Value Chain Implementation in Rural-Scale Integrated Coconut Farming System in North Sulawesi Province, Indonesia

Abstract

The value of coconut production in North Sulawesi reaches almost 10% of Indonesia’s total coconut production, and more than 95% is managed by farmers. The main problem in coconut development is that the management of coconut cultivation is still traditional, and the quality of the products produced is still low, so that coconut commodities that are multipurpose relatively have no added value. The economic value of coconut is still very dependent on primary products, namely coconut seeds and copra. To increase farmers‘income, the solution that can be taken is to implement the value chain in integrated coconut farming by diversifying coconut products. This is a review chapter that aims to present the implementation of value chain analysis approach and formulate the strategic development of integrated coconut farming system on a rural scale in the North Sulawesi province. Implementation of the value chain by diversifying coconut commodities can provide added value. By managing an integrated coconut farm that produces 3–5 processed products, the economic value of coconut will increase by about 5–6 times. Several issues become obstacles in the development of the value chain, including the lack of farmer participation in the modern chain, weak market power and market access, weak contractual relationship strength, and weak agricultural sector development orientation in the provision of employment.

1. Introduction

The role of the agricultural sector in Indonesia contributes significantly to development and the national economy. It absorbed 29.769% of the total labor force in Indonesia and contributed 9.85% to the national GDP in 2021 [1]. To realize advanced, independent, and modern agriculture as the ideals of Indonesia’s agricultural development in the future to improve the economy and welfare of farmers, the priority aspect is to increase productivity and added value of agricultural products.

In the midst of increasing activity of foreign consumer good import flows, agricultural commodities, especially plantation sub-sector commodities, in Indonesia are still the leading commodities in the international world. Among them is the coconut plant, which is a plantation plant with the largest area in Indonesia. The total area of coconut in 2018 reached 3,417,951 hectares, of which about 99% or an area of 3,385,085 hectares was cultivated by smallholder plantations, cultivated in monoculture or overlapping with other crops; large state plantations covered an area of 3482 hectares or 0.11%, and large private plantations covered an area of 29,024 hectares or 0.85%, with national coconut production reaching 2.85 million tons in 2021 [2].

The North Sulawesi province is one of the coconut production centers in Indonesia with a coconut plant population in 2018 recorded over an area of 273,331 hectares and is the second largest area after Riau province [2]. The value of coconut production in North Sulawesi reaches almost 10% of the total Indonesian coconut production, and more than 95% is managed by farming communities; until now, the acquisition of value from various products has been limited to primary products. Therefore, farmers‘income from the business sector is still relatively low, not comparable to the potential resources available to produce various competitive and economically valuable products.

The main problem is that generally the farming community finds it difficult to get out of the condition of product value acquisition; farmers rely only on the value of primary products. Farmers who practice coconut monoculture and produce copra or coconut granules as their main product can obtain a net profit of Rp 9,000,000 per hectare per year or around Rp 750,000 per hectare per month. The productivity potential is approximately 2 tons of copra per hectare per year or around 8,000 coconuts, with a copra selling price of around Rp 10,000 per kilogram. This condition has an impact on the existence of farmers who are becoming increasingly helpless, and there tend to be more and more coconut farmers who become poor. Allorerung et al. [3] reported the results of research in North Sulawesi and Riau, which showed that the socioeconomic level of coconut farmers is below the poverty line, which is less than US$ 200/capita/year.

To overcome the problems mentioned above, initially, the farming community must get out of the discomfort zone by empowering all existing potential through a process that will face various obstacles, so a persistent, resilient, and confident attitude is needed. The success of each farm is highly dependent on the ability of each farmer in the management of the farm. Hernando [4] stated that agricultural management is the ability of farmers to determine, organize, and coordinate the factors of production that are best controlled and able to provide agricultural production as expected. It is further stated that the measure of management success is the productivity of each factor and the productivity of its business.

In the next few years, demand for various coconut products is expected to increase. To anticipate this, increasing the income of coconut farming needs to be done through the value chain approach. Value chain analysis is used as a strategy analysis tool to better understand competitive advantage, where a manufacturer or firm can increase added value or lower costs to make the business more competitive [5]. This chapter is a review that aims to present the implementation of value chain analysis approach and formulate the strategic development of integrated coconut farming system in the North Sulawesi province.

