International Journal of Entrepreneurship (Print ISSN: 1099-9264; Online ISSN: 1939-4675)

Research Article: 2019 Vol: 23 Issue: 1S

Broiler Livestock Business Based on Partnership Cooperation in Indonesia: The Assessment of Opportunities and Business Developments

Amam, Jember University

Zaenal Fanani, Brawijaya University

Budi Hartono, Brawijaya University

Bambang Ali Nugroho, Brawijaya University

Abstract

The principle of partnership cooperation in Indonesia is based on mutual need, mutual reinforcement, and mutual benefit to both parties who conduct business cooperation. The business cooperation includes the partnership between broiler livestock business between livestock companies and farmers. This study aims to map the potential of broiler breeders partnership systems that support livestock business development and find a model for developing broiler livestock business partnership systems in Indonesia. The study was conducted in January - August 2018 in Malang Regency, East Java Province. Respondents are broiler breeders with a partnership system. The number of respondents is 126 farmers. The results show that breeders and their access to resources have an effect on the development of livestock businesses by 56.4%. The conclusion of the study shows that the development of broiler livestock business partnership system in Indonesia is significantly influenced by financial resources, economic resources, social resources, and human resources.

Keywords

Partnership System, Broiler, Resources, Breeders.

Introduction

The need of chickenfor the fulfillment of animal protein has an impact on increasing public consumption of chicken, with an average growth of 17.64%, in 2017 the consumption of chicken reaches 0.744 kg/capita/year (Ministry of Agriculture of the Republic of Indonesia, 2017). Thus, the average price of broilers at the consumer level reaches Rp 33,334/kg (Directorate General of Animal Husbandry and Animal Health, 2017). Efficient price integration policies should be established so that the price gaps between consumer and producer levels are acceptable (Setianti et al., 2016). Therefore, the poultry industry experiences a population increase of 6.82% or as much as 1.69 billion tails in line with the partnership between livestock companies and farmers. Animal husbandry business partnership in Indonesia has been regulated in the Minister of Agriculture Regulation of the Republic of Indonesia Number 13/PERMENTAN / PK.240 / 5/2017 concerning Livestock Business Partnership and Republic of Indonesia Government Regulation Number 44 of 1997 concerning Partnerships.

The principle of partnership cooperation in Indonesia is mutual need, mutual reinforcement, and mutual benefit between the parties that carry out business cooperation, including broiler livestock business with partnerships between livestock companies and farmers.

The partnership partnership in reality does not always strengthen and mutually benefit each other. Many breeders have suffered losses because of the bargaining position of low farmers, which has an effect on the sustainability of broiler livestock business and the development of broiler livestock businesses. The low bargaining power of farmers is because most production factor inputs are obtained from livestock companies, whereas production factor inputs simultaneously have a significant effect on farmers' profits (Haloho et al., 2013), while character, capacity, and conditions do not significantly affect farmer credit returns (Prasetyo et al., 2012), although the return of 5% livestock business credit will still be declared profitable when the profitability of livestock business reaches 10.34% (Dolewikou et al., 2016).

Partnership collaboration has an impact on farmers' access to resources (Mukson et al., 2017) to support agribusiness subsystems which include preproduction, marketing, and supporting services (Prasetyo et al., 2012) because the broiler livestock business partnerships are said to be feasible technical, organizational, and financial factors (Arrienda et al., 2010). Mukson et al. (2012) stated that the role of technical, social, economic, institutional, and business environment factors needs to be considered in an effort to increase business productivity and farmer income. These technical factors according to Perilla et al. (2009), among others, make their own nurseries as an initial investment step and to reduce adipocyte proliferation (Sugiharto et al., 2010), whereas according to Sumekar et al. (2013) stated that technical factors for livestock population, feed management, and mastery of breeders' technology were not optimal.

Broiler livestock business with partnership cooperation enables farmers to be able to expand the chicken marketing management by optimizing the length of fattening time. Optimization of fattening time needs to be done to increase farmer's income (Setiawan et al., 2013). Therefore, government involvement is needed to encourage the growth of the poultry industry, exploit potential new areas, and update legislation to preserve the environment. Potential investors must be encouraged to overcome price volatility (Indarsih et al., 2010).

The development of broiler livestock business partnership systems in Indonesia is inseparable from the access of farmers to various resources. These resources include financial resources, technological resources, physical resources, economic resources, environmental resources, and social resources (Syukur et al., 2014). This study aims to map the potential of broiler breeders partnership systems that support livestock business development and find a model for developing broiler livestock business partnership systems in Indonesia.

