Background

The agricultural sector is a key sector of the Indonesian economy, accounting for 17% of the GDP and 40% of the employment. Rice is produced on 13,4 million ha (BPS 2013), about 30%  of the total agricultural land. About 77% of all farmers (27 million) are producing rice.

The target group of the G4INDO project are smallholder rice farmers. Typically they have small farms, consisting of several separated fields. The average farmer has approximately half a ha of rice fields. The rice fields of the target group are irrigated. The farmer/owner and his family work on the household’s rice fields, often with help of agricultural labourers. Small landowners sell their own labour to other farmers to substitute their income. Moreover, rice farmers obtain part of the family’s income from off-farm activities. Land ownership is skewed. Many rice fields are cultivated on a share crop basis.

Indonesia follows a policy to be self-sufficient with regard to rice. The present government has made self-sufficiency in rice (and a few other crops) a policy priority. The challenge is to produce extra at least the 1.1 million tons that is imported in a normal year, plus enough to compensate for increasing consumption per capita of the increasingly more prosperous population. The extra production will have to be realised on existing fields, as the total area under rice will probably not expand.

G4INDO targets rice farmers in three adjacent rice-growing districts in East Java. East Java is one of the main rice production areas of the country, producing roughly one-third of the national production of 65 million tons of unmilled rice.

Figure 1: map showing the G4INDO area in East Java (yellow circle).

Many rice farmers structurally face difficulties to make both ends meet and have very few, if any, financial reserves. As a consequence they also experience problems raising enough capital to invest in high quality inputs for a new crop at the beginning of a planting season. In addition farming has become more challenging, among others because of climate change, increasing incidences of floods and droughts, increasing competition for surface (irrigation) water, increases in pests. In 2008, 3.9% of the agricultural production was lost to floods, droughts, and pests/disasters. Crop insurance can relief a farmer’s financial position, as part of the risk of an  unsuccessful crop and therefore loss of investment is shifted to the insurance company. Farmers with an insurance contract will be more certain that they can earn their investment costs back. More capital will remain in the production areas and be available to invest in higher quality inputs. This in turn will stimulate production levels and will help achieving self-sufficiency in rice production.