

Upon completing the FGDs in May 2019, the second author conducted a follow-up fieldwork and interviewed twelve additional farmers who were not closely related to the elites in the customary community by using a mixed random-snowball sampling method. We randomly selected the first three respondents in three sub-village clusters or locally known as ‘Rukun Tetangga’ (RT), by visiting them at home or in the plantations. The next respondent was selected using the same method and/or snowballing. These data-gathering processes were the only viable option given the lack of accessible consolidated data on Tebat Benawa Customary Community at the time of the fieldwork.

All fieldwork complied with the World Resources Institute (WRI) Indonesia’s ethical standard and was approved by the Science and Research Division. We treated the data anonymously using identifier codes, making it unlikely to identify individuals involved in our research. A verbal consent was obtained from each respondent prior to the data gathering for both semi-structured interviews and FGDs by explaining the purpose of the research and how we would use the data. The authors anonymized the respondents upon analysis to protect their personal data.

Conceptual frameworks

Social capital and value chain analysis

Building on Scoones (1998, 2015) works related to a sustainable livelihood, individual ability to pursue different livelihood strategies is dependent on the basic tangible and intangible assets or capitals that people have in their possession. As an intangible capital, social capital plays an essential role in achieving sustainable livelihoods, particularly in rural communities (Scoones, 1998, 2015). This social capital may include networks and cultural identity that enable individuals to gain access to information and market (Ahmed et al., 2009; Rivera et al., 2019). In the context of Tebat Benawa, we argue that customary rules become the social capital that shapes farmer-trader relations.

To understand the interplay between social capital and coffee value chain, we adopted a framework developed by Jordaan et al. (2014) that categorized value chain actors into three, namely players, supporters, and influencers. Value chain players include those involved in the product transformation, typically between farmers and buyers (Jordaan et al., 2014). Value chain supporters are all other actors that support the players, such as through capacity building and market information. Lastly, value chain influencers, which build on Roduner’s (2007) work, are rules and regulations that organize the interaction between players and supporters, such as social and institutional environments.

Based on this framework, we categorized all actors involved in the coffee value chain in Tebat Benawa (Figure 2). In this case, the influence of customary setting could occur in both value chain players and supporters, whereby the customary forest's institutional environment supposedly strengthens the social embeddedness. For value chain players (e.g. farmers, traders, buyers), social embeddedness and institutional environment of customary community strengthen the social capital that can influence farmer-trader relations. This is further reinforced by the existence of value chain supporters, such as NGOs and extension workers, who have the capacity to mobilize resources to enhance the social capital through customary community.

Figure 2. Value chain analytical framework. Source: Adapted from Jordaan et al. (2014).

We applied this framework to understand how such an influence occurs and used a matrix to unbox customary settings’ influence over farmer-trader relations as indicated by clan-based familial relationships between them. In doing so, we started from understanding the value chain influencers, particularly on the clan-based system that define the familial relationships within Tebat Benawa Community. Our focus is on the value chain players as we would like to unpack farmer-trader relations in Tebat Benawa Community through its clan-based system. The information was complemented by identifying and interviewing value chain supporters.

Social network analysis

We employed social network analysis (SNA) to empirically assess social capital's role in the agricultural value chain. SNA emerged from classical sociological literature as early as the 1930s, and it has since evolved as a prominent tool to understand social mobility, kinship, and class structure, among others (Scott, 1988). It is a mathematical model to explain the exchanges of information and resources among and between individuals. It unpacks the patterns of information exchange, with actors as nodes in the network and information exchange relationships as connectors between nodes.

Social networks are often referred to as a form of social capital (Putnam, 1995), including trust, ability to work together, access to opportunities, reciprocity, informal safety nets, and membership in organizations (Adato & Meinzen-Dick, 2002). Access to social networks influences how small-scale, resource-poor farmers could access and use the information on market access and even farming technology adoption (Abdul-Rahaman & Abdulai, 2020; Lamb et al., 2016; Zhang et al., 2020). Access to social networks can also define, limit, or enhance one's opportunities for social learning through membership or participation, thereby affecting access to knowledge (Spielman et al., 2011). Access to social networks is often differentiated among small-scale farmers as it often intercepts with gender, social, and economic status, among others.

