T h e 2 n d I n t e r n a t i o n a l C o n f e r e n c e s o f A g r i c u l t u r e ( I C A - 2 )

Sub-Theme: Strategy and Food Security Policy 149

FINANCIAL FEASIBILITY ANALYSIS AND COCOA MARKETING

MARGIN IN KARE VILLAGE, KARE DISTRICT, MADIUN

REGENCY

Pawana Nur Indah1*, Hamidah Hendrarini2,Endang Yektiningsih3, Nisa Hafiidhoh Fitriana4

1Agribisnis Study Program, Faculty of Agriculture, UPN “Veteran” East Java,

Pawana_ni@upnjatim.ac.id * 2Agribisnis Study Program, Faculty of Agriculture, UPN “Veteran” East

Java,Hamidah_h@upnjatim.ac.id 31Agribisnis Study Program, Faculty of Agriculture, UPN “Veteran” East Java, endangyn@gmail.com 41Agribisnis Study Program, Faculty of Agriculture, UPN “Veteran” East Java, Hafiidhoh@gmail.com

Abstract: Cocoa is one of the plantation commodities whose role is quite important for the

national economy, especially as a provider of employment, a source of revenue and foreign

exchange. Financial gain is a must in exploiting a commodity. The market aspect is one of

the determining factors for the success of cocoa plantation operations. Thus the results of

the above analysis are combined with stakeholder opinions about cocoa agribusiness development. The objectives of this study are to analyze the financial viability of cocoa

farming and to analyze the cocoa farming chain and marketing margins. The analytical

methods used to analyze financial feasibility are NPV, Net B/C, IRR, Payback Period, and

Sensitivity Analysis, while for analyzing the marketing (chain analysis and marketing

margins). The results of the observation presented that cocoa farming business is viable to

develop financially, due to the NPV> 0, Gross B / C> 1, Net B / C> 1, IRR> current interest

rates, and the time limit of fund reimbursement is less than 20 years. The sensitivity /

sensitivity of cocoa farming occurs in decreasing production. Where cocoa farming is still

feasible if this condition happened. Marketing chains and margins, specifically, there are

two marketing channels for cocoa, a marketing margin of 5,000 IDR and 2,000 IDR. The

highest channel is the first one, namely direct sales from the farmers to the big traders.

Keywords: Financial Feasibility, Farming Chain, Marketing margin, Cacao

I. INTRODUCTION

Cocoa is one of the plantation commodities whose role is quite important for the national

economy, especially as a provider of employment, a source of revenue and foreign exchange(M.

Saleh et al., 2019). Besides, cocoa also gives a role in encouraging regional development and agro-

industrial development (Hadinata & Marianti, 2020). Cocoa is one of the plantation commodities

that is appropriate for country plantations, due to the plant which can bloom a whole year, thus it

can be a source of daily or weekly income for farmers (L. Saleh, 2017). In addition, plantation crop

commodities are foreign exchange sources for the country and the series of production activities

absorbe quiet a lot labor (Prasetya et al., 2020).

The quality of exported cocoa is generally not good, because it is not fermented. About 90

percent of cocoa exports constitute original or unfermented cocoa, but, the price is still going to be

very low instead of the fermentation cocoa (Tahir & Fadwiwati, 2017). This condition also occurs

in the cocoa center in Madiun Regency, East Java, where almost all the farmers there do not carry

out fermentation. Indonesia is a country that produces quite high enough cocoa. In East Java, there

are several regions which produce cacao such as Banyuwangi, Jember, Blitar, Madiun and some

other cocoa-producing regions (Badan Pusat Statistik, 2018).

Madiun Regency is the third largest cocoa-producing region in East Java with plantation areas

about 5,843 ha in 2017 with productions about 3,145 tons (Central Statistics Agency, 2018). In terms

of productivity, which has the highest cocoa productivity in East Java is Banyuwangi with

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productions about 7,760 tons / ha, followed by Kediri and Madiun, respectively 3,151 tons / ha and

3,145 tons / ha. These are some areas in East Java which have very good potential for cocoa-

producing development. Well-managed cocoa plantation businesses starting from cultivation, post-

harvest, processing industry, to distribution and marketing processes with effective institutional

support can increase the prosperity of farmers and stakeholders (Supriatna, 2017).

