The Sustainability of Contract Farming Model: A Case Study of an Agribusiness Company

Eka Nurjati(1*), Fransisca Susanti Wiryawan(2)

(1) Research Center for Behaviour and Circular Economic, National Research and Innovation Agency
(2) School of Business, IPB University
(*) Corresponding Author

Abstract

The benefits of the agricultural partnership for companies are achieving supply continuity and
quality. Meanwhile, partner farmers get price guarantees and marketing certainty. However,
several aspects threaten sustainability. As a case study of PT SSS, this research used qualitative
descriptive analysis. The results of the situational analysis show that the performance of PT SSS in
2021 is positive as reflected in the sales, profits, market share, and additional workforce, while the
performance of partner farmers also is positive during the partnership with the company. There are
two partnership patterns adopted by PT SSS, i.e. the plasma core and the trading partnership. In
the plasma core partnership, the partner company is obliged to accommodate the partner farmers’
harvests according to the agreed quantity and price and the company provides agricultural input
credit. Trade partnerships are carried out if the supply of plasma core partnerships is not met. Problem
analysis based on the fishbone method includes four dimensions, i.e. economic, social, environmental,
and governmental. The policy implications needed are: 1) Strengthening the commitment to continue
mutually beneficial partnerships, 2) Written partnership contracts containing rights and obligations,
rewards, and punishments, 3) Establishment of farmer insurance, activation of farmer groups, and
mentoring and counseling programs, 4) Adoption of more environmentally friendly technology and
improvement of farm’s and company’s efficiency, 5) The adoption of innovation in marketing, products,
and methods/processes/production techniques for PT SSS, 6) Government’s commitment to reconsider
land conversion, 7) Coordination with the government regarding the accessibility and affordability of
subsidized fertilizers. Both the partner farmers and the company are committed to continuing contract
farming, but there are technical aspects that need to be followed up and require the commitment of
various stakeholders.

Keywords

partnership, supply, social, economic, environment

Full Text:

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DOI: 10.23917/jep.v24i1.19613

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