Profitability and Value Addition in Cassava Processing in Buton District of Southeast Sulawesi Province , Indonesia

This study was carried out to examine profitability of and value addition from cassava processing into kaopi based on the type of graters being used. A two-stage random sampling technique was employed to obtain primary data from 53 respondents selected for this study. Data were analyzed using cost and return analysis, R/C ratio, Break Even Point, and production structure. The study revealed that cassava processing into kaopi is profitable and a significant value adding process, but the level of profitability and value addition is higher for processors using mechanized grater than those using manual one because the former can reduce processing costs, process higher volume of raw materials, and produce more output with greater efficiency. In view of its potential for attainment of food security, and income and employment generation, it is recommended that processors who currently use manual grater shift to mechanized grater since the time and money saved can be put into other economic use and family welfare.


Introduction
Cassava is a major calorie source, especially for poor people, and is a staple food for many in Indonesia.It is grown in all provinces in Indonesia with the main producing areas being in Java and Sumatera.With the issuance of Law on Energy No 30/2007, the new role of cassava as an alternative source of energy has led to competition in the use of cassava for food, feed, and fuel (Salim & Nuryanti, 2011;Simatupang, 2012).Dixon (1982) estimated that in Java approximately 65% of cassava production was used for human consumption, which is mainly in the form of fresh tuber, gaplek (dried cassava) and oyek (mixed with rice).In West Java, about 80% of cassava was consumed in the form of fresh boiled tuber.
Cassava is the third important staple after rice and corn (Darwis, Muslim, & Askin, 2009).In general, Indonesian people preferred rice over other staples, and increasing average income led to decreasing cassava consumption (Dixon, 1982;Eng, 1998).Kuntjoro, Kusnadi & Sayogyo (1989) and Simatupang (2012) stated that cassava is regarded as an inferior food.As staple, cassava is consumed as a substitute for rice, such as when rice price is high during pre-harvest period (Suprapti, 2005).Nevertheless, because poor people consume more non-rice carbohydrate food staples compared to non-poor, and rural people consume more carbohydrate staples than urban people, cassava plays a substantial role in increasing food availability in rural areas in many districts.At the same time, considering the likely reduced rice supplies in the long run due to leveling off of rice production and productivity in the face of high population number of 260 million people, the government of Indonesia has taken measures to reduce dependence on rice through a food diversification program focusing on non-rice staples, especially cassava.Despite the low performance of food diversification program (Widyanti, Sunaryo, & Kumalasari, 2014), the implementation of the program itself has basically acknowledged the significant role of cassava in promoting food security in the country, particularly in areas where it has been planted and consumed for a long time.
In Buton and Wakatobi districts in the province of Southeast Sulawesi, cassava has become the main subsistence crop for generations.In Buton district, cassava is grown in subsistence farming with a rotation with corn and legumes.Cassava fits well into farming systems because the area has low soil fertility and little irrigated land.It suits with the condition of the smallholder farmers because it is available all year round and more resistant to drought, pests and diseases.Compared to other food crops especially rice, cassava production itself is much simpler, requires less labor, and does not require much attention during growth (Eng, 1998).For this reason, despite wide availability of rice due to emphasis of food policy on rice and distribution of raskin (subsidized rice for the poor) program, cassava remains a major staple food in rural areas in Buton.
With respect to cassava consumption, people in Buton processed cassava first into kaopi.Processing of cassava into kaopi is done through peeling, washing, grating, pressing, dewatering and fermenting, which are similar to the first several steps in gari making in Africa (Okorji, Eze, & Eze, 2003;Oti et al., 2010;James et al., 2012).At the end of dewatering and fermenting stage, the dewatered cassava mash will become a solid cake, which is called kaopi.Kaopi can be stored for some time until needed for use.For consumption, kaopi is broken up and kaopi granules are steamed in a cone-shaped basket made of coconut leaf that is put in a pot containing a small amount of water.The steamed food is called kasoami, and is the most popular staple food consumed from cassava.In the study area food dishes are usually prepared using kasoami as the basic ingredient to which is added fish, vegetables, or other protein sources.
Kaopi processing reduces cassava perishability and toxicity, improves the storage life of the product, and enhances its value (Okorji et al., 2003).In addition, kaopi processing could actually be one of the answers for measures to develop new food forms of cassava consumption that do not have negative images and negative expenditure elasticities.At the same time, kaopi potential as a source of income and food supply is in line with efforts of ensuring food security, promoting food diversification, and contributing positively to poverty alleviation.Unfortunately, Indonesia has yet to tap this full potential.Descriptions of the traditional methods used to prepare foods from the cassava roots are mostly based in and oriented to areas in Java and Sumatera.Documentation and studies regarding kaopi processing are absent and empirical data on its value addition are lacking.This study was done to fill this gap with the main objective being to evaluate the economic potentials of cassava processing into kaopi.Specifically, the study aims to analyze the cost and return of, and the value addition from, cassava processing into kaopi.