2. Methodological approach

This chapter uses a research design with a scientific review method. This method is used to conduct descriptive exploration and analysis of data on the topic discussed, which are sourced from various scientific references, such as journals, books, proceedings, electronic and print media, and other relevant published sources. The steps of the data analysis process are uniting and equalizing into complementary data. Collecting various data obtained is described descriptively to find problems and solutions for future development. The results of the identification and description of the data are presented in the form of charts or flowcharts.

3. Results and discussion

3.1 Concept and stages of implementation of value chain analysis

The value chain approach can help to understand how trends reshape the value chain, identify who is leading and addressing them, answer broad and specific questions, and take a relationship/friendship approach. Poole [6] states that the value chain concept offers an analytical approach to explore market-agriculture-food relations, to assess potential cross-sectoral contributions, and to identify incentives and barriers in production and consumption.

Designing value chain analysis, among others, by improving the ability of local companies to compete, increasing returns for consumers, encouraging targeted policies, and empowering the participation of farmers in rural areas to engage in all productive activities. Stringer [7] stated that value chain analysis is one of the concepts of how to add activities and enlarge the value of products to the maximum in the supply chain. Value chain analysis offers the opportunity to maintain competitive advantage through a relational approach. Value chain analysis focuses on end users and chain organizations to meet the needs and desires of consumers [8].

The main objective of value chain management is to increase or maximize profits and minimize financing. Value chain analysis always refers to how much and how long it takes to prepare or present goods for sale. Creating jobs and local income always refer to the value chain with an understanding of what the market will pay [7].

The amount of value of a product depends a lot on the outside of the system, especially knowing what exactly the needs and desires of consumers are. Kotler and Keller [9] states that marketing and consumer behavior are derived from the marketing concept that states that the essence of marketing is meeting the needs of consumers, creating value that fits their needs, and retaining customers. To obtain the value of the final product in marketing, the dominant result is determined by the degree to which the producer knows the consumer’s desire for a product and a variety of products.

The value chain provides a vehicle for identifying ways to create differentiation through value development [10]. Value chain activities are categorized into primary activities and supporting activities. Supporting activities bring together functions further dividing the specific main activities in the value chain would be beneficial.

To realize the maximum product value, it is necessary to know what the needs and desires of consumers are; then, the maximum economic value is more focused on the desires and needs of consumers. The development of smallholder oil palm plantations will generate maximum product value and income if sub-systems in the distribution channel chain can be created/added to various productive activities and if all of them are interrelated and strengthened.

Several problems become obstacles in the development of the value chain, including the lack of participation of farmers in the modern chain, weak market power and marketing access, the absence of certification, weak strength of relationships through contractual agreements, and weak orientation of regional development in the agricultural sector in the provision of employment. Some of the fundamental challenges for the main actors include not believing in payment, not being able to supply inputs because working capital is limited, and not being able to supply input quality, technology, and management. The solution should be to build economic and social institutions for farmers, such as through a combination of farmer groups oriented to developing business partnerships based on mutual agreements, negotiating to rebuild trust in order to produce sustainably with timely payment systems, escorting input allocation, and escorting management and technology.

The stages of value added analysis activities are as follows: (1) present a real problem situation; (2) analyze the condition of the situation with stakeholders by analyzing the inventory of value chains, institutions, and social systems; (3) organize the sequence of problems encountered; (4) make improvements and solutions to existing problems through system identification, model design, and improvement suggestions in several stages of testing; (5) distinguish between the model designed with the real situation in the field; (6) systematic changes in desires that allow, and (7) act/implement activities to change things to be more productive to obtain added value.

Adding value through process innovation can be done, among others, via a good service system, looking different, promotion, building distribution channels, doing some marketing methods, transportation management, storage systems, cooling systems, quality assurance and insurance, application of production technology, post-harvest handling, cleaning, harvesting techniques, application of culture, use of good plant materials, organization of the growing season, certification, and labor management. Adding value through product innovation can be done in the form of product attributes, originality information, appropriate ingredients, mixtures and packaging boxes, packaging forms, product identity explanations, health information, yield quality, use of appropriate plant varieties, appropriate timing, consistency of product provision, and product volume.

3.2 Application of value chain In oil palm cultivation

The coconut crop in the North Sulawesi province is one of the leading commodities of the region, which has the largest area and makes up the main source of income of the farming community and contributes dominantly to the economic growth of the region. The reality of the field shows that factually it is not directly proportional to the living conditions of the farming community as coconut owners.

