MARKET SURVEY report - lvcd.files.wordpress.com fileThe areas surrounding Surabaya include Lamongan to the northwest,Gresik to the west, Bangkalan to the northeast, Sidoarjo to the

ACCESS TO MARKET INITIATIVES

MARKET SURVEY

SURABAYA

By DIANA MARGARETH J

MARKET FACILITATOR


CHAPTER I INTRODUCTION

Nowadays, Wahana Visi Indonesia as a partner of World Vision Indonesia is assisting

community, especially poor people in 40 areas or ADPs. Two of that is ADP Sikka and ADP East Flores, both of them is in Flores Island (Figure 1). Most of the community work as a farmer. Figures of the Central Bureau of Statistics (BPS) show that agriculture becomes the biggest contributor to the economy. Nevertheless, the farmer is still become the poor man, although they have many agriculture products. Base on the phase I research, one of the causes is the farmers have lack of access to markets and market information (qualities, quantities, prices, logistics, etc). The farmers still controlled by middlemen, traders, brokers, local buyers in the monopoly and “Ijon” system.

Figure 1. Sikka District and East Flores District.

World Vision Australia cooperation with World Vision Indonesia has focused on what the

producers producing, and assists them to get the access to market and get the market information by conducting phase II research. The purpose of this research is to get the information regarding market demand, qualities, quantities, prices, packaging, logistics, etc of potential products that may give an opportunity to the farmer to access the market. The impact of this program is hopefully this market information can increase the real income of the farmers in Sikka and East Flores.


CHAPTER II METHODOLOGY & TIME RESEARCH

2.1 Methodology Methodology of Phase II research is by doing market survey in Surabaya. The purpose of

research is to get information of Surabaya market and get opportunity for NTT products. The data’s was from direct interview with buyers, traders, businessman, banker, government, KADIN, and people from the other institutes. Further interview, data’s been from internet and literature research, as such Surabaya

Dalam Angka (BPS), WVI data’s, DISPERINDAG data’s and field observation (Figure 2).

Figure 2. Methodology of research

2.2. Time Research This survey was started on June 2009 – August 2009. Generally, this research will always continue by updating the new data’s.

START

Direct interview with traders, buyers,

businessman, banker, and other NGOs /

institute

Literature research: Internet, Data’s of

BPS, KADIN, DISPERINDAG,

and WVI

DATA’S COLLECTING

ANALYSIS (Calculation & Documentation)

MARKET OPPORTUNITY

RECOMMENDATION

Resource analysis Logistic


CHAPTER III DATA’S ANALYSIST

3.1 Surabaya

Figure 3. Surabaya city & icon of Surabaya

Surabaya is Indonesia’s second-largest city, and the capital of the province of East Java. It is

located on the northern shore of eastern java at the mouth of the Mas River and along the edge of the Madura strait. The icon of Surabaya is fighting Sura (Shark) and Baya (Crocodile) (Figure 3).

Today, Surabaya's population is around three million, and the surrounding rural area houses at least 7 million. The areas surrounding Surabaya include Lamongan to the northwest,Gresik to the west, Bangkalan to the northeast, Sidoarjo to the south, and Mojokerto and Jombang to the southwest. Surabaya has 31 subdistricts. They are: Genteng, Bubutan, Tegalsari, Simokerto, Tambaksari, Gubeng, Krembangan, Semampir, Pabean Cantikan, Wonokromo, Sawahan, Tandes, Karang Pilang, Wonocolo, Rungkut, Sukolilo, Kenjeran, Benowo, Lakarsantri, Mulyorejo, Tenggilis Mejoyo, Gunung Anyar, Jambangan, Gayungan, Wiyung, Dukuh Pakis, Asem Rowo, Sukomanunggal, Bulak, Pakal and Sambikerep. Surabaya consists of 163 villages.

As the main seaport and commercial center in the eastern region of Indonesia, Surabaya is home to the Eastern Armada, one of two in the Indonesian Navy. Surabaya has become one of the largest cities in Southeast Asia. Tanjung Perak is the main port of the city and is one of the busiest ports in the country. Nowadays, it is also one of the top ten busiest cargo harbors in Southeast Asia. Although the operational of the port is nearly traditional, it is also used to carry modern cargo ships worldwide.