Demand for cocoa commodities as an industrial raw material sequently increases, both in the

domestic market and the foreign market (Thoriq & Widyasanti, 2019). Currently, cocoa farming

does not appear to be a priority crop (a side farm) from the perspective of the importance of

household income (Sinamaremare et al., 2018). This causes the price of the cocoa commodities to

be quite high and tend to be stable. Heeding its role and potential, cocoa is a promising plantation

commodity for being developed in supporting the regional development in Madiun Regency

(Pasaribu et al., 2016). For the development of cocoa agribusiness, a direct approach is required. In

a national development of cocoa, several problems and challenges are faced, including low

productivity which still only reaches about 900 kg per ha per year, while the potential reaches should

be more than two thousands kg per ha per year (M. Saleh et al., 2019). The problem in developing

cocoa plantations in Madiun Regency is that there is no development of cocoa plantations yet, which

are convenient for cocoa plantations, so that the gains have not reached the expected targets,

especially in increasing the per capita income of local residents (Purwanto et al., 2019). Furthermore,

the information obtained by farmers about the up and down of cocoa prices is still limited and also

the technical skills of the farmers in handling cocoa post-harvest are still low (Rizal et al., 2017).

For this case, it is necessary to develop cocoa plantations for the people for getting both maximum

results and benefits, therefore with a massive enough potential, the increase in cocoa production

must be developed (Rayuddin, 2019).

II. THEORY

Financial Feasibility

Financial analysis is an analysis where a project is viewed from an individual perspective, it

means it doesn’t need any attentions for what the impacts are going to be in the wider scope of

economy (Kusmayadi et al., 2017). In financial analysis, the concerns are about total results or

productivities or benefits obtained from all sources used in the project for the community or the

economy as a whole, regardless of who provides these sources and who receives the project results

(Arifin et al., 2017). Financial analysis is an activity of assessing and determining the rupiah unit of

aspects which are considered worthy comes from decisions made in the business analysis stage

(Khatimah, 2019). Financial Feasibility Includes Net Present Value, Net Benefit/Cost, Internal Rate

of Return, Payback Period, Break Event Points and Sensitivity (Widyasari et al., 2020).

Marketing Channel

Marketing channel is a flow path which through by the commodities from the producer to

middleman and finally come to the consumer (L. Saleh, 2017). Marketing channels are group of

traders and company agents who combine physical demands and rights of a product to create uses

for certain markets (Taariwuan, 2017). This definition implies that the marketing channel is a chain

consisting of several groups of institutions in cooperation to achieve an objective (Alam & Sutanto,

2019).

Marketing Margin

Marketing margin is the difference between the price at the producer level and the price at the

retail level (Hasanah et al., 2017). Marketing margin only explains about price differences and does

not state the quantity of the marketed product (Mohoridju et al., 2019). Moreover, marketing margin

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Sub-Theme: Strategy and Food Security Policy 151

can be defined as the difference between the price paid by consumers and the price received by

producers, but it can also be expressed as the value of services in the implementation of trading

activities from the producer level to the final consumer level (Nurpajar et al., 2019). Marketing

margin indicators are more often used in marketing efficiency analysis or research, because through

those marketing margin analysis, the level of operational efficiency (technology) and price efficiency

(economy) of marketing can be seen (Maysari et al., 2017). Marketing margin is also the item price

difference received by producers and the item price paid by consumers, which consists of marketing

costs and marketing agency profits (Prasetya et al., 2020). Marketing margin in general is known as

the difference of prices at the various levels of marketing system. In agriculture side, marketing

margin can be interpreted as the difference of prices at the farm level and prices at the consumer

level, or in other words, the price difference between two market levels (Pangkey et al., 2018).

Cocoa

Cocoa is the only commercially cultivated species among 22 others of the genus Theobroma,

the Sterculiaceae family. The cacao plant (Theobroma cacao L.) isan annual plant belonging to the

caulofloris plant group, namely plants that flower and fruit on their stems and branches. Generally,

this plant can be divided into two parts, those are the vegetative part which includes roots, stems,

leaves and the generative part such as flowers and fruits (Susilowati et al., 2020). The original habitat

for cacao plants is tropical forests with high shade trees, high rainfall, relatively similar temperatures

all year long, and relatively constant high humidity. In such that habitat, the cacao plants will grow

up taller but only produce a few flowers and fruits. If they are cultivated in the farm, the three-year-

old plant height reaches 1.8 - 3.0 meters and at the age of 12 it can reach 4.5 - 7.0 meters (Hadinata

& Marianti, 2020).