Research Methods

The study was conducted in Malang Regency, East Java Province, Indonesia from January to August 2018. Farmer data was obtained from 33 sub-districts in Malang Regency. Respondents were broiler breeders in partnership systems (total sampling). The number of respondents is 126 breeders. Data are obtained using questionnaires, interviews, and observations. The Likert scale 1 to 5 is utilized to fill the questionnaires.

Research Variables

This study consists of 8 main variables and 59 indicators. These variables are: financial resources (X1), technological resources (X2), physical resources (X3), economic resources (X4), environmental resources (X5), social resources (X6), human resources ( Z1), and development of broiler livestock business (Z1). The research variables and indicators of the research are explained in Table 1 below:

Table 1: Indicators And Research Variables
No. Variables Indicators  
1 Financial (X1) Main income X1.1
Income from broiler livestock business X1.2
Side income from non-farm businesses X1.3
Income from other livestock businesses X1.4
Income for family needs X1.5
Amount of savings X1.6
Amount of debt X1.7
Amount of debt repayment X1.8
The number of broiler populations X1.9
2 Technological Resources (X2) DOC selection technology X2.1
Feeding technology X2.2
Livestock health X2.3
Caging management X2.4
Marketing management X2.5
Body weighttarget X2.6
FCR knowledge X2.7
3 Physical Resources (X3) Home ownership X3.1
Cage ownership X3.2
Ownership of vehicles X3.3
Ownership of communication tools X3.4
Ownership of information facilities X3.5
Electricity usage X3.6
Land ownership X3.7
The use of Land X3.8
Access to water source X3.9
Access to feed sources X3.10
4 Economical Resources (X4) Formal education of farmers X4.1
Non-formal education of farmers X4.2
Involvement of siblingson work X4.3
Family health status X4.4
Family nutritional status X4.5
Residential comfort X4.6
Transfer of technology to the surrounding community X4.7
Vacation opportunity X4.8
Credibility of farmers X4.9
5 Environmental Resources (X5) Air pollution level X5.1
Level of soil pollution X5.2
Water pollution level X5.3
Sound pollution level X5.4
Utilization of livestock waste for fertilizer X5.5
Utilization of agricultural waste for feed X5.6
6 Social Resources (X6) The role of farmers in community X6.1
Relationship with other farmers X6.2
Relationship with village based civil servants X6.3
Relationship with health workers X6.4
Relationship with the livestock office X6.5
Relationship with feeding companies X6.6
Relationship with the DOC supplier company X6.7
Relationship with extension workers X6.8
Relationship with financial institutions X6.9
Relationship with marketing agencies X6.10
7 Farming/Breeder Human Resources (Z1) Intellectual quality of farmers Z1.1
Level of health of farmers Z1.2
Spiritual quality of farmers Z1.3
Language abilities Z1.4
8 Business Development (Y1) Growth of revenue Y1.1
Increasing number of broiler populations Y1.2
Growth in the number of workers Y1.3
Additional number of cages Y1.4

Data Analysis Method

Data are analyzed using the Structural Equation Model (SEM) with SmartPLS. SmartPLS is used because it is useful to strengthen weak theories and / or find a new theory (Wiyono, 2011). The specification of the relationship between latent variables and indicators in Partial Least Square (PLS) theory is called the measurement model or outer relation. Mathematically, determining the value of outer loading on the reflective indicator is as follows:

image

x and y are indicators for exogenous latent variables (ξ) and endogenous (η), while Λx and Λy are loading matrices that illustrate simple regression coefficients that connect latent variables to their indicators. Residuals are measured by ϵx and ϵy which can be interpreted as measurement errors.

PLS is designed for recursive models. Moreover, the relationship between latent variables applies that each dependent latent variable η can be specified as follows:

image

gЉ (in the form of a rotated matrix г) is a path coefficient that connects an endogenous latent variable (η) with an exogenous latent variable (ξ), whereas βji is a path coefficient that bridges an endogenous latent variable (η) with another endogenous latent variable (ξ), while the parameter ς is the inner residual variable.

Weigth Relations (WR) is the estimation of the case values of the latent variables, inner models, and outer models that provide specifications, so as to provide estimates of weight relation in the following logarithmic equation:

image

Wkb and Wki are k weigth which are used to form estimation of latent variables η and ξ. The estimation of the latent variable is linear aggregation of indicators whose weight values are acquired from the PLS estimation procedure.

Result and Discussion

Potential of Broiler Livestock Business Resources

Resources are a potential value that is owned by institutions or individuals that can be accessed and a continuing processes in their lives. The potential of these resources is obtained from the access of broiler breeders to the partnership system of various resources. These resources include financial, technological, physical, economic, environmental and social resources (Syukur et al., 2014).