The production of coconut farming systems is sold by most farmers only in the form of coconut or copra granules. By relying on coconut products, the economic value of coconut is mostly only enjoyed by intermediaries, especially producers. The incommensurate acquisition of added value gives an idea that the coconut agribusiness system in this area is still conditioned to its spread [11], which is characterized by weak or no functional relationship between each level of business. In this case, farmers only become suppliers of raw materials, and intermediaries/producers accommodate primary products for further processing or distribution to other parties for maximum profit.

In general, coconut farmers sell individual coconut products directly to traders. Until now, the coconut marketing chain produced by farmers has been quite long, so there needs to be an effort to take efficient coconut marketing actions without going through some unnecessary intermediaries. The activity flow of copra value chain actors from farmers in North Sulawesi is shown in Figure 1.

Figure 1.

Flow of activity of actors in the copra value chain in North Sulawesi.

Price difference in the form of copra products between village traders and wholesalers or manufacturers is usually around Rp 300-Rp 400/kg, and in the form of granular products, there is a difference of around Rp 100-Rp 150/kg. If farmers have as much as 4000 kg of copra/year, then every year, there is an opportunity for additional income through a collective sales system. For sales like this, each farming family will have an additional income of around Rp 1.2-Rp 1.6 million/year for copra and Rp 1.6-Rp 2.4 million/year for sand coconut. Assuming in 1 village, there is a copra equivalent production of 800 tons, by implementing a collective sales system, there will be an increase in revenue of Rp 240-Rp 320 million/village/year for copra and Rp 320 million-Rp 480 million/village/year for coconut sand.

Field facts to date show that the mainstay of obtaining the value of coconut products is still very dependent on primary products in the form of coconut granules or copra [12]. The shape and color of copra products sold by coconut farmers are still the same as the shape and color of copra about 30–40 years ago. To overcome the low income of farmers, it is necessary to diversify and create the value of processed coconut products to increase the value of processed coconut products so that farmers not only focus on selling coconut as a primary product but also can process it into other products that have high economic value and will ultimately have an impact on increasing farmers‘income. Diversification is the diversification of products to meet consumer needs.

Some forms of coconut processing products that can provide added value include (a) white copra, (b) virgin coconut oil (VCO), (c) nata de coco, (d) shell charcoal, (E) vinegar acid, (f) coir fiber, and (f) application of diversification efforts in coconut plantation areas with other types of crops or livestock. Diversification and value creation of processed coconut products on a rural scale is seen in Figure 2.

Figure 2.

Diversification and value creation of processed coconut products on a rural scale.

3.2.1 White copra

White copra is a type of quality copra produced from fresh fruit pulp through a drying/organizing process at a temperature of 60–75°C; and has low moisture content of between 5 and 6%, free from boletus (mushrooms); and has a much whiter and cleaner color. By applying coconut processing into white copra products, assuming that every farmer has a coconut with an average product of 4 tons/year equivalent to copra, there can be an added value of the price difference with ordinary copra of Rp 700–Rp 1000/kg. By implementing a white copra processing system, each farmer has an additional income opportunity of around Rp 2,400,000-Rp 4000,000/year. If a village produces 800 tons of copra per year, they can increase their income by approximately Rp 560,000,000 to Rp 800,000,000 per year by processing the copra into white copra.

Wardanu and Uliyanti [13] reported that the result of his research to obtain the value of efficiency or Revenue Cost Ratio (R/C) was 1.61, which means that every Rp 1 cost incurred for the processing of white copra will generate a gross income of Rp 1.61 and a net profit of Rp 0.61. Ha shows that the business of processing white copra is efficient or commensurate with the company, where the income obtained amounted to Rp 5,650,000.00/production. At the same time, the total costs incurred amounted to Rp 15,929,433. 33 per production to obtain a profit of Rp 9,720,566. 67/production.

3.2.2 Virgin coconut oil (VCO)

Virgin coconut oil or better known as (VCO) is oil produced from the purification of coconut milk by a certain method to separate the chemical elements gradually [14]. If 25% of coconut products in a village can be processed into pure coconut oil (VCO), with an equivalent of 200 tons of coconut production per year, approximately 6,500 liters of VCO can be produced, worth around Rp 1.85 billion per year per village at a price of Rp 30,000 per liter. The potential difference in value is quite large compared to just making copra worth more than Rp 1 billion/year/village.