III. RESEARCH METHODS

The research was conducted in Kare Village, Kare District, Madiun Regency. The determination

of the research location was carried out purposively with the consideration that Kare Village is one

of the production centers for Cocoa products in Madiun Regency (Tanjung et al., 2017). Meanwhile,

the sampling for farmers was done by using the Simple Random Sampling method, while for

collectors, wholesalers and SMEs used the snowball method, then following the flow of cocoa sales

with farmers as a starting point, consists of 2 Collecting Traders, 2 Wholesalers, and 1 Cocoa

MSMEs. The data collection methods used questionnaires and interviews with experts and related

instances (Wahyuniardi et al., 2017). The data analysis method used is as follows:

Analysis of Financial Feasibility of Cocoa Farming:

a. Net Present Value (NPV)

𝑁𝑃𝑉 = ∑𝐵𝑡 − 𝐶𝑡

(1 + 𝑖)𝑡

𝑛

𝑡=0/1

Annotation:

Bt : benefit in year-t t : lenght of investment period

Ct : cost in year-t i : interest rate

b. Net Benefit Cost Ratio (Net BCR)

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Sub-Theme: Strategy and Food Security Policy 152

𝑁𝐸𝑇 𝐵𝐶𝑅 = ∑

𝐵𝑡−𝐶𝑡

(1+𝑖)𝑡

𝑛𝑡=0/1

∑𝐵𝑡−𝐶𝑡

(1+𝑖)𝑡

𝑛𝑡=0/1

Annotation:

Bt : benefit in year-t i : interest rate

Ct : cost in year-t n : age of farming project

c. Internal Rate of Return (IRR)

𝐼𝑅𝑅 = 𝑖1 +𝑁𝑃𝑉1

𝑁𝑃𝑉1 − 𝑁𝑃𝑉2 𝑥 (𝑖2 − 𝑖1)

Annotation:

NPV1 : Positive present Value i1 : the discount rate that produces NPV1

NPV2 : Positive present Value i2 : the discount rate that produces NPV2

Business feasibility is determined by considering those three analytical tools, where that business

is assumed to be feasible if:

- If the IRR > interest rate, then the project is feasible

- If the IRR < interest rate, then the project is unfesiable

- If the IRR = interest rate, then the project is Break Event

d. Payback Period

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 = 𝑇𝑝 − 1 + ∑ 𝑇𝐶𝑖𝑐𝑝 − 1 − ∑ 𝐵𝑖𝑐𝑝 − 1 𝑛

𝑖=1𝑛𝑖=1

𝐵𝑝

Annotation:

T p-1 : number of years while the value of Cumulative Net Benefit (negative)

TCicp-1 : total cost at the time of Cumulative Net Benefit (negative)

Bicp-1 : total benefit amount at the time Cumulative Net Benefit (negative)

BP : total benefit at the beginning of the Cumulative Net Benefit (positive)

Eligibelity criteria:

- If the payback period is shorter than the economic life of the business, then the project is

feasible to develop.

- If the payback period is longer than the economic life of the business, then the project is

unfeasible to develop.

e. Break Event Point (BEP)

1) BEP Acceptance

𝐵𝐸𝑃 𝑅 =𝐹𝐶

1 −𝐴𝑉𝐶

𝑇𝑅

Annotation:

BEP R : Break Event Point Revenue

TR : Total Revenue

FC : Fixed Cost

AVC : Average Variable Cost

Hypothesis testing:

Acceptance > BEP acceptance, the farming is feasible to develop.

Acceptance < BEP acceptance, the farming is unfeasible to develop.

2) BEP Production

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Sub-Theme: Strategy and Food Security Policy 153

𝐵𝐸𝑃 𝑌 =𝐹𝐶

𝑃 − 𝐴𝑉𝐶

Annotation:

BEP Y : Break Event Point Production

P : Price

FC : Fixed Cost

AVC : Average Variable Cost

Hypothesis testing:

Farm production > BEP production, the farming is feasible to develop.