As the provincial capital, Surabaya is also the home of many offices and business centers. Due to the many industries located in the city Surabaya economies are also influenced by the recent growth in foreign industries. Surabaya is the main trading port in East Java. Enriched by its facilities, and geography advantages, Surabaya has great economic potential.

3.2 Analysis of 6 Potential products Generally, the market lacks transparency. It is possible on any given day to hear five or six

reports or rumors as to prices traded. As price is determined by quality even knowing a price accurately is lithe use without knowing the quality. 3.2.1 CASHEW

Figure 4. Cashew & grade of cashew

Quality & Quantity of market demand

Base on the theory, cashew (Indonesian: Mente) has many quality grades, consist of 6 grades of cashew size and 4 grades of cashew color. Generally, in the market, the grades become smaller in amount:

- Super 1 complete (Big size & not break) - Super 2 complete (small size & not break) - Half (break being half) - Quarter (break being quarter) - Menir (break being crumbs) - Gelondongan (cashew in shell) The other term of cashew are : Complete cashew without break, No black or brown spot because

of disease, Moisture max 5 % - 10 %, Old cashew, Color of cashew : white, slightly white, or bright grey, Not mix with rotten cashew, Not mix with dirt or strange things.


Quantity of market demand is unlimited, Most of the quantity was for export, Base on the data, Indonesia Kernels exports by destination average 2005 & 2006 were sending especially to USA 47 %, Canada 10 %, EU 7 %, and to the other Asia.

The commercialized domestic consumption is estimated at less than 500 tones kernels equivalent to about 2,000 tones in-shell cashew. The failure to develop a viable shelling industry is primarily due to inability of Indonesia companies to complete with the Indian, and latterly Vietnamese, sheller for raw material. The competitive advantages that Indonesia possesses for the export are exactly the factors that make it difficult for an Indonesia shelling industry to develop successfully. Low freight, short transit and lack of seasonal competition bring all The Indian and Vietnamese buyer to Indonesia during the cashew season. Base on the interview, some buyer should import the cashew because most of cashew from domestic area has already bought by Indian or Vietnamese.

Figure 5. PT Supa Surya Niaga - Grading

Price The number of traders has fallen to the point where individual Indian sellers are sourcing at origin

through brokers and agent. The Indian shellers do this unwillingly as it significantly draws on their financial resources whilst they still pay prices set by the traders. They have, in effect, taken on risk previously assumed by the traders with little reward.

In the market place, there is lack of price transparency. Base on the interview, the price of cashew are fluctuate (Table 1), it because of:

- Quality of the nut - Ready stock when harvest time or un harvest time - Harvest time in Africa, India or Vietnam


Table 1. Price of Cashew

No Grades of Cashew Price 1 Super 1 complete (Big size & not break) Rp. 28.000 – 35.000

2 Super 2 complete (small size & not break) Rp. 25.000 – 30.000

3 Half (break being half) Rp. 12.000 – 17.000

4 Quarter (break being quarter) Rp. 5.000 - 8.000

5 Menir (break being crumbs) Under Rp. 5.000

6 Gelondongan (cashew in shell) Rp. 8.000 – 10.000

Base on the field survey, the price can be higher, as a sample, the price of Super 1 complete at

supermarkets in Surabaya was Rp. 60.000 /kg (Figure 6).

Figure 6. Panen Raya – Cashew kernel

Calculation (sample case) This calculation only for cashew in shell (gelondongan), total producers only 500 producers, each of

them can produce 5 kg/day.

• Producer price : Rp. 4.000 / kg

• Buyer price : Rp. 8.000 / kg

• Cost of Packaging + Transport local + expedition : Rp. 1.500, so the buyer price become Rp. 6.500

• Total producers : 500 people (5 kg / each producer), so the total cashew production is : 500 producers x 5 kg = 2.500 kg /day 2500 kg x 25 days = 62.500 kg /month 62500 kg x 3 months = 187.500 kg/season (/ year)


Rp. 4.000 (Cashew in shell) Rp. 6.500 (Cashew in shell) 187.500 x Rp. 4000 = Rp. 750.000.000 187.500 x Rp. 6.500 = Rp 1.218.750.000

Rp. 1.218.750.000 – Rp. 750.000.000 = Rp. 468.750.000/ season (/year) = 46,875 US$ / season (/year) 3.2.2 COPRA

Figure 7. Coconut & Copra

Copra (Indonesian: Kopra) is dried meat or kernel of coconut. Copra (Figure 7) is used for edible

oil extraction, margarine production, cooking fats and shortenings, soap, stearin and desiccated coconut.