Upon data collection through FGD and interviews with key actors involved in the coffee value chains, we performed SNA to (1) depict the structure, the position, the information flow, and the relationship between these actors, and (2) provide information on their roles and influence (Wasserman & Faust, 1994). SNA is often used to connect the nodes at the micro and macro levels with strong and weak ties within the community or society being investigated (Granovetter, 1983). SNA is a reliable technique to show the strength of dyadic ties by mapping the relationship of individuals and measuring how such a relationship operates among individuals and groups. Essentially, it unpacks the patterns of information exchange, with actors as nodes in the network and information exchange relationships as connectors between nodes.

To this end, egocentric or centrality analyses could help gauge the extent to which inter-actor relationships operate (Scott, 2000). We employed four types of centrality analyses in SNA to identify the actors that play a role in Tebat Benawa's coffee value chain and see the extent of the customary setting's influence on it (Table 1).

Table 1. Centrality analyses used in this study.

Centrality analysis	Details
Degree of centrality	The number of connections a node has, indicating a potential power or influence.
Closeness centrality	The distance of a node with all other nodes in the network, identifying the most visible nodes that could spread information quicker.
Betweenness centrality	The shortest paths that a node has which identifies nodes with better control over information and thus could bridge the information within the network.
Eigenvector	Identifies the nodes that are connected to other well-connected nodes in the network, allowing to identify the leaders of a network.

Source: Das et al. (2018); Freeman (1978, 2014).

In understanding the social network, actor identification is vital. An actor could be a group of people or an individual who can affect or be affected by an organization's mission (Lépineux, 2005). Both groups and individuals have two basic typologies; (1) those with moral interests (sociocentric perspective), and (2) those with economic interests (egocentric perspective) (Lépineux, 2005; Wasserman & Faust, 1994). While moral interests allow other stakeholders to join a particular community or society, economic interests are not always inclusive due to utility maximation issues (Lépineux, 2005).

For example, coffee off-taker contributes to economic growth by providing jobs, access to the big market, and other opportunities. Yet, it also creates social inequalities when access to information, for instance, is not evenly distributed. At the farmer-trader level, we argue that coffee traders in the village would also use moral claim on top of business reasons, such as considering the background of the farmer to determine the price rather than just by simply judging the beans’ quality (Karau & Hart, 1998; Lawler & Yoon, 1993; Lépineux, 2005; Schaefer, 2009).

Triangulation

We employed triangulation techniques to improve reliability and validity of our analysis by combining multiple approaches to answer the research questions (Busetto et al., 2020; Heale & Forbes, 2013). In this paper, we used methodological, data source, theory, and investigator triangulations that are commonly used in qualitative research (Carter et al., 2014). For methodological triangulation, we employed several data gathering methods to collect primary and secondary data, including literature review, semi-structured interviews, and focused group discussions.

Data triangulation refers to the utilization of several sources to obtain information and data (Carter et al., 2014), specifically on coffee value chain and farmer-trader relations. We did so by engaging various actors along the coffee value chains, including farmers, traders, roasteries, government officials, and sustainability certification organizations, among others. The data was then analysed using the combination of conceptual frameworks, i.e. social capital, value chain analysis, and social network analysis, to understand how customary setting as a social capital might influence farmer-trader relations. Finally, the entire research process was done by four researchers with various expertise who co-designed the research, analysed the data, and wrote the manuscript. The authors met regularly during the analysis period to compare notes, co-develop the SNA figures, and sharpen the arguments made in the paper.

Results

Tebat Benawa customary community's social structure

Many indigenous and customary communities in Indonesia lost their access to their lands due to forest demarcation. Although there have been several community-based forest management schemes implemented since the 1970s (Fauzi et al., 2019), it was not until 1998 that the social movement to recognize customary lands started to emerge (Afiff & Rachman, 2019). The movement finally came to fruition when the Constitutional Court favoured the demand to recognize the rights of indigenous communities to their lands. In 2016, the government enacted social forestry regulation which formalized the licensing procedure and strengthened the position of customary communities to regain their land rights (Rakatama & Pandit, 2020). For a customary forest license to be given, the respective community must obtain a government recognition as a customary community or ‘Masyarakat Hukum Adat’.