The access to these resources is obtained from the results of tests using SmartPLS (Figure 1). Resources that can be accessed are resources that have the value of outer loading> 0.500 and declared valid, while the value of outer loading <0.500 is regarded as invalid and must be removed from the model because it does not support latent variables. Access to broiler breeders in partnership with resources is explained in Table 2 below:

Figure 1:Results Of Pls.

Table 2: Access To Broiler Farmers In The Partnership System For Resources
Latent Variables Indicators Outer Loading
Financial (X1) Main income(X1.1) 0.597
Income from broiler livestock business (X1.2) 0.673
Side income from non-farm businesses(X1.3) 0.798
Income from other livestock businesses(X1.4) 0.669
Amount of savings(X1.6) 0.68
The number of broiler populations(X1.9) 0.798
Technological Resources(X2) Marketing management(X2.5) 1
Physical Resources (X3) Ownership of information facilities(X3.5) 0.761
Electricity usage(X3.6) 0.917
Economical Resources (X4) Involvement of siblings on work(X4.3) 0.789
Vacation opportunity(X4.8) 0.724
Credibility of farmers(X4.9) 0.543
Environmental Resources (X5) Utilization of livestock waste for fertilizer(X5.5) 0.83
Utilization of agricultural waste for feed(X5.6) 0.827
Social Resources(X6) The role of farmers in community(X6.1) 0.569
Relations with village based civil servants(X6.3) 0.728
Relationship with health workers(X6.4) 0.696
Relationship with the livestock office(X6.5) 0.741
Relationship with feeding companies(X6.6) 0.784
Relationship with the DOC supplier company(X6.7) 0.63
Farming/Breeder Human Resources (Z1) Intellectual quality of farmers(Z1.1) 0.945
Level of health of farmers(Z1.2) 0.587
Business Development(Y1) Growth of revenue(Y1.1) 0.798
Increasing number of broiler populations(Y1.2) 0.939
Growth in the number of workers(Y1.3) 0.936
Additional number of cages(Y1.4) 0.931
Note: Outer Loading values after removing invalid indicators (<0.500)
Source: Processed data (2018)

Financial, technological, physical and economic resources have a significant positive effect on human resources. Therefore, access of broiler breeders to the partnership system of financial, technological, physical and economic resources directly affects the human resources of breeders. Broiler breedings under partnership system in Indonesia has a significant positive effect on livestock business development. This shows that the higher human resources of breeders, the chances of farmers in developing livestock businesses are also getting increased. Roessali et al. (2011) states that family carrying capacity can influence farmers' decisions to increase the scale of their business (Table 3).

Table 3: Coefficient Of Determination, Path Coefficient, And T-Statistic
Coefficient of determination
Examining Results
Farming human resources (HR) 0.705
Development of livestock business 0.564
Path coefficientand t-statistic
Endogenous Func. Direct Effect Total Effect
  Farming HR (Z1) Business Development (Y1) Business Development (Y1)
Exogenous Func. Coefficient t-value Coefficient t-value Coefficient t-value
Financial Resources X1 0.169 2.629 0.188 2.421 0.266 3.777
Technological Resources X2 0.561 6.092 0.561 0.558 0.192 3.664
Physical Resources X3 0.266 2.368 0.086 0.821 0.181 1.54
Economical Resources X4 0.199 2.312 0.238 2.445 0.329 3.548
Environmental Resources X5 0.104 1.614 0.104 1.207 0.154 2.059
Social Resources X6 -0.155 1.004 -0.1 1.651 -0.171 1.715
Note:T-Tabel = 1.660Sources: Processed Data (2018)

Financial and economic resources undoubtedly and significantly impacts on the development of broiler farming in the partnership system. Thereby, more access of farmers to financial and economic resources influences the opportunity for farmers to develop livestock businesses. Riszqina et al. (2014) states that livestock business productivity is strongly influenced by business scale. Productivity and profitability of large-scale livestock businesses is higher than that of small-scale livestock businesses (Asmara et al., 2017).

Development of Broiler Livestock Business Partnership System

Access to resources for farmers and the quality of Human Resources (HR) affect the development of broiler livestock business partnership systems in Malang Regency by 56.4%, while the remaining 43.6% is influenced by other factors not found in the model depicted in Figure 2. Ellitan (2003) states that the performance of HR and technology is influenced positively and/or negatively by accessibility to resources.