Farm production < BEP production, the farming is unfeasible to develop.

3) BEP Prices

𝐵𝐸𝑃 𝑃 =𝑇𝐶

𝑌

Annotation:

TC : Total Cost

Y : Total production

Hypothesis testing:

Output price > BEP price, the farming is feasible to develop.

Output price < BEP price, the farming is unfeasible to develop.

f. Sensitivity Analysis

Sensitivity analysis is carried out to determine how far those factors’ decrease or increase can

lead the alteration in investment criteria, from feasible to the unfeasible one of implementation

(Thoriq & Widyasanti, 2019). The sensitivity analysis in this study is calculated using the following

scenarios:

I. Increase the Input Cost

II. Calculating Break Event Point (BEP) for the selling price of farmesrs’ cocoa

III. Calculating Break Event Point (BEP) of farmers’ cocoa production volume

Marketing Margin Analysis

Mathematically, the marketing margin equation can be formulated as follows:

𝑀 = ∑ 𝑀𝑖 − ∑ ∑ 𝐶𝑖𝑗 + ∑ 𝑃𝑗𝑚

𝑗=1

𝑛

𝑖=1

𝑚

𝑗=1

𝑚

𝑗=1

Where:

M : margin of trading (Rp/kg)

Mj : margin of trading (Rp/kg) trading business institute to-j (j=1,2,..,m) and m is the amount of

institution involved in trading system

Cij : the cost of trading to-i (Rp/kg) at the trading institution to-j (i=1,2,..,n) and n is the number

of types of financing

Pj : profit margin of trading institute to-j (Rp/kg)

IV. RESULT AND DISCUSSION

Cocoa Financial Feasibilty Analysis

The financial feasibility analysis of cocoa farming in Kare village includes the calculation of

Net Present Value (NPV), Net Benefit Cost Ratio (Net BCR) and Internal Rate of Return (IRR)

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which reflect the level of financial feasibility of cocoa farming in Kare village after getting a

correction with an interest rate of 6% (Discount Rate) (Mustika et al., 2019). This analysis is carried

out in an assumption used about the productive age of the cocoa plants for 20 years, the cocoa plants

begin producing at the age of 3 years, the price assumption pattern used in this analysis is a constant

price of IDR 27,000 per kilogram. Labors are calculated using daily wages which are converted into

people working days (HOK) and labor wages during the observation period is IDR 80,000/day. The

calculation of this financial analysis is based on the average data of the input and output structures

of each farmer, which consists of twenty sample respondents.

Table 1. Financial Analysis (NPV, Net B/C Ratio, IRR Dan Payback Period) Fermented Cocoa in 1

ha at an Interest Rate of 6% in Kare Village, Kare District, Madiun regency

Criteria Value (IDR)

Net Present Value (Rp) 73.637.133

Net B/C 9,8

IRR (%) 32,79%

Payback Periode (years) 7 years Source : Primary data processed, 2020

Table 2. Calculation Resultsof NPV, Net B/C, IRR, dan Payback Period

Year Benefit Cost Net Benefit

(B-C)

Discount

Rate

(6%)

NPV

(DR 6%)

Discount

Rate

(32,8%)

NPV

(DR 32,8%)