Tebat Benawa community was the first in South Sumatra province to receive customary community recognition which carries rights to their lands. Tebat Benawa customary community is built upon Besemah Tengah Padang culture, which has long existed in South Sumatra (Jumhari & Hariadi, 2014). The community has established a good relationship with what is now known as Tebat Benawa customary forest. The customary forest area is protected to maintain water supply, in which the area was divided into five ‘pematang’ or hill, namely Bukit Suban, Tanjung Alam, Belukar Beruhim, Belukar Samak Pure, and Belukar Geraham. Just adjacent to this customary forest, Tebat Benawa customary community flourished.

Besemah culture originated from six big traditional communities or clans based on a genealogical bond called Sumbai as depicted in Figure 3 (Jumhari & Hariadi, 2014; Sakai, 2017; Sukarti, 2013). The Sumbai adopts a patrilineal system in which the oldest man in the family or ‘Juray Tuwe’ in Basemah language becomes the one passing down Besemah tradition (Jumhari & Hariadi, 2014; Sukarti, 2017). As a clan-based community, Tebat Benawa was initially established by four sub-clans or ‘Puyang’, namely Puyang Siak, Puyang Sanggahan, Puyang Nik Malim, and Puyang Kedung Samat. To date, this community has been led by the four Juray Tuwe or descendants of those sub-clans (Figure 3). These Juray Tuwe and their families are usually more powerful than other descendants in the Tebat Benawa community. We argue that this clan system fostered the social relations among the Tebat Benawa community, including the interactions between actors in the coffee value chain.

Figure 3. Social structure of Tebat Benawa and its pedigree in Besemah. Source: A series of fieldworks conducted by the authors in February, May and October 2019.

Coffee value chain in Tebat Benawa customary community

Most people in Tebat Benawa have been growing coffee outside the forest, with an average land size of 0.7–1.2 ha/family and a production capacity of 265.76 kg/ha.³ Most of the coffee trees owned by Tebat Benawa farmers are Robusta type, and they were planted in the mid-1980s after converting most of their rice fields due to water supply depletion. With the strengthening of forest protection rule among the Tebat Benawa Customary Community, farmers have since left their coffee plantations inside the forest and focused on their out-of-forest plantations.

Farmers harvest their coffee plantations only once a year, mainly between April and September, with July-August being the peak harvest period. During which, coffee beans’ price will fluctuate depending on the (assumed) production. That is, the price will be relatively high during the early and end of harvest period due to limited coffee supply, but it drops as the supply increases during the peak months. Even though the price during peak periods tends to be low, most farmers will still sell their harvest after three to seven days of drying because of the lack of storage and pressing household needs.

Generally, post-harvest processing of coffee in Tebat Benawa is simple and aimed at producing green beans (Figure 4). Coffee cherry-picking methods vary among Tebat Benawa farmers, whereby some apply selective harvest to only pick ripe cherries, while the rest harvest all the cherries regardless of the ripeness. Some farmers then sun-dry the cherries for a few days, and some others opt to crack the cherry first to boost the drying process from seven days to only three days. To some extent, the choice of drying techniques depends on the economic needs of each farmer. In other words, those who need quick money will tend to crack the cherry than those who do not. Mcstocker (1987) found that mixed or ‘strip’ harvest was common among Sumatra's farmers as sometimes farmers needed to pay the debt to the traders in which their coffee production became collateral. Although the quality of beans resulted from cherry cracking is generally lower, the first trader will give a single price for both low- and high-quality beans depending on the moisture level of the beans regardless of the post-harvest treatments.

Figure 4. Coffee’s post-harvest processes in Tebat Benawa. Source: Interviews and FGDs conducted in May and October 2019.