The results of the financial feasibility analysis showed that the BCR value of the VCO processing industry was greater than 1 (2.08–2.28), as well as the Net Present Value (NPV) was positive. This result illustrates that the amount of net income is much greater than the amount of expenses, or it is profitable to strive for. Meanwhile, the Internal Rate of Return (IRR) value shows a number higher than the discount factor set, namely 12%, 15%, and 20%. Under the conditions of prices and products specified in the analysis, IRR values of 35.5% and 39.4% or greater than 20% are obtained, which means that the investments allocated to the business of this industry will provide the maximum net profit, assuming guaranteed marketing continuity. The value of coconut production through the implementation of this business reached around Rp 1665/grain, and farmers‘net profit reached Rp 955/grain.

3.2.3 Nata de coco

Nata de coco is a food product made from coconut water. Coconut water is waste from coconuts, potentially generating added value after intervention with treatment technology. The results of the financial feasibility analysis showed that the Benefit Cost Ratio (BCR) value of Nata de coco processing industry was greater than 1 (2.32–2.48), as well as the NPV value was positive. This result illustrates that the amount of net receipts is much higher compared to the amount of expenses, or it is profitable to strive for. Meanwhile, the IRR value shows a number higher than the discount factor set, namely 12%, 15%, and 20%. In the conditions of prices and products specified in the analysis, obtained IRR of 35.3% and 39.7% or greater than 20% means that the investment allocated to the industrial business provides the maximum profit, assuming the marketing of the resulting product is guaranteed. The implementation of this business obtains additional value of coconut production of around Rp 575/grain, and farmers obtain additional net profit of RP 350/grain.

Some results of the study reported that the calculation of value-added analysis of processing Nata de coco with the use of coconut water as much as 400 liters of Rp 350/liter produces Nata de coco of 167.73 kg, with a selling price of Rp 15,000/Kg [15]. Furthermore, it was stated that the average income in the Nata de coco processing business by the household industry was economically profitable with an income level of Rp 2,159,445.

3.2.4 Shell charcoal

Shell charcoal is charcoal made by carbonization of coconut shell/shell [16]. In North Sulawesi, a copra-producing region, coconut shells are found in large quantities, which is the result of copra making. During this time, the shell was used as fuel in the manufacture of copra, but most of the rest was wasted. The huge potential of shell production needs to be utilized for productive activities to increase its added value because coconut shell processing technology is relatively simple and can be implemented by small businesses [17].

The economic value of coconut shell can be increased by using it as an industrial raw material, for example, as a raw material for making activated charcoal. Activated charcoal is indispensable in the cooking oil processing, sugar, and other food and non-food industries, because of the ability of activated charcoal to absorb color, gas, and other impurities [18]. With the increasing need for activated charcoal, the need for coconut shell charcoal, which is the raw material for making activated charcoal, will also increase.

The results of economic analysis showed that the BCR value of shell charcoal processing industry is greater than 1 (1.28–1.33), as well as a positive NPV value. This result illustrates that the amount of net receipts is higher than the amount of expenses, or it is profitable to strive for. Meanwhile, the IRR value shows a number higher than the discount factor set at 12%, 15%, and 20%. In the conditions of prices and products determined in the analysis, the obtained IRR value of 36.2% and 39.7% or greater than 20% means that the investment allocated to the business of this industry will provide substantial benefits, assuming the marketing of its products is guaranteed. The application of this business generates additional value of coconut production of around Rp 85/grain, and additional net profit of Rp 22/grain is obtained by farmers.

The results of several studies show that the average total cost incurred in the coconut shell charcoal business is Rp 2,8.34.586,57/production; the average income received by coconut shell charcoal businesses is Rp 5,748,750,00/production. Meanwhile, the average income is Rp. 2,914,163.43/production. The value of RCR (Return Cost Ratio) in the manufacture of coconut shell charcoal is 2.02. This indicates that the effort is feasible (RCR > 1). The added value for charcoal shell making business is Rp. 799.02/Kg [19].

3.2.5 Vinegar acid

Food processing derived from coconut water is processed not only into Nata De coco but also in the form of vinegar acid. One country that uses the raw material of coconut water in the manufacture of vinegar is the Philippines by applying a fermentation process to it.