Figure 2:Results Of Bootsrap Pls

The total effect of financial resources to breeders and business development has a significant positive effect of 26.6%. This factor is supported by financial resources that have a significant positive influence on breeders' human resources and the development of broiler livestock business partnership systems in Indonesia. Sutawi (2013) states that the value of interest on bank loans shows that broiler farms, both open and closed pensions, are very flexible if funded by bank loan. This means that farmers' access to resources can influence the motivation of farmers to continue to develop their livestock business. This motivation has a significant effect on business productivity (Riszqina et al., 2014), but small-scale livestock business must also be protected and considered for the broiler livestock business (Benalywa et al., 2018).

The total effect of technology resources to breeders and business development has a significant positive effect of 19.2%. This is supported by technological resources that have a significant positive influence on breeders' HR, but not significantly assessed on business development. This means that without quality human resources, technological resources cannot guarantee the development of broiler livestock business partnership systems in Indonesia. Technology and HR performance are influenced positively and / or negatively by the availability of resources (Ellitan, 2003). This shows that farmers' access to resources can strengthen or weaken the influence of technology on HR performance. Yudiarini (2014) explains that facilities and infrastructure can guarantee the efficiency of livestock business, while at the location of research facilities and infrastructure production is the responsibility of the company.

The total effect of economic resources to breeders and business development has a significant positive effect of 32.9%. This is supported by economic resources that have a significant positive influence on livestock breeders and the development of broiler livestock business partnership systems in Indonesia. It shows that if farmers are getting richer, higher education, and have more motivations then it impacts on the farmers' decision to increase the business scale because of the support from labor with family ties (Roessali et al., 2011).

The total effect of environmental resources to breeders and business development has a significant positive effect of 15.4%. This is supported by environmental resources that have a significant positive effect on breeders' HR, but not significant on business development. This means that without quality human resources, environmental resources cannot guarantee the development of broiler livestock business partnership systems in Indonesia. Amam and Soetriono (2019) stated that livestock business development must be supported by various production facilities (resources), one of which is access to animal feed. Utilization of agricultural waste for feed and utilization of livestock manure for organic fertilizer fortified with chemical fertilizers has been shown to increase crop productivity by 39-48% (Bamualim et al., 2015), besides that farmers can also make cost efficiency on production for animal feed (Pakage et al., 2015).

The total effect from social resources to breeder HR and business development has a significant negative effect of -17.1%. This is supported by social resources that have a negative influence but are not significant to breeders' HR, but have a significant effect on business development. Although breeders' human resources are not qualified enough, but they have a lot of access to social resources, they are able to guarantee the development of broiler livestock business partnership systems in Indonesia. Priyono and Priyanto (2018) describe that the development of livestock business is hampered if there is no support of social resources in the form of farmer relationships with financial institutions. This approach is executed due to difficulties in accessing financial resources. Besides, the farmer must establish a partnership with another party. Fauzi et al. (2016) mentions that human capital or HR influences financial performance and competitive strategies.

Correlation Analysis

The results of the correlation analysis or latent variable correlation of the partnership model development of broiler livestock systems are described in Table 4 below:

Table 4: Latent Variable Correlation
  Y1 X4 X1 X5 Z1 X2 X6 X3
Y1 1.000              
X4 0.573 1.000            
X1 0.543 0.430 1.000          
X5 0.393 0.367 0.305 1.000        
Z1 0.684 0.584 0.508 0.384 1.000      
X2 0.462 0.479 0.286 0.263 0.747 1.000    
X6 0.435 0.606 0.512 0.407 0.483 0.435 1.000  
X3 0.517 0.465 0.665 0.308 0.558 0.386 0.681 1.000
Note: Results are calculated from PLS outputs after indicator testing
Sumber: Processed Data (2018)

Based on the results of the correlation analysis in Table 4, it shows that the highest positive correlation is between technology resources and breeders, namely with a coefficient of 0.747. That is, technology resources contribute significantly to breeders' human resources. Technology and HR performance are influenced positively and / or negatively by the availability of resources (Ellitan, 2003). This shows that farmers' access to resources can strengthen or weaken the influence of technology on HR performance.

Conclusion

The research findings show that breeders 'human resources and farmers' access to resources influence the development of livestock businesses by 56.4%. The development of broiler livestock business partnership systems in Indonesia is significantly influenced by financial resources, economic resources, social resources, and human resources.

Acknowledgement

The authors gratefully acknowledge the contribution and support from PT Charoen Pokphand Indonesia Tbk, Yayasan Toyota Astra, Livestock Office of Malang Regency, Office of Research and Development of Jember University, and Animal Husbandry Faculty of Brawijaya University.

References

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