Like any other agricultural market in Indonesia, traders became the major actor connecting farmers with buyers. Bennett and Godoy (1992) mapped each stage of the value chain in Lahat District in which Pagar Alam District was part of until their separation in 2001. During this period, Palembang had various brokers who would connect the coffee to the exporters. However, this study had not showcased other types of actors involved in the coffee value chain, such as coffee shops and local roastery, who are involved in the value chain.

Social network analysis of coffee value chain in Tebat Benawa

Our assessment in Tebat Benawa indicated a relatively similar market pathway documented by Bennett and Godoy (1992). We categorized the actors involved into five groups: coffee farmers, first trader, second trader, third trader, and off-taker; and two types of connections, namely business and family relationships. There are three layers of traders in Tebat Benawa before the coffee reaches the off-takers, such as roastery and exporters (Figure 5).

Figure 5. Degree of centrality of coffee value chain actors in Tebat Benawa. Source: FGDs and Interviews conducted in May and October 2019, processed with Kumu. The size of the nodes indicates the degree of centrality, i.e. the number of connections that a node has.

The first traders (FT) usually live in the village where they will sell the coffee to the second traders in the same village and/or third traders in the Pagar Alam market. However, the third-level traders only purchase in a bulk of at least 500 kg from first and/or second traders. When the first traders could not meet the minimum quota, it is not uncommon for them to sell whatever they get to the second traders⁴ (ST) who have larger buying capacity across different villages and own a means for transporting the coffee beans, but with a lesser margin. It is the third traders (TT) who have access to off-takers (OT) or big buyers located mainly in Lampung and Bengkulu provinces, the two most significant trading points of Sumatra's coffee.

To further understand the nature of relationships among actors in the value chain, we identified the most influential actors based on four centrality indicators: degree, closeness, betweenness, and eigenvector (Table 2). Considering the degree of centrality, First Traders 1 and 5 appear to be the most connected actors in Tebat Benawa, with total scores of 37 and 23, respectively. They have strong connections with the farmers in the village and bigger traders. Besides, Third Trader 2 appears to have a high degree of centrality with a score of 22, as they are accessible by the farmers.

Table 2. First quintile of actors with highest centrality scores (n = 60).

Rank	Degree	Closeness	Betweenness	Eigenvector
1	FT1 (37)	FT1 (0.785)	FT1 (0.461)	FT1 (0.069)
2	FT5 (23)	TT2 (0.675)	TT2 (0.201)	TT2 (0.047)
3	TT2 (22)	FT5 (0.621)	FT5 (0.177)	FT5 (0.043)
4	FT3 (17)	FT3 (0.588)	TT5 (0.077)	FT3 (0.039)
5	FT6 (10)	ST7 (0.542)	FT3 (0.076)	ST7 (0.028)
6	TT5 (9)	ST3 (0.542)	OT4 (0.042)	ST3 (0.028)
7	FT2 (8)	ST6 (0.542)	TT6 (0.026)	ST6 (0.028)
8	TT7 (8)	ST5 (0.542)	FT2 (0.024)	ST5 (0.028)
9	OT4 (8)	ST4 (0.542)	F2 (0.02)	ST4 (0.028)
10	EU (7)	TT6 (0.531)	OT3 (0.018)	FT6 (0.025)
11	ST7 (7)	F9 (0.525)	ST7 (0.017)	FT4 (0.024)
12	ST3 (7)	TT5 (0.525)	ST3 (0.017)	FT2 (0.023)
13	ST6 (7)	F2 (0.52)	ST6 (0.017)	F15 (0.023)
14	ST5 (7)	F15 (0.516)	ST5 (0.017)	TT7 (0.022)
15	FT4 (7)	OT4 (0.514)	ST4 (0.017)	TT6 (0.021)
Mean	5.167	0.481	0.023	0.017
Std. Dev.	6.085	0.070	0.068	0.011

Note: F: Farmer; FT: First Trader; ST: Second Trader; TT: Third Trader; OT: Off Taker, EU: End Users/Exporters. Scores are in parentheses, please see the supplementary material for the detailed scores for all actors.