Vinegar or acetic acid is a liquid that tastes sour and is made through the process of alcoholic fermentation. Acetic acid is commonly used for household purposes as a flavoring agent in food. Acetic acid can be prepared from ethanol-containing substrates, which can be obtained from a wide variety of materials, one of which is coconut water. In North Sulawesi, the availability of coconut water in abundance is a potential that has not been fully utilized. Coconut water can be made into vinegar traditionally by the community through fermentation techniques.

The analysis showed that the industrial BCR value of vinegar acid was greater than 1 (2.1–2.8), as well as a positive NPV value. This result illustrates that the amount of net income is much greater than the amount of expenses, or it is profitable to strive for. Meanwhile, the IRR value shows a number higher than the discount factor set, namely 12%, 15%, and 20%. In the condition of product prices determined in the analysis, IRR values of 36.5% and 39.5% or greater than 20% are obtained, which means that the investment allocated to this industrial business will provide maximum net profit, assuming the continuity of marketing of its products is guaranteed. The application of this business can obtain additional value of coconut production of around Rp 760/grain and additional net profit of Rp 500/grain for farmers.

3.2.6 Coir fiber

Coconut fiber is a by-product of coconut processing products derived from the separation process of fruit-skin fibers. The content of coir fiber in coconut is a fairly large part, which is 35% of the overall weight of coconut. Each coconut grain contains an average of 525 grams of fiber (75% coir) and 175 grams of cork (25% coir).

The results of observations in the field show that coconut fiber is mostly discarded at the time of manufacture of copra, or left alone, to rot and dry under coconut stands. Manikantan et al. [20] argued that the coconut belt still has a fairly good economic value. Coconut fiber can be obtained. Coir fiber for coconut-producing neighboring countries has become an export commodity that supplies the world’s needs. With this phenomenon, it is increasingly clear that this fact is a great potential for the development of the coir management industry, which is then expected to generate increased income, which has a positive effect on increasing the value of companies that can support the lives of lower- and middle-economic communities that use coconut coir as their livelihood [21].

The results of economic analysis showed that the BCR value of the coir processing industry >1 (1.60–1.69), as well as the NPV value was positive. This result illustrates that the amount of net income is much greater than the amount of expenses, or it is profitable to strive for. Meanwhile, the IRR value shows a number higher than the discount factor set at 12%, 15%, and 20%. At the price and product conditions determined in the analysis, the obtained IRR values of 34.6% and 39.8% or greater than 20% mean that the investment allocated to the business of this industry will provide substantial benefits, assuming the continuity of product marketing is guaranteed. The application of this business to obtain additional coconut production generates value of about Rp 285/grain and additional net profit of RP 122/grain for farmers.

Applied to an integrated coconut industry business like this, when farmers have an area of 1 ha of coconut with copra equivalent productivity of 2 tons/ha/year or 8000 grains/ha/year, farmers get a net profit of Rp 12,000,000, compared with the present condition of grain sales, where they only get a net profit of Rp 1.800.000/ha/year. By building an integrated coconut industry business like this, the value of coconut production increases by about 5–7 times the value of primary production, industrial capacity of 1500 grains/day or 450,000 grains per year, or equivalent to 112.5 tons of copra/year.

The results of research [22] showed that the processing of coconut fiber into coconut fiber in the integrated agro-industrial business area (strong) in the District of West Coast could provide added value for the processor of Rp 1.890 for each kilogram of raw materials and provide an increase in added value of 57.55 percent.

3.2.7 Application of diversification efforts in coconut plantation areas with other types of crops or livestock

Diversification is the diversification of products to meet consumer needs. This effort is made to generate added value and increase sales [23]. With this, integration patterns, land production, and productivity can be increased, or farmers‘income can also increase and be more resistant to various risks, such as seasonality, price, and income. Farmers obtained a net profit of Rp 9 million/ha/year or Rp 750 thousand/ha/month from monoculture coconut cultivation with copra primary products or granulated coconut with a productivity potential of 2 tons of copra/ha/year (approximately 8 thousand grains) at a copra price of Rp 10 thousand/kg. Coconut prices now fluctuate so much that when the price of copra is only Rp 5000 thousand/kg net, profit obtained is 4.5 million/ha/year or Rp 375,000/ha/month. This is in line with what Mahmud [24] stated that the coconut monoculture business only earns revenue of around Rp 2.5 million/ha/year or Rp 200,000/month.

