Primary producers in Indonesia are in an economic position little different from their counterparts elsewhere in the developing world; they’re usually price takers, not price makers.
Frequently short of capital and desperate for cash flow they’re often forced to sell at the farm gate at the price set by the buyer.
Small farmers who can’t deliver consistent quantities of their produce at an acceptable quality are particularly vulnerable. Middlemen with cash bundle the commodity from several properties, process, package and resell in bulk.
If the farmers did their own value-adding their incomes could increase and become more stable.
That’s the thinking of Surabaya pharmacist Dr Hans Siwon who has been researching the economics of essential oil production in East Java.
His particular interest is patchouli, a plant cultivated by many farmers because it’s fast growing, easy to handle and can be harvested several times.
The leaves are dried and then steamed in a distillery to yield patchouli oil. The more sophisticated stills are made of stainless steel and pressurised. The light brown oil is widely used in the cosmetic industry and as a stabiliser in perfumes to hold their scent.
During the 1960s it became popular as the fragrance of choice for hippies.
It’s also employed in many household products. If the tissue on your desk or air-freshener in your car has a fragrance it’s probably based on patchouli oil. It’s also reported to be a component in low-tar tobaccos.
In the crude wood-fired stills found on most farms 100 kilograms of dried leaf will produce only two kilograms of oil, currently selling for around Rp 140,000 a kilo. The dregs from this process made up of hairs from the leaves and other debris also contain oil. This mix is normally thrown away.
Dr Siwon claims to have developed a simple process to retrieve the extra oil from the dregs and which could double the yield.
“Ideally this should be done in an industrial centrifuge (a high-speed spinning machine which separates solids from liquids),” he said. “However the capital cost and the maintenance and calibration skills required make this process unsuitable for farmers.
“My system applies basic filtration techniques using special paper and which can be employed with little training. There are other tricks which can improve yields – like drying the leaves in the shade, not direct sunlight and slowing down the distillation process.”
The metre-high bush is believed to have originated in India. It’s popular among small farmers because it doesn’t need pesticides and thrives without fertiliser. However it’s potassium hungry; yields can be boosted if ash from the still and processed leaves can be returned to the soil.
Dr Siwon has been conducting his research at Surabaya’s prestigious Institut Teknologi Sepuluh Nopember (ITS) for the past year with assistant Wiyono.
Dr Siwon has been working in Indonesia since 1984 at universities and as a consultant on the chemistry of natural products. His original assignment from the Dutch government was to investigate traditional medicines.
Dr Siwon said world demand for patchouli oil would continue because it was impossible to synthesise as the molecules were complex. However Indonesia was not the sole exporter and many other countries in the region produced the oil. If the price rose too high farmers would expand their plantings and create a glut.
“The current price is so low it’s turning growers away,” he said. “Ideally they should be getting about Rp 300,000 (US$ 33). (In the mid 1990s poor weather conditions in some countries pushed the world price to US$ 60 (Rp 540,000)
“However the return rises rapidly once the oil leaves the farm gate and it passes through the hands of middlemen. A phial of five millilitres retails for about US$3.50 (Rp 32,000) – that’s US$ 700 a kilogram (Rp 6.3 million).
“If the yield could be improved on the farm and some processing controlled by the growers their incomes would improve.
“There’s room for a partnership between farmers and businesspeople to improve the industry.”
(First published in The Jakarta Post Monday 29 May 2006)