Source: Interviews and FGDs held in May and October 2019, processed with Kumu.

Despite being the key player in the coffee value chain, farmers are generally left out of the picture, which indicates their lack of power in the network. They do not have many connections with bigger market players, affecting information flow. Therefore, the traders are the strongest market players by means of information that they withhold from other bigger players. More specifically, First Traders hold and channel the information to the farmers. As observed, FT1 appears to be the leader or the leading actor of the coffee network at Tebat Benawa based on the eigenvector rank. FT1 is deemed to have a strong network, influence, and ties that could influence the sales decision of the farmers (Magala et al., 2019; Maldifassi & Stambuk, 2018).

Further, there are two major observations from this social network analysis. First, although there appear to be quite extensive actors involved in the coffee value chain in Tebat Benawa, farmers do not realize that such a network exists. This can be observed from the nature of the network, which centres around a few first-stage traders, i.e. FT1, FT5, and FT3, indicating that most of the farmers only sell to small-scale traders located in the village. Second, this situation results in the lack of market access beyond small-scale traders, although some farmers do have trading relations with bigger, third-level traders but not with the second stage of traders. We then performed a deeper analysis of the social relations underlying farmer-trader relations.

Social relations and coffee value chain in Tebat Benawa

Although there are at least 20 identified traders, farmers could only access a few, particularly the first-stage traders. Such strong ties between farmers and traders raised another interesting question as to how such relationships exist and whether customary or social setting in general influences their interaction. To do so, we break down the relationship of each farmer and trader to understand whether they have any familial relationship or kinship based on the customary arrangement in Tebat Benawa.

We developed a sociometric showing the business and kinship of the farmers and traders. We defined a business relationship as a trading arrangement between a farmer and a trader whereby we asked each farmer respondent about their trading partners. On the other hand, kinship was established mainly by clans or marriage, although the latter has become more common and stronger than the former. The nature of both business and kinship between farmers and traders constitutes a two-mode network in which the relationships occur both ways rather than one-way. By combining the data on kin and business relationships, it appears that kinship translates into business relationships, but it is not widely observed across all respondents (Figure 6).

Figure 6. Kin – business relations between farmers and traders. Source: Interview and FGDs conducted in May and October 2019.

There are at least five observations in which coffee business or trading relationships coincided with familial relationships between farmers and traders. These relationships occurred mainly with the First Trader 1, who lives in the village and holds a position of power as an elite in the customary community. Both First Traders 1 and 5 have relatively more capital and accept fewer coffee beans from farmers. These traders also provide the farmers in need with loans during the lean season, allowing them to establish an informal ‘contract’ with the farmers. Consequently, farmers will be more inclined to sell their harvested coffee beans to these traders to pay off the loan partially, a common practice in Indonesia's agricultural sector called ‘ijon’ (Liddle, 1987; Zainuri & Yamaura, 2021).

Another point that arises from this analysis is the lack of market access for farmers, as most of them only have access to the first traders. In contrast, none has a trading relationship with the second traders. Proximity, convenience, and social relationships with the first traders are among other reasons why farmers mainly sell their produce to them. Apparently, not all first-stage traders sell their accumulated coffee beans to the second stage of traders as they have the levers to leapfrog to the third stage of buyers, thus cutting the chain short with potentially higher margins.

On the contrary, the third traders, who are mainly based in Dempo Market in downtown Pagar Alam roughly 18 km away from Tebat Benawa and have direct access to larger buyers outside the city, have the leverage to purchase coffees in larger volumes and manage the prices. The relationships between third traders and off-takers are rather one-way as it is mostly the third traders who will reach out and proactively sell to the off-takers. Interestingly, 13 out of 30 farmers we interviewed appear to have access to the third traders despite having no familial relationships. The nature of this pure business relationship allows the farmers to bargain with the third traders to get a favourable price than the first traders. Based on farmers’ calculations, they will decide whom they will sell their harvest to. Additionally, farmers do not have the luxury to leapfrog to big buyers or off-takers. This is because the buyers and off-takers usually require a large volume with a certain quality standard that individual farmers cannot meet.