Business development integration of coconut plants with livestock in essence optimally utilizes coconut crop area so that the feed available in quantity and quality is in accordance with the needs of the cultivated livestock. The more livestock that want to be cultivated, the more feed products produced per unit area of coconut farming. The results of observations in various areas of coconut centers where farmers cultivate cattle in coconut plantation areas, with traditionally only 2 cows, show that every year the value of income from livestock business exceeds the income from the value of coconut production (primary product).

Kindangen et al. [25] reported the results of their research on the feasibility of some business patterns of integration of coconut crops with livestock. In the integration business pattern, a coconut + corn + cow (3 parents) in the 1st year earned a profit of Rp 525,000, in the 3rd year Rp 11.285,000, in the 7th year Rp 15,005,000/ha/year, and in the 10th year Rp 24,450,000/ha/year. Business integration pattern b, coconut + corn + cow (8 parents) + grass king, in the 1st year obtained a negative profit above Rp 4000,000; in the 3rd and 5th year, it obtained a profit above Rp 10,000,000 and Rp 11,000,000/year, respectively. Furthermore, in the 7th and 9th year, the profit became more than 2 times from each has reached more than Rp 23,000,000/year. Most of the labor can be family labor, especially for the maintenance of livestock, so that family income becomes greater. In the 3rd to 5th year, the total family income reached above Rp 16,000,000/year, and in the 7th to 9th year, it reached above Rp 28,000,000/year. The business implementation is designed for a 10-year period, and during the 3rd to 5th year, the plan resulted in an added value that was almost four times greater than that of a coconut monoculture alone. By the 7th to 9th year, the added value had increased to more than seven times its original value. Overall, through integration with cattle, the added value is almost 2 times, starting from the 3rd to the 5th year, and starting from the 7th year, the added value reaches 3 times more than just the integration of coconut + corn.

The application of this business pattern contributes to the income from cattle business to be greater, with the proportion reaching 75%. In the integration business (pattern C) coconut + grass king + gamal/lamtoro, the early years of the period required considerable initial funds of more than Rp 80,000,000, especially due to investment for 20 cows/year, and starting from the 3rd year, a profit of more than Rp 28,000,000/year was reached, and this number was reached until the 5th year. Furthermore, starting from the 6th year, profits of more than Rp 50,000,000/year were obtained.

3.3 Value chain implementation prospects

The potential to obtain a minimum income value of about 3–5 times the existing conditions is very likely to be achieved through the development of processing activities of some products, and the exploitation of other crops and livestock in the coconut plantation area. The development of various productive business activities will be faster if supported by building and empowering economic and social institutions toward village-owned enterprises. The application of productive coconut farming that can produce diverse products coupled with the processing of various coconut products will gain added value for farmers. If the potential of coconut copra is equivalent to 800 tons/village as mentioned earlier, it means that during this time, the coconut farming community will have lost about ten billion rupiah/village. If only all the leading commodities in this area of the development system approach the value chain, then during this period in every village, coconut centers will have lost tens of billions of dollars. It must be realized that the result of this kind of helplessness is the main cause that more and more people who continue to pursue business in the agricultural sector become poor, even very poor.

The development of coconut farming through the value chain approach is identical to the business development of farming communities in rural areas in the future. Therefore, if this business starts to be pursued now and is carried out consistently by all relevant parties and is sustainable and fully supported by all relevant institutions, then only, in a relatively short time, there will be a real improvement in the economy of the community and the region. With the establishment of economic institutions, including the seriousness of the government to facilitate it, it can be predicted that the condition of the farming community in the next 5.10–20 years is likely to be better. Dornan and Maxwell [26] argue that true success is determined by our attitude. The success we achieve depends more on the way we think than any other factor.

Success in the development of various agricultural commodities, the human factor being the most decisive in this regard, concerns the attitude of the main actors, especially the farming community itself and related supporting elements. In the early stages, the attitude of farmers’ institutional managers is decisive for the achievement of success. The main thing that must be instilled in the institutional managers of agricultural communities is to respond positively to this institution as the main foundation for realizing the welfare of agricultural communities in the future. Formation of professional business people is a long process; its formation can only be done through practicing the business world through the processes of structuring, communication, and management systems and rational leadership, as well as a steady career plan [27].

