Appendix A: Marketing Channels für Rice This appendix explains the marketing channels for rice mainly based on our observations through the Majalengka study (Chapter 4). As drawn in Figure A.I, rice mill plays a central role in the local marketing of rice. H mills paddies colleeted both from villuge colleetors und directly from farmers, and supplies milled ricc for loeal consumption via bazaar traders as weil as for transshipment to other regions. Rice marketing is similar to vegetable marketing in the aspect thatbazaar traders specialize largely in retailing to loeal consumers, but is different in the aspect that no agent like inter-village collectors of vegetables specializes in interregional trades. In addition to those private marketing channels, government channels are established for rice. When market priees go down below government support prices, rice mills seil their products to KUD (Village Unit Cooperative), which are collected in the local depots of BULOG (Food Logistic Board). Also, farmers are encourage<! to seil their paddy to KU D through the farmers' group (kelompok lalli), though this channel is not uctive. According to the official statistics of the Majalengku Distl'ict, the percentage of rice marketed through the government ehannel in 1989 was only 3.8 per cent or total output in this distriet. In principlc, when market prices are high, BULOG is supposed to dischurge its stock kept in is depots to local markets via KUD. However, such operations are very rarely practised. In terms of government intervention into market, rice is the strongest and vegetables the weakest among agricultural commodities. While the marketing of locally-produced soybean is largely unregulated, the distribution or imported soybeim is controlled by BULOG and KOPTI (Cooperative of Tempe and TaJIII producers) (Chapter 2, Section I). Marketing of vegetables is unique as it is carried out exclusively by Ihe privule seclor wilh virlually no governmenl regulation whatsoever. 174 Appendix A 175 -- Private channel - - • Govemment channel Other Region [ Consumers lown r Markel ptace I (pa.ar) I -----f-----j I I Oazaar Iraders I :- ---------~'T':)- -:-.::, RieB"'" .",.. Farmers' group mill (kelompok ram) •I 1 I Villago I collec1or I I Village Paddy --+ (Horne consumplion) Farmer" Farm househotd Fig/trI! A.I Marketing channels for riee Appendix B: Estimation of Credit Cüsts für Vegetable Producers under Alternative Credit Arrangements This appendix explains the method and assumptions made for estimating the credit costs for vegetable producers in Majalengka under alternative credit arrangements (Table 4.6). Table A.I must be referred to while reading the following explanations: A producer who plants vegetables on 125 bala (0.175 ha) of farmland in the study village typically applies 300 kg of fertilizer and I litre of chemical (Table A.I, Column I). If the producer purchases some portion of these inputs from a village grocery (lI'l/rlil/g) in small lots, usually less than a bag (50 kg), his purchase price would be Rp 200/kg for urea and ZA (ammonium sulphate), Rp 21O/kg for TSP (tri pie superphosphate) and Rp 5000 for a boUle of Azodrin (monocrotophos) (Column 2). Thus, his total cost for the cash purchase is calculated to be Rp 70,500 (Column 3). If the producer buys the inputs on credit, he may have several alternatives; (a) collectors' trade credit, (b) purchase from fertilizer dealers on credit and (c) cash purchase from a fertilizer dealer by receiving loan from bank. The credit costs under these alternative credit arrangements are compared with the cost for cash purchase mentioned above. COLLECTORS' TRADE CREDIT Many vegetable producers in the study village receive fertilizer and chemieals from a collector at the early stage of planting and pay back when the vegetables are harvested, usually 2 months later. Under this arrangement, collectors charge typically Rp 200 for urea and ZA, Rp 215 for TSP and Rp 5000 for azodrin (Column 8), which is almost the same price charged by village groceries. Thus the producer's total payment is Rp 70,750 (Column 9) and which is only Rp 250 higher than that of cash purchase (Column 11). The difference between the cost of cash purchase (Column 3) and the payment to the collector (Column 7) implies his implied interest payment under this credit arrangement. Its monthly interest rate is calculated to be 0.18 per cent. However, it does not mean the collector receives only 0.18 per cent of interest payment. Since he can buy in a large lot from fertilizer dealers, his purchuse prices are much cheaper: Rp 182 for urea und