Discussions

Based on our SNA results as depicted in the centrality and sociometry, it appeared that customary setting as a social capital, albeit not as strong, did have a certain degree of influence on farmer-trader relations. To explain this finding, we offer four explanations on social capital, power imbalance, farmers’ rationale, and organizational arrangements.

Customary rules as social capital

We found that the customary setting in Tebat Benawa as a social capital did not overwhelmingly influence the interaction between farmers and traders as economic rationale played a bigger role in farmers’ trading decisions. We argue that the nuance of customary community in Tebat Benawa does not translate into the communal organization of farmers to promote market access and pre- and post-harvest activities. This is partly because the customary rules in Tebat Benawa were just re-collected and institutionalized in 2018 to allow them to apply for a customary forest permit to the Ministry of Environment and Forestry. Yet, it was a top-down approach from the NGOs and government stakeholders rather than bottom-up from the customary community themselves, in which social development scholars have noted it as a tendency in development sector (Midgley, 2014; Shortall, 2004).

Prior to this period, customary community barely existed except for the clan system and the customary area known as ‘hutan larangan’ or prohibited forest, which has now been legalized under social forestry's customary forest scheme. The agricultural practice of coffee cultivation among the Tebat Benawa customary community remains the same after the enactment of the customary forest. However, upon this recognition, farmers who used to cultivate their coffee plantations inside the customary forest must abandon these plantations and focus on what they have on their private lands. If anything, the customary setting in Tebat Benawa benefitted the elites the most to reassert their role in the coffee value chain, such as by being a trader. Hence, it will take some time for the customary rules to become a social capital for Tebat Benawa farmers beyond the clan-based kinship, which might be worth investing (Rivera et al., 2019).

Farmers’ economic rationale

We argue that economic interests play a big role in explaining the relationships between actors in the coffee value chain in Tebat Benawa, in which relatively flexible business transactions characterize farmer-trader relations. The first traders did not impose any minimum quota of the coffee beans regardless of the post-harvest processing techniques the farmers performed. This was because traders would collect different kinds of beans from farmers and mix the Robusta and Arabica types with the same price level.⁵ The only difference is that these traders, who were generally smaller in scale, only imposed a lower price if the bean's moisture level did not meet the requirement. It is, however, interesting to note that these smaller traders (first and second traders) did not use proper tools to measure beans’ moisture level. Instead, they used their instinct by rubbing on the beans. Only at the bigger traders (third trades) would these beans’ moisture level be measured using proper tools.

With the subjective moisture level assessment, it is unsurprising that the farmgate price for coffee beans in Tebat Benawa was low as traders bear the risks associated with mixed beans they purchase from the farmers. However, the risks (and economic rents) of mixing different qualities of coffee beans from farmers is mainly borne by bigger traders (third trader and above) as they will perform other value-adding activities before the beans are sold to the buyers and eventually to the customers. As a result of this lack of incentive for the farmers to improve the coffee beans’ quality, only traders with direct access to the big buyers outside of Pagar Alam district and the capacity of adding more value to the coffee beans have better control over price and margins (see Mcstocker, 1987).

As traders made trading arrangements more flexible and less troublesome for farmers, they attracted financially unstable farmers to sell their produce to them. Given that Tebat Benawa farmers mainly rely on the coffee plantations for livelihood, the harvest season, which falls between April to September each year, becomes the time when they could earn the majority of their annual income. With more flexibility allowed by the first traders, farmers could gain access to quick cash. Especially during this period, too, farmers will need extra money for major household expenses, such as paying school fees. It is a general practice that traders provide the farmers with credit access during the lean season, whereby their upcoming harvest becomes a kind of collateral (Zainuri & Yamaura, 2021). Besides, there is no perceived benefit for them to apply good agricultural practices, including selective harvesting, proper drying, and milling. Given that this business arrangement becomes more practical, it might have undermined the social capital as reflected by the customary kinship.