Therefore, it is necessary for all members of an institution to learn and apply a positive thinking attitude when facing various challenges in the development of agricultural businesses with measurable results. As institutional managers, their responsibility at the initial stage is to create a simple business plan in their environment that will then be conditioned per the role of each actor to behave and behave positively so that their development is better in the future. The future of farmers in rural areas is expected to be about not only the economic growth of each farmer and region but also more than that. The future of farmers is expected to improve measurable welfare, realizing the guarantee of a decent farming family life in a sustainable manner.

The North Sulawesi province has several villages around 1500, and about 50–60% of them have coconut planting area, and future development should be such that each village can design the development of coconut farming through the value chain approach, at the initial stage, with the acquisition of added value of an average of Rp 300 million/village/year and then the acquisition of added value of all existing villages of Rp 450 billion/year or about 1.8–2% of Gross Domestic Product (GDP) at the prevailing price. The acquisition of added value from this amount will allow each village to gradually build a village-owned enterprise. In the 2004 regional autonomy law, it is stated that “villages can establish village-owned enterprises based on the needs and potential of the village” [28]. Therefore, any combination of existing farmer groups can design their income per farmer household in the short term (1–2 years), medium term (5 years), and long term (>10 years).

Through the presentation of value chain analysis, it is expected that the insight of the farming community will be open so that though farmer groups and farmer group associations immediately design it for each member in the next 5 years, a minimum income of Rp 50 million/ha/year will be obtained, and there will be a real increase in each period over the next 5 years. This will soon happen en masse if this effort becomes a program in every coconut center village that will be designed for development every 5 years along with the target type and number of products to be produced. The existence of the authority of regional autonomy should be the economic condition of each village where all the assets of the farming community need to be designed to achieve the target results for each year.

3.4 Strategic increase in the added value of coconut farming

Coconut farming, which is the mainstay of increasing farmers‘income, in the future is faced with various challenges that hinder its development, so anticipatory steps are needed to develop effective strategies, namely operational steps that can maintain and even increase the added value of coconut farming.

Challenges that are predicted to arise in the development of coconut farming are related to the provision of raw materials for coconuts. Many coconut plants are now unproductive due to the relatively old age of the plant and disruption of plant pest organisms. This condition aggravates the achievement of coconut production, whose productivity is also not optimal because the coconut seeds planted are not superior varieties, but random seeds.

Many coconut farming systems still focus on primary products because the downstream industries that process coconut development are still limited. Coconut is known as a versatile tree that has not been managed optimally. The economic utilization of coconut is mainly focused on its fruit, shell, fiber, and sticks. This traditional approach reinforces conventional coconut farming activities. However, at the macro level, there are challenges due to the lack of government support for coconut farmers. Agricultural development priorities are still oriented towards staple food production, particularly rice.

Nasution and Rachmat [29] conducted research on aspects that hinder the development of oil palm related to market demand, lack of technological adaptation, and lack of capital controls. On the prediction of development challenges and constraints, coconut farming solutions include coconut cultivation, plant rejuvenation, and diversification of coconut processing. Based on these lessons, we developed strategies to improve added value of coconut products, which are differentiated according to upstream sub-sectors, aquaculture, and downstream sub-sectors.

In the upstream sub-sector, efforts to increase added value are focused on the introduction of superior seed use, provision of rejuvenation, rehabilitation, expansion, empowerment of farmer groups, provision of supporting facilities, improving the quality of post-harvest tools, and capital facilitation and initiatives to form farmer corporations. Local governments are expected to make efforts to trigger copra prices by developing the coconut cooking oil industry on the scale of farmer groups, namely by assisting farmer groups with coconut oil production machines and also through government efforts to improve the welfare of farmers [30, 31].

Anticipatory steps to maintain the continuity of coconut business development include replacing old plants and damaged plants and unproductive plants by rejuvenating plants. Although results are not obtained in the short term, at least for the long term, farmers are guaranteed to get a source of income from this coconut plant. To do rejuvenation takes approximately 4 years to produce again. Relatively long term concerns the needs and continuity of income. Therefore, while rejuvenating, farmers are encouraged to take advantage of vacant land with annuals as intercropping plants.

In a situation of decreasing prices of coconut products, including copra, efforts to reduce the risk of agricultural income through intercropping are an effective option, especially in monoculture coconut cultivation. Intercropping among coconut plants is supported by the results of Agronomic Research on monoculture plants whose land utilization is only 20 percent.