Quality & Quantity of market demand Same as the other horticultures product, quality is important for the market. Sun dried white

copra or hot air dried white copra is of higher quality. Desiccated copra (broken into pieces the size of grains of rice) or copra cut into narrow strips is also of very high quality. The other term of copra is:

Moisture content : max 8 – 10 % Other Water content: max 5 – 6 %

No insects / Fungus Oil content min 60 % - 65 % Clean No reek No preservative


Copra must be protected from all forms of moisture (seawater, rain and condensation water), since moisture promotes hydrolytic/enzymatic fat cleavage, which then results in self-heating due to increased respiration. Water content of > 10 % and excessively high relative humidity’s cause mold and at an advanced stage, rotting of the cargo, which turns black and musty. Market demand of copra is unlimited. Copra in Surabaya was come from Sulawesi, Java, and NTT.

Figure 8. PT Agrindo Jaya – warehouse

Price Price of Copra is fluctuating. The price was following the price of world cooking oil, especially

price of Virgin Coconut Oil (VCO). Base on the interview, price of copra in the marketplace is around Rp. 3.700 – Rp. 4.500.

Calculation



• Cost of Packaging + Transport local + expedition : Rp. 1.000, so the buyer price become Rp. 3.000

• Total producers : 500 people (5 kg / each producer), so the total cashew production is : 500 producers x 5 kg = 2.500 kg /day 2500 kg x 25 days = 62.500 kg /month 62500 kg x 12 months = 750.000 kg/year


Rp. 2.600 / kg Rp. 3.000 / kg 750.000 x Rp. 2600 = Rp. 1.950.000.000 750.000 x Rp. 3.000 = Rp 2.250.000.000

Rp. 2.250.000.000 – Rp. 1.950.000.000 = Rp. 300.000.000 /year = 30,000 US$ / year 3.2.3 CANDLE NUT

Candle nut seed is including stony

seed because crusty look like shell of coconut with lobed harsh surface. In the inside is endosperm in turn white brass color (figure 9), and it’s used for many cookery flavors. Market demand of candle nut is unlimited.

Figure 9. Candle nut Generally, candle nut (Indonesian: Kemiri) has no grade, but there are some term of quality, such as:

• Color : turn white brass (a), Not red (b), (d) Not black (c)

• Complete / not break (d) • No insect / fungus • No hole (c) (b) (a)

Price Price for candle nut is not to fluctuating, the price was influenced by quality and ready stock in the marketplace. Base on the interview and field observation, candle nut price is: - Candle nut complete : Rp. 10.000 – 12.000 - Half candle nut (break become half) : Rp. 8.000 – 9.000


Calculation



• Cost of Packaging + Transport local + expedition : Rp. 2.000, so the buyer price become Rp. 8.000/ kg

• Total producers : 500 people (25 kg / each producer), so the total cashew production is : 500 producers x 25 kg = 12.500 kg /month 12500 kg x 12 months = 150.000 kg/year

Rp. 6.000 / kg Rp. 8.000 / kg 150.000 x Rp. 6000 = Rp. 900.000.000 150.000 x Rp. 8.000 = Rp 1.200.000.000

Rp. 1.200.000.000 – Rp. 900.000.000 = Rp. 300.000.000 /year = 30,000 US$ / year 3.2.4 COCOA

Indonesia represents one of state of special exported of world cocoa. Request of world to commodity of cocoa progressively mount from year to year. Till 2001, ICCO (International Cocoa Organization) estimate production of cocoa in the world will reach 4,05 million tones, whereas consumptions will reach 4,1 million tones, so that will happened deficit around 50 thousand tones per year (Suryani, 2007)


Unfortunately, quality of cocoa seed which exported by Indonesia is very low, this matter because of processing of cocoa still use traditional method (85% seed of Indonesia cocoa was not fermented). Talbot (2002) provides a stylized sketch of the value chain for cocoa as follows: Cocoa pods → rest → remove seeds → fermented → dry → cocoa beans → roast → shell → cocoa nibs → grind → chocolate liquor → press → cocoa butter and powder → chocolate (along with the input of sugar and milk).