Cumulative

Net Benefit

0 0 5,139,500 -5,139,500 1.0000 (5,139,500) 1.0000 (5,139,500) -5,139,500

1 0 1,427,500 -1,427,500 0.9430 (1,346,698) 0.7530 (1,074,925) -6,567,000

2 0 1,517,500 -1,517,500 0.8900 (1,350,570) 0.5670 (860,464) -8,084,500

3 1,620,000 2,305,500 -685,500 0.8400 (575,559) 0.4270 (292,694) -8,770,000

4 3,915,000 2,617,500 1,297,500 0.7920 1,027,742 0.3215 417,172 -7,472,500

5 5,103,000 2,527,500 2,575,500 0.7470 1,924,563 0.2421 623,550 -4,897,000

6 7,155,000 2,687,500 4,467,500 0.7050 3,149,411 0.1823 814,472 -429,500

7 10,719,000 3,005,500 7,713,500 0.6650 5,129,918 0.1373 1,058,924 7,284,000

8 11,691,000 3,057,500 8,633,500 0.6270 5,416,765 0.1034 892,488 15,917,500

9 12,312,000 3,147,500 9,164,500 0.5920 5,424,453 0.0778 713,388 25,082,000

10 13,473,000 3,143,000 10,330,000 0.5580 5,768,218 0.0586 605,508 35,412,000

11 13,878,000 3,251,000 10,627,000 0.5270 5,598,171 0.0441 469,064 46,039,000

12 17,064,000 3,393,000 13,671,000 0.4970 6,794,068 0.0332 454,384 59,710,000

13 17,847,000 3,213,000 14,634,000 0.4690 6,860,990 0.0250 366,259 74,344,000

14 18,549,000 3,288,000 15,261,000 0.4420 6,749,955 0.0188 287,614 89,605,000

15 18,927,000 3,558,000 15,369,000 0.4170 6,412,947 0.0142 218,109 104,974,000

16 18,819,000 3,213,000 15,606,000 0.3940 6,143,244 0.0107 166,772 120,580,000

17 17,631,000 3,213,000 14,418,000 0.3710 5,354,332 0.0080 116,021 134,998,000

18 14,823,000 3,323,000 11,500,000 0.3500 4,028,954 0.0061 69,684 146,498,000

19 13,527,000 3,143,000 10,384,000 0.3310 3,432,047 0.0046 47,381 156,882,000

20 12,231,000 3,143,000 9,088,000 0.3120 2,833,681 0.0034 31,225 165,970,000

Total 229,284,000 63,314,000 73,637,133 (15,567)

Source : Primary data processed, 2020

Net Present Value

The feasibility of a business is assessed if the NPV is higher than zero (positive NPV), it means

that the net income (benefit) of a business is higher than the total cost incurred (Suharjo & Rahman,

2019). The table 1 presents the NPV value at an interest rate of 6% is IDR 73,637,133 / ha / 20 years,

this figure shows the benefits obtained during the productive life of the cocoa plant, which means

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that the NPV value is positive or higher than zero. This point out that the net income of cocoa farming

is higher than the total costs incurred, thus it can be concluded that cocoa farming in Kare Village,

Kare District, Madiun Regency is profitable and feasible to develop because the NPV value is> 0.

Analisis Net B/C Ratio

This analysis compares between the net income to the net cost which is calculated at its current

value. If the value of B/C > 1, then the project is feasible to develope, but if the value of B/C < 1, then the project is unfeasible to develope (Junita & Hurri, 2017). The table 3 presents the results of

the calculation of Net B/C at an interest rate of 6% is 9.8, which means that the cocoa farming in

Kare Village, Kare District, Madiun Regency is feasible and efficient and continued to be

implemented and developed because the Net B/C > 1. The result of the calculation of the Net BCR is the ratio between the number of positive and negative NPV which can be seen from the table 2. The

final results of the Net BCR arepresented in table 3 below:

Table 3. Result of Net BCR Calculation for Cocoa Farming

Variable Result

Net Benefit (B-C) > 0 82,049,460

Net Benefit (B-C) < 0 8,412,327

Net BCR 9.8

Source: Primary data analyzed, 2020

Internal Rate of Return

In the IRR analysis, a project is measured to be feasible to develop or profitable if the IRR value

is higher than the prevailing interest rate (Sofanudin & Budiman, 2017). The table 1 presents the

amount of IRR value at the interest rate of 6% for cocoa farming is 32.79%, which means that the

IRR value is higher than the prevailing interest rate. This shows that cocoa farming in Kare Village,

Kare District, Madiun Regency is profitable and feasible to develop. Based on the table 1, it can be

seen that the results of trial and error for i2 is 32.8%, this value gives negative NPV results, then the

IRR calculations will be carried out as follows:

𝐼𝑅𝑅 = 𝑖1 +𝑁𝑃𝑉1

𝑁𝑃𝑉1 − 𝑁𝑃𝑉2× (𝑖2 − 𝑖1)

𝐼𝑅𝑅 = 0,06 +73.637.133

73.637.133 − (−15.567)× (0,328 − 0,06)

𝐼𝑅𝑅 = 0,3279

𝐼𝑅𝑅 = 32,79%

This value means that cocoa farming will provide a return to the capital invested about 32.79%

during the economic life of the plant.

