Cocoa Farming Commercialization Level and Influencing Factors

Abstract Cocoa in Indonesia is an important agricultural commodity that plays a significant role in the national economy. As the main raw material for the industry, cocoa is recognized as a commercial commodity. However, at the farm level, the issue of subsistence in cocoa farming is believed to still be a current issue. This study aims to measure the level of cocoa farming commercialization and determine the factors influencing it. The research utilizes secondary data from a survey conducted in collaboration between the Department of Agribusiness, Faculty of Economics and Management, IPB University, and Maastricht School of Management (MSM) in the Netherlands, under the Project NICHE (The Netherlands Initiative for Capacity Development in Higher Education) in 2016. A total of 270 cocoa farming units were selected from three provinces, namely West Sulawesi, Bali, and West Sumatra. The Structural Equation Modeling-Partial Least Squares (SEM-PLS) method was used in this study. The results of the analysis indicate that the characteristics of subsistence cocoa farming are more dominant (54.45 percent) compared to the characteristics of commercial cocoa farming (45.55 percent). The factors influencing the level of cocoa farming commercialization are the characteristics of the farming system and the role of economic institutions related to cocoa farming. Personal characteristics of farmers were not confirmed as determinants of commercialization. The implication of these findings is that the level of commercialization is an outcome of the socio-economic environment in which cocoa farming operates.