Base on that theory and interview with the buyer, most of the farmer in Flores – NTT produce unfermented bulk bean for export. However, the fermented bean gives a good taste and smell of bean its colour is more attractive. Term of bean quality is the number of unfermented bean max 3%. Beside of fermented, the moisture of cocoa bean max 7 %.

Approximately 90% of total Flores cocoa beans were sent to the exporters in Makassar (Sulawesi). The remainder tones of NTT beans ± 10% export to Bali and Java. Price

The prices that market intermediaries pay are based primarily on a "discounting" process. The

daily global prices for Flores cocoa is widely known by all participants through the value chain, and

serve as the basis for an initial price offer. Once an initial price is established, collector and traders (as

well as exporters based in Sulawesi) will then engage in a discounting process to reduce the initial price

base on certain quality parameters. The net price is the multiplied by the volume of beans sold

determine the seller's revenue.

Base on the interview, the price of fermented cocoa bean is Rp. 25.000 – 27.000/kg. we can’t

compare or calculate this price with the price of producers, because most of cocoa bean in the

producers is not fermented yet. Producer price of unfermented cocoa was Rp. 12.000 – 15.000 /kg.

3.2.5 TAMARIND

Most of market demand of tamarind is for tamarind without seed, besides, tamarind should be clean without sand or stones. Price for tamarind without seed is Rp. 4.000 – Rp. 5.000 / kg If we compare with producers price Rp. 1.500 – Rp. 2.000 / kg, Surabaya price can give some profit to the producers. Unfortunately, the market demand for tamarind is low.


Calculation



• Cost of Packaging + Transport local + expedition : Rp. 2.000, so the buyer price become Rp. 2.500/ kg

• Total producers : 500 people (3 kg / each producer), so the total cashew production is : 500 producers x 3 kg = 1500 kg /month 1500 kg x 12 months = 18.000 kg/year

Rp. 1.500 / kg Rp. 2.500 / kg 18.000 x Rp. 1500 = Rp. 27.000.000 18.000 x Rp. 2.500 = Rp 45.000.000

Rp. 45.000.000 – Rp. 27.000.000 = Rp. 18.000.000 /year = 1,800 US$ / year 3.2.6 BANANA

Quality of Banana (Indonesian: Pisang) :

Texture : Not flabby Size : Not small / old enough No black spot


Price Price of banana is depends on variety of banana, quality, size, and “end market”. Especially for

banana from Flores, the variety is Cavendish (the other call “kapok” banana). End markets of banana are into buyers who sells banana to traditional market or buyers who sells banana to Supermarket.

Base o the survey, price of Cavendish banana in traditional market was Rp. 19.000 – 21.000 /tandan (4 – 5 combs) and Rp 20.000 – Rp 25.000 /tandan (5 – 7 combs). In the supermarket, the price becomes Rp 12.000 – 14.000 / comb. Calculation

• Producer price : Rp. 15.000 / tandan

• Buyer price : Rp. 21.000 / tandan

• Cost of Transport local + expedition : Rp. 2.000, so the buyer price become Rp. 18.000/ tandan

• Total producers : 500 people (5 tandan / each producer), so the total cashew production is : 500 producers x 5 tandan = 2500 tandan /day 2500 tandan x 4 weeks = 10.000 tandan /month 10.000 tandan x 12 months = 120.000 tandan/year

Rp. 15.000 /tandan Rp. 18.000 /tandan 120.000 x Rp. 15.000 = Rp 1.800.000.000 /year 120.000 x Rp. 18.000 = Rp 2.160.000.000

Rp. 2.160.000.000 – Rp. 1.800.000.000 = Rp. 360.000.000/year = 36,000 US$ / year 3.2.7 Total profit of 6 Potential Products

Name of products Provit (Rupiah) Profit (US$)Cashew 468,750,000.00Rp 46,875$ Copra 300,000,000.00Rp 30,000$ Candle nut 300,000,000.00Rp 30,000$ Cocoa -Rp -$ Tamarind 18,000,000.00Rp 1,800$ Banana 360,000,000.00Rp 36,000$

Total ( /year) 1,446,750,000.00Rp 144,675$


3.3 Payment System Base on the interview, the payment system are:

• There is product, there is money : CASH (By Transfer) • Payment after checking products (1 – 2 days) • Payment after 3 – 4 weeks • Deposit some money before, and keel after get the product

Most of company who sells product to the big factory uses the first and the second system. It’s different with the buyer from the big factory; most of them will pay after 3 – 4 weeks.