Power imbalance between value chain actors

From the SNA results and interviews with the traders on price setting mechanisms and market information, there seems to be a degree of the power imbalance between big and small traders. Such an imbalance occurs because of a clear hierarchy in the value chain in which those having closer access to end-users possess a higher degree of ‘power’ than those who do not. Off-takers indeed play a central role in ensuring that coffee value chains operate because they could directly access the end-users or at least the manufacturing companies who need raw materials in large quantities. It is, therefore, interesting to understand that it is not only farmers who appear to be less potent in the coffee value chain but also smaller traders who apparently do not have so much degree of power in the coffee value chains.

The relationships between actors in the coffee value chain in Tebat Benawa mostly correspond to what Lépineux, 2005; Wasserman and Faust (1994) define as economic interests while moral interests only appeared in some of the farmer-trader relations. A clear hierarchy in the coffee value chain structure has made off-takers the strongest actor as they become the ones setting the price to all the traders. Since the nature of trader and off-taker relations is a one-way mode, the amount of information exchange is lesser, mainly because these off-takers have access to many traders across the region. On the other hand, farmers and traders maintain a stronger relationship as the exchange between them often involves daily social interactions (particularly with first traders), loans, and familial relationships. As a result, the farmer-trader relationship is more cohesive than trader – off-taker relationship as the former has a higher degree of exchange than the latter due to proximity and, to some extent, familial relationship.

The off-takers or buyers will purchase coffee beans in bulk from the third-level traders. Although some off-takers, such as roasteries and relationship coffee traders, buy the coffee directly from the farmers, none has penetrated Tebat Benawa. With Robusta being used as a blend for many coffee shops and the raw material for instant coffee industries (Bray, 2019), coffee from Tebat Benawa does not have any niche markets to target, which explains why they are not connected directly to the off-takers or big buyers. Bray (2019) also found that sustainability standard such as UTZ/Rainforest Alliance could not sustain their programme in the region because of the lack of market demand for low quality coffee from Southern Sumatra, including the Robusta type which is grown by farmers in Tebat Benawa.

Farmers’ organizational arrangement

We found that the absence of active farmers’ groups or cooperatives which could facilitate collective marketing has made market options for farmers more limited. Neilson (2008) argued that farmer groups (and village cooperatives) could not act as an essential economic unit as they were often politicized, especially during the New Order era between the 1960s and the 1990s. In fact, there are some farmer groups and cooperatives in Tebat Benawa, albeit not under customary organization. Still, they were not organized in such a way that could facilitate alternative market access for farmers. Instead, these farmers’ groups mainly focus on conducting pre-marketing activities, such as collective weeding, fertilizing, and harvesting. In arranging these activities, each member will take turns to get help from other members with minimal to zero compensation given in return.

Although some farmers’ groups support productive activities, not all farmers join such groups, and not all groups have such regular activities. Other than farm-related activities, post-harvest processing is mainly done by the individual farmer and involves the core family members, i.e. spouse and children. As coffee cherries need to be pulped and followed by hulling to remove the white parchment after drying, farmers will take their harvest to small mills that are also members of the Tebat Benawa Customary Community. For every 100 kg of coffee being processed, farmers will give the machine owners three kg of their coffee beans in exchange for the service provided. The lack of organizational arrangements for collective market access and post-harvest exacerbates the farmers’ already unequal flow of information.

In addition, given that the establishment of the Tebat Benawa as a customary community came with customary forest legalization, its governance is monitored by the forest management unit. Yet, the coffee trees planted in Tebat Benawa were mainly outside the forest, which was not under their purview. As a result, there have not been any extension workers from the forest management unit or other value chain players to assist the farmers. The NGOs helping the Tebat Benawa customary community mainly focused on the customary forest arrangement. However, they had some degree of flexibility in providing assistance beyond customary forest areas, including to enhance the community's livelihood through coffee production. Such a lack of technical assistance faced by the farmers is common in the agricultural landscape in Indonesia (Chandra et al., 2022; Fauzi et al., 2019).