ZA, Rp 207 for TSP and Rp 4400 for Azodrin (Column 4). If we assume that the collector buys 1.5 t of fertilizer and dozens of chemicals, and then charters a small truck, the transportation cost to the village would be Rp 4500, including loading and 176 Appendix B 177 TC/ble A.I Estimation of credit costs for vegetable producers under alternative credit arrangements, 1990 (Rp) Fer/ilizer e"ell/iml ____• _______ •• 0 ____ UreC/ TSP ZA AzocMII To/C/I (I) Quantity (kg)" 150 50 100 2 Cash purehase: Farmer (in small 10ts)1> (2) Price (Rp/kg) 200 210 200 5000 (3) Cost (2) x (I) 30000 10500 20000 10000 70500 Collector (in large lots) (4) Price (Rp/kg) 182 207 182 4400 (5) Cost (4) x (I) 27300 10350 18200 8800 64650 (6) Tl'llnspol'tation costC 450 150 300 0 900 (7) Sum (5) + (6) 65550 Credit purchuse: A. Colleetors' trade credit (8) Price (Rp/kg) 200 215 200 5000 (9) Cost (8) x (I) 30000 10750 20000 10000 70750 (10) fmplied interest obtained by collector (9) - (7) 5200 fnterest rute (monthly): 3.89% (11) fmplied interest paid by farmer (9) - (3) 250 fnterest rate (monthly): 0.18% B. Ferlilizer dealers' sale on credil (12) f'rice (Rp/kg) 202 227 202 4500 (13) Cost (12) x (I) 30300 11350 20200 9000 70850 (14) Tl'llnsportation costd 1200 400 800 0 2400 (15) Sum (13)+(14) 73250 (16) Implied inlerest paid by farmer (15) -- (3) 2750 Inlerest rate (monlhly): 1.93% C. Bank 101111 (17) Pricc (Rp/kg) 182 207 182 4500 (18) eost (17)x(l) 27300 10350 18200 9000 64850 (19) Transportation eostd 1200 400 800 0 2400 (20) Dank loan eoste 8700 (21) Sum (18) + (19) +(20) 75950 (22) fmplied inlerest paid by farmer (21) - (3) 5200 Interest rate (monthly): 3.79% Tahle A. J 1I0/es Oll folloll'i"g page 178 Appendix B Tah/e A./ /lo/es " Mcasurclllcnt unit of chcmical is bottlc ( = 0.5 litrc). h AsslImcs farmcr purchascs from a villagc groccry in small lots. e AsslImcs the portage of 1.5 t of load by small truck eosts Rp 4500. including loading/unloading. d Rp 1900 for 300 kg of load plus Rp 500 for a passenger by mini-bus. eInterest paYll1ent Rp 3300. duty stamp Rp 3000. eopy of ID cards Rp 60. transportation cost Rp 1500 and the cost for pictures of hushand and wife Rp 840 (Rp 1250/3 prints for eaeh). unloading costs, that is Rp 900 for 300 kg of fertilizer (Colull1n 6). Thus his cost for this credit arrangement is Rp 65,550 (Colul11n 7). As he receives repayment of Rp 70,750 from the producer, he can obtain the impHcit interest of Rp 5200, wh ich implies 3.89 per cent per month. FERTILIZER DEALERS' SALE ON CREDIT The farm producer can purchase the inpuls from fertilizer dealers in town on credit. The dealer charges Rp IO/kg monthly for the sales on credi!. If he pays back two months later, his purchase price is Rp 202 for urea and ZA, and Rp 227 for TSP (Column 12). Since the dealer does not seil chemicals on credit, he has 10 buy in cash and pays Rp 4500 for a bollle of Azodrin. His eost is Rp 70,850 (Column 13). ßesides this cosl he has to puy for transportation. The bus farc from Ihe village to Ihe dealer's shop is Rp 500 for his round trip .md additional Rp 1900 is required for carrying 300 kg of load. Thus his total cost is Rp 73,250 (Column 15) and his interest is Rp 2750 (Column 16), which implies 1.93 per cenl per 1110nlh. BANK LOAN Anolher possible alternative for the farm producer is to get a loan from a government bank, such as BRI (BlIllk Rakyal Illdollesia). and purchase all necessary inputs from the fertiHzer dealer in cash.Since he can purchase in cash. the price is Rp 20 lower than the credit buying case. namely Rp 182 for urea and ZA, Rp 207 for TSP and Rp 4500 for Azodrin. His payment is Rp 64,850 (Column 18). Although ßRI claims the monthly interest rate of only 1.5 per cent for a small loan. aclual inlerest rate amounts to 2.5 per cent, since I per cent of insurance premium is additionally charged. Applieants must submit several docllmenls, such as a copy of I D card. aland certificate for collateral. pictllres of the applicant al1<\ his wife. and an endorsed letter by the village head. In order to prepare these documents. an applicant must go to town at least twice. wh ich costs Rp 1500 for transportation and Rp 900 for the documents preparation. Moreover he has to pay Rp 3300 for revenue shunp irrespective the ulllount of his loan. If he borrows Rp 65.000. wh ich only covers the cost of Appendix B 179 ferlilizer lind chemiclIl, lind PIlYS blick all 111 the time of hllrvest (2 months IlIler), his 101l,1 cost of the blink 10lln is Rp 8700 (Column 20), wh ich includes Rp 3300 for inleresl payment to the bank lind Rp 5400 for other costs for IIpplication.