3.4 Logistics • Most of the product uses a plastic bag for packaging.

• Sample of Memorandum of Understanding (MoU)

D:\My Documents\DYNE\sample MoU - s

3.5 Transportation system

Transportation from SIKKA – SURABAYA: Expedition cost: Port to Port: Copra : 74 kg / plastic bag : Rp. 22.000 Candle Nut : 80 kg / plastic bag : Rp. 25.000 Cashew : 80 kg / plastic bag : Rp. 25.000 The shipping is third – fourth a month. The shipping time from Sikka to Surabaya is 3 days. All of expedition has no insurance.


BAB IV OTHER POTENTIAL PRODUCTS

Many products has selling in Surabaya, some products has a market demand and can give an

opportunities to the farmer of Flores to sells their products to Surabaya. Some of those products are: a. Seaweed b. Peanut c. Charcoal of coconut shell

BAB V FUNDING RESOURCES

5.1 Bank Rakyat Indonesia (BRI)

Bank interest: 2%, and customer will get payback or bonus 0,5% if the customer always paid on time.

Term to get the loan : a) Have a business b) Photocopy ID c) Photocopy family card d) Photocopy letter of married e) Picture 4 x 6

Guarantee a. BPKB b. SHM / SHGB c. Letter of land d. Letter C


5.2 Bank NTT Bank interest:

• 100 – 250 million : 14 %

• 250 - 500 million : 13,75%

• 500 – 1 billion : 13,50%

• 1 – 3 billion : 13,25%

• More than 3 billion : 13% Term to get the loan :

a. Have a business, photocopy of company letters (SIUP, SITU, TDP, etc) b. Photocopy ID c. Photocopy family card d. Photocopy letter of married e. Photocopy NPWP f. Photocopy of book keeping min 6 months.

Guarantee a. BPKB b. SHM / SHGB c. Letter of land d. Letter C e. Invoice

5.3 Credit Union (CU) CU interest: 2% Term to be member :

a. Photocopy ID b. Development contribution : Rp. 250.000 c. Transportation contribution : Rp. 100.000 d. Principle deposit


CHAPTER VI RECOMMENDATION STEP

a b c e d

1. ADP as a link of Community/ Producers (association) to other stakeholder a : Product selling to end buyer in Surabaya b : Community resuscitation c : Credit/ financial d : Networking, training of quality, bargaining, bookkeeper, etc e : Regulation of Local Government

2. Other recommendation : a) Presentation of market survey to the community b) Association forming c) Coordination with local government d) Coordination with other institute / NGOs e) Training the community about product quality

FUNDING BANK BUYER / INVESTOR

GOVERMENT INSTITUTION / NGOs

ASOSIASI / GAPOKTAN

KSM / Stasi

KSM / Stasi

KSM / Stasi

CHURCH


UTTERANCE OF THANKS This research and this report can’t finish without GOD helps. “Without You, I am nothing”. There were many people who had active to give me help, support, advice, and power in this research, I want to say thank you to:

a. SEU (Jock, Olivia, and Lerina), this is a pride to work with you all b. Bpk. Silvester Lowa (ADP Manager of East Flores), Bpk. Eben Ezer Sembiring (ADP Manager of

Sikka). I learn many things from you, I can finish my research because I know I have full support from you.

c. Ibu Agnes Wulandari (Urban Manager of Surabaya) and ADPM Surabaya I & II. Thank you to give the feeling “ a home” to me in Urban Surabaya.

d. EE@W Team : Enrico, Sonny, Teguh, Pak Barry. Guys, I can’t imagine to work without you all, thank you for Spirit as a team.

e. Ibu Mastien (Accounting Urban Surabaya), I not worry about finance because of you, thank you so much.

f. All ADP staffs (CDC, Monev, Accounting, book keeper, CRS, Field Facilitators, Drivers, and Janitors) in East Flores, Sikka and Urban Surabaya. I am always thanks to God because He gives me a chance to met and work together with you all.