Method
The study was carried out in April-June 2012 in Batauga subdistrict of Buton District in Southeast Sulawesi Province, Indonesia.Buton district is located between the coordinates 4°56' -6°25' of south latitudes and longitudes 122°0' -123°34' east.Batauga subdistrict is located in the southern part of Buton Island, and has a size of 68.83 km 2 .The average temperature varies between 29 o C and 32 o C, while mean annual rainfall is between 1,411 mm and 2,000 mm.The major economic activity of the inhabitants is agriculture.The main food crops grown are cassava, upland rice, corn, and sweet potato.Like any other areas in Indonesia, the subdistrict has a tropical climate marked by dry and rainy reasons.The subdistrict consists of 12 villages.It has 15,672 inhabitants, consisting of 3,858 households.All these villages produce cassava and process it into kaopi for human consumption.Data and information were collected using interview method based on the questionnaire.Data collected in the interview schedule included socio-economic characteristics of processors, processing operations, price, inputs, output, and revenue of processing operation.Interviews were done with processors supported by direct observations of processing techniques and local markets.
The data were mainly from primary sources collected from 53 processors selected using two stage sampling technique.In the first stage, out of 12 villages six (6) cassava processing villages were randomly selected.The second stage involved the random selection of cassava processor from each of the villages, making a total of 53 respondents.Subdistrict Extension Office provided the sampling frame from the list of 234 cassava processors residing in the subdistrict.Data were analysed using cost and return analysis, R/C ratio, Break Even Point (BEP), and value addition analysis.The analysis was made on the basis of the type of grater used in the study area, namely mechanized and manual graters.
(1) Cost and return analysis was performed as follows: (2) R/C ratio; R/C ratio is a ratio of total revenue to total cost used to understand the profitability of processing operation.The criteria are as follows: R/C > 1 = profitable, R/C = 1 = neither profitable nor loss, and R/C < 1 = not profitable (3) Break Even Point (BEP) Break-even Point is the point at which cost and revenue are equal: the processor or the enterprise generates neither a profit nor a loss on operating activities.BEP in units is calculated by dividing the BEP in sales rupiah by the selling price of output per unit.BEP in sales rupiah was calculated using the following formula: Analysis of value addition was done using the following production structure of processing operation (Hayami, Kawagoe, Morooka, & Siregar, 1987).

Characteristics of Respondents
All of the households interviewed are farmer-processors, using their own cassava harvest to produce kaopi.Table 2 indicates that most respondents (96.2%) fell within the age bracket of 15-55 years (with a mean of 42.6 years), while the group of 56 years and above is 3.8%.This implies that most processors were in their productive stage.Most cassava processing families (69.8%) had household size of 4-6 members, with an average of 5 persons.Households with less than 4 members and with more than 6 members constituted 16.1% each.A large family size tends to suggest that more family labour could be made available for cassava processing, consequently reducing the amount spent on hired labour.However, higher number of family members also means more people to feed, thus putting pressure on the availability of food.

Cost of Cassava Processing
Cassava processing cost can be divided into two parts, namely fixed and variable costs.Fixed costs include depreciation of tools and equipment used, namely knife, basin, brush, grater, bucket, bamboo sieve, sack, and presser.Variable costs include the cost of raw materials (cassava tubers), labor, fuel for mechanized grater, and supporting materials.
The cost components were calculated according to the type of expenses.An estimation of costs was made using the following assumptions.Unpaid family labor was included in the cost component (Fujimoto, 1976;Aurangzeb, Nigar and Shah, 2007;Zwald, Kohlman, Gunderson, Hoffman, & Kriegl, 2007) which was estimated according to the predominating wage rate in the study villages.Costs for water and gasolines were the actual expenses paid by processors.Cassava roots were obtained from own farming but were included in the cost based on the price prevailing at the village at the processors' house.Therefore, the calculation of labor tasks started from peeling and did not include harvesting and transporting cassava roots from farm to the house.Costs for depreciation were calculated based on straight line method.
Unpaid family labor was included in the cost component because (i) it was not always easy to distinguish family and exchange labor, and (ii) the use of hired labor in cassava processing was not yet common in the study area, so specifity of hired labor was not yet established.In other word, the study used the concept of opportunity cost which was calculated according to market wage rate (IRRI, 1991;Zwald et al., 2007).Valuing family labor is considered essential to evaluate the profitability of cassava processing in the context of cassava commercialization.This is because an economically successful business should be able to pay for all costs including realistic opportunity costs (IRRI, 1991).However, the concept of family labor earnings is also introduced in the analysis to represent the net return to family labor devoted to cassava processing.
Average monthly depreciation costs are presented in Table 3. Tools and equipment used consisted of knife, plastic bowl, brush, grater, bucket, bamboo sieve, sack, and presser.Depreciation cost for each processor was Rp22 513 for mechanized grater and Rp