Payback Period

This analysis is used to determine the period of return on investment in a project. If the

investment payback period is shorter than the economic life of the project, then the project is

profitable and feasible to run (Mohoridju et al., 2019). Payback period calculations require negative

Cumulative Net Benefit (CNB) information, total costs and total benefits when CNB is negative. The

payback period calculation results with the help of Ms. Excel are presented on the table 2. From the

information in that table, it is n that the number of years at the time of the negative CNB is 7 years,

then the payback period will be calculated as follows:

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 = 𝑇𝑝−1 +∑ 𝑇𝐶𝑖𝑐𝑝−1 − ∑ 𝐵𝑖𝑐𝑝−1

𝐵𝑃

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 = 7 +18.222.500 − 17.793.000

10.719.000

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 = 7,04 ≈ 7 𝑡𝑎ℎ𝑢𝑛.

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Thus, the fastest time required for a project to return its initial investment and working capital

is 7 years, so the payback period for investment is shorter than the economic life of the project which

is 15 years. Repayment periods or payback periods are during the period of net cash flow can cover

the entire costs or investment costs (Rizal et al., 2017).

Break Event Point (BEP)

The components of calculating the break event point analysis include the results of total costs,

productions and selling prices of cocoa (Thoriq et al., 2019). The analysis of BEP consists of BEP

acceptance, BEP production and BEP price, the following table of variables is require in calculating

BEP and the results of BEP calculations.

Table 4. Variables Calculating BEP for Cocoa Farming

Variable Amount (IDR)

Fixed Cost 63,314,000

Average Variable Cost (AVC) 1,405,100

Total Revenue (Benefit) 229,284,000

Price (Harga Produk) 27,000

Jumlah Produksi (Y) 8,492

Source: Praimary data analyzed, 2020

To calculate the break event point is used the average value of all components of the break event

point analysis calculation, and the results obtained from the break event point calculation are:

Table 5. Result of Comparative Analysis of Cocoa Farming BEP

Annotation Business

Conditions

BEP Appropriateness

Price (IDR/Kg) 27,000 7,456 Well worth it

Production (Kg/Ha) 8492 (46) Well worth it

Revenue (IDR) 229,984,000 63,704,394 Well worth it

Source: Primary data analyzed, 2020

Based on the table 5 calculations of the BEP value, it is obtained that the BEP cocoa price is

7.456 IDR, the calculation of BEP cocoa production is obtained about (46) kg and the calculation of

BEP cocoa revenue is obtained about 63,704,394 IDR to note that according to the results of the BEP

analysis, the cocoa farming in Kare Village is worth to be fermented cocoa production. With this

current business conditions, the price of cocoa is 27,000 IDR, the number of cocoa production is

8,492 kg / ha and cocoa revenue is 229,984,000 IDR. The interpretation of the figures above is, if

the selling price of cocoa beans and the volume of production in each farmer group is smaller than

these values, so the cocoa plantation farming is no longer provididing benefits for farmers.

Sensitivity Analysis

In the sensitivity analysis by increasing input costs, known how far the cocoa farming is still

feasible to be defended if there is an increase in input costs. This analysis is carried out with the

assumption that other factors do not affect (ceteris paribus) (Kusmayadi et al., 2017). The scenario

sensitivity analysis to a decrease in production of 16% is based on the decrease in the average

production that has occurred in cocoa farming in the village, it is assumed that the plant is attacked

by plant bugs causing a decrease in cocoa production.

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Table 6. Financial Feasibility Anaysis (NPV, Net B/C Ratio Dan IRR) for Cocoa Farm in 1 Ha in

Kare Village, Kare District, Madiun Regency Using a Production Reduction Scenari

No Parameter

Circumstances

Normal 16% Decrease in

Production

1 Net Present Value (NPV) 73.637.133 55.991.297

2 Net BCR 9,8 7,5

3 Internal Rate of Return (IRR) 32,79% 28,9%

4 Payback Period 7 years 7,4 years

5 Break Event Point (BEP)

a. BEP Reception 63.704.394 63.779.301

b. BEP Production -46 -46

c. BEP Price 7.456 8.876 Source: Primary data analyzed, 2020

Based on table 6, it can be seen that a decrease in the amount of production by 16% with input

costs that still result in a decrease in the value of NPV, Net BCR, and IRR, but even so the criteria

index is still in a proper assessment or decision and business activities can be continued.