Other strategies to increase the added value of coconut farming in the upstream sub-sector are capital credit facilitation for intensification, rehabilitation, and rejuvenation; technical and institutional development of production; the existence of institutions such as “Coconut Board;” provision of Information Technology and market; improvement of the legal status of business land ownership; and infrastructure development.

Rejuvenation/rehabilitation of monoculture coconut plantations in a range of old/damaged/unproductive plant conditions, with superior varieties, through an integrative people’s agricultural diversification system is based on coconut plants, with spacing arrangements (up to 16 M x 6 m) integrated with livestock. In the subsector of cultivation, efforts are made to intensify the control of plant pest organisms and farm diversification.

Diversification of coconut farming aims to anticipate the decline in coconut farming performance. When the condition of coconut marketing goes down, farmers are still saved economically because there is a harvest of intercropping plants cultivated in the alleys of coconut plants. Vacant land between coconut trees used for crops or short-lived annuals can provide income for farming households.

The practice of diversifying coconut businesses with food crops, industrial crops, and horticultural crops has been practiced by several coconut farmers in North Sulawesi. Besides being able to obtain added value from the sale of coconut plants, the existence of intercropping plants has proven effective in improving coconut production performance. In the downstream sub-sector, increasing the added value of coconut is done by diversifying the processing results, increasing the capacity of coconut farmers, and improving the performance of market promotion.

In addition, to ensure the sustainability of coconut cultivation, it needs the support of existing institutions such as farmer groups and community economic institutions (cooperatives). Agustinus et al. [32] stated that to improve the value chain, namely to strengthen farmer groups’ existence to increase bargaining power and reduce transaction costs in marketing. Meanwhile, increased vertical coordination is carried out by building a network of partnerships with market participants and fulfilling contractual agreements in profitable markets. One of the institutional functions is as a vehicle for learning, cooperation, discussion, and capital.

The success of coconut cultivation is not only determined by technical factors. Aspects of knowledge, attitudes, and skills of the main actors and business actors are also determining factors. Therefore, increasing the capacity of the main actors and actors of coconut cultivation is very important. Coconut plantation management by farmers is strongly influenced by coconut market conditions. In market conditions that provide attractive prices, farmers generally manage coconut plantations well. The outpouring of family labor is aimed at the management of coconuts in the garden or field, since there is hope of obtaining an adequate income. However, when the market price of coconut plummeted, farmers do not pay attention to the coconut harvest. Another strategy is to encourage synergy in the development of coconut and coconut processing industries, as well as the empowerment of coconut planters through a partnership management-based economic togetherness system with institutional strengthening of farmers through community economic institutions.

4. Conclusion

Value chain approach in coconut farming system, synonymous with sustainable business development for farming communities in rural areas in the future, comes as a major actor. The implementation of the value chain provides added value in a sustainable manner and the creation of harmonious communication between coconut business actors. Value chain approach in coconut farming is still likely to be improved 3–10 times from current conditions.

The development of the maximum added value of coconut farming requires collective action through the sale of products, the purchase of production facilities, investment capital, as well as access to information about new technologies. Success in the development of coconut farming, the most decisive being human factor in this regard, concerns the attitude of the main actors, especially if the farming community itself is supported by related supporting elements. At the initial stage, the attitude of farmers’ institutional managers is decisive for the achievement of success. The main thing that must be instilled in the institutional managers of agricultural communities is to respond positively to this institution as the main foundation for realizing the welfare of agricultural communities in the future. It is hoped that this institution will become an economic and social force in the village that can access the needs of farmers in the management of coconut farming.

The future of farming communities in rural areas is expected to contribute to not only the economic growth of every farmer and region but also more than that. It is expected that there will be a measurable increase in welfare, realizing the guarantee of a decent farming family life on an ongoing basis. Using the value chain analysis approach, it is expected that the farming community will gain insight and benefit from the program. The goal is for each member of the farmer group and combined farmer group to earn a minimum income of Rp 50 million/ha/year in the next 5 years. Subsequently, the development plan will be updated every 5 years, with the target of increasing the production of goods by at least Rp 50 million/ha/year. The principle of regional autonomy should ensure the economic well-being of each village, where all the assets of the farming community should be utilized to achieve yearly results.