Conclusions

This paper started with two research questions that aimed to identify the most influential actors in contemporary Tebat Benawa coffee value chain and the influence of customary community setting on the relationships between actors. Our analyses revealed that based on SNA, the first-stage traders became the most influential actors in Tebat Benawa coffee value chain as they have the access to most actors in the value chain, especially farmer, larger traders and buyers. When it comes to customary setting in Tebat Benawa that is reflected in the clan-based kinship, it appears that their existence has limited influence on farmer-trader interactions. Such a limited societal influence on farmer–trader interaction reflects that economic interests become the underlying motivation for actors to interact with each other, subsiding the moral interest that could play a significant role in the customary community setting.

The value chain structure and strong economic interest among actors result in a power imbalance between coffee value chain actors, with farmers being the weakest power because they are very distant to the end-users and off-takers. The first-stage traders mainly determine the farmgate price after factoring in some margins from the price given by the third traders. Given that the chain of information flows in one direction, i.e. from off-takers down to farmers through traders, the farther the distance an actor has with the end-users or off takers, the weaker the power to influence the price. The lack of active farmers’ associations in Tebat Benawa that could facilitate organized trading to better position the farmers when facing the buyers has further lowered cohesiveness and moral interest among the farmers.

Therefore, increasing the network cohesiveness becomes crucial, especially among the farmers who appear to be the weakest actor in this value chain. One of the ways is to strengthen farmers’ associations in Tebat Benawa to develop activities that could improve the quality of their coffee production and source for alternative markets. Besides, the improvement of information flow on market access and price would certainly enable farmers to make a better business decision. Currently, farmers’ only market information channel is from traders, be it the first-stage or third-stage traders. In doing so, farmers’ associations, government institutions, or even NGOs could provide a middle ground for all actors to exercise information sharing and develop new market opportunities where traders could actively engage in the process (Thiele et al., 2011; Yadav et al., 2021).

Furthermore, the fact that Pagar Alam's Robusta coffee has received geographical indication should be leveraged for building relationship coffee value chains with off-takers. This could allow Tebat Benawa farmers to better position and participate in the global value chains. Jamaica appears to serve as a good example on how their coffee’s geographical indication is used as a marketing tool that boosted their coffee price (Teuber, 2010). Presently, geographical indication of Indonesian coffees has yet to yield substantial economic benefits (Neilson et al., 2018) which necessitates better marketing strategies as what was done in Jamaica.

Finally, we cautioned against extrapolating the results of this study to different locations or contexts, given that it is very context-specific, i.e. Tebat Benawa customary community located in South Sumatra Province of Indonesia. There are many types of customary communities in various stages of economic development and moral-cultural protection, and this study serves the purpose of one example. Despite the context-specific nature of this study, it enriches the literature on non-relationship coffee value chain and other common agricultural sectors without access to premium market and capacity building. Moreover, the methods used in this study could be replicated in different contexts, especially the use of SNA and sociometric as the main analytical tools to unravel the intersection between socio-cultural settings and agricultural value chains in other geographies. In addition, further ethnographic research could give an even deeper understanding on how social capital influences farmer-trader relations in the context of customary community.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The data gathering and initial analysis of this work were funded by the Norway’s International Climate and Forest Initiative (NICFI) for the World Resources Institute.

Notes

1 Relationship coffee or third wave coffee is characterized by the direct trading relationship with the farmers who grow specialty coffee. Meanwhile, the first wave coffee is characterized by the earliest, basic form of coffee trade and the second wave emerged when chain coffeeshops started developing. Both have yet to explore the unique taste of coffee beans resulting from different roasting and brewing methods that specialty or relationship coffee offers.

2 Pagar Alam District where Tebat Benawa Customary Community lives was part of Lahat District before it split up and became an independent district in 2001.

3 The estimate was obtained from a survey data of Tebat Benawa customary community conducted by WRI Indonesia’s South Sumatra regional office in 2019. We have obtained the permission to use the figure for the purpose of this article.

4 Second traders are travelling salespersons who are not originally from the village.

5 Most of the farmers in Tebat Benawa grew Robusta coffee while only a small fraction who grew Arabica due to the absence of specific market access and price difference, in addition to easier maintenance. In the coffee market, the price of Arabica beans can be two to three times higher than Robusta.