Marketing Chain

The results of the marketing chain analysis show that there are several marketing institutions

involved in the marketing chain for fermented cocoa in Kare Village, Kare District, Madiun Regency,

starting from farmers as producers of fermented cocoa, village collectors, wholesalers and

MSMEs/Industries. Two forms of cocoa commodity marketing chain in Kare Village, Kare District,

Madiun Regency are presented in Image 1.

Image 1. Forms of Cocoa Commodity Marketing Chain in Kare Village

Annotation:

: Chain I

: Chain II

Marketing Chain I: Village collectors buy from farmers, village collectors sell to big

traders/wholesalers, and the wholesalers sell to MSEMs/Industries.

Marketing Chain II: Farmers directly sell to wholesalers, the wholesalers sell to

MSMEs/Industries.

Marketing Margin

Marketing margin has an important role in determining the amount of the farmer's income,

because it immediately affects to the price formation at the producer farmer level (L. Saleh, 2017).

Other than that, this analysis also wants to know the benefits and costs incurred by each marketing

institutions (Mohoridju et al., 2019). Costs incurred by farmers in general are harvesting costs, fruit

breaking, fermentation, drying and transportation costs to the market (Pangkey et al., 2018).

Farmer Village Collector

Wholesaler MSMEs/

Industry

T h e 2 n d I n t e r n a t i o n a l C o n f e r e n c e s o f A g r i c u l t u r e ( I C A - 2 )

Sub-Theme: Strategy and Food Security Policy 158

Table 7. Analysis of Cocoa Marketing Margin Per Channel in Kare Village, Kare District, Madiun

Regency

Marketing Chain I

No Description Unit Value (IDR)

1. Farmer

Total Cost IDR / Kg 900,00

Selling Price IDR / Kg 27.000,00

2. Village Collectors

Total Cost IDR / Kg 470,00

Selling Price IDR / Kg 28.000,00

Marketing Margin IDR / Kg 1,000,00

3. Big Trader/Wholesaler

Total Cost IDR / Kg 140,00

Selling Price IDR / Kg 32.000,00

Marketing Chain IDR / Kg 4.000,00

Total Margin IDR / Kg 5.000,00

Marketing Chain II

1. Farmer

Total Cost IDR / Kg 660,00

Selling Price IDR / Kg 27.000,00

2. Vilage Collectors

Total Cost IDR / Kg 210,00

Selling Price IDR / Kg 30.000,00

Marketing Margin IDR / Kg 2,000,00

Total Margin 2.000,00 Source: Primary data analyzed, 2020 *) presented in IDR/Rupiah

Farmer's share shows the share of value obtained by farmers from marketing activities (Alam

& Sutanto, 2019). The value paid by consumers is not fully accepted by farmers due to the marketing

margin which reduces the share of the value received by the farmer.

Table 8. Analysis of Farmer’s Share in the Marketing Chain of Fermented cocoa

Marketing

Chain

Prices at Farmer Level

(IDR/Kg)

Prices in MSMEs/

Agroindustry

(IDR/Kg)

Farmer’s

Share (%)

I 27,000 32,000 84,37

II 28,000 30,000 93,33 Source: Primary data analyzed, 2020

The highest channel for farmer's share is 93.33 percent, that’s the direct sales from farmers to

wholesalers. Farmer's share has a negative correlation with marketing margin, the bigger the

farmer's share, the bigger the farmer's share will be.

V. CONCLUSION

The cultivation of fermented cocoa farming in Kare village, Kare District, Madiun Regency is

feasible to develop financially, because the NPV > 0, Net B/C > 1, IRR > the prevailing interest rate,

and the return on capital is less than 20 years. There are two forms of marketing chain for cocoa

commodities in Kare village, Kare District, Madiun Regency, those are: (1) marketing chain 1:

farmers - village collectors - wholesalers - industry; (2) marketing chain 2: farmers - wholesalers -

T h e 2 n d I n t e r n a t i o n a l C o n f e r e n c e s o f A g r i c u l t u r e ( I C A - 2 )

Sub-Theme: Strategy and Food Security Policy 159

MSMEs. It can be known well from the two marketing chains that based on the marketing margin,

the marketing chain 2 gives a higher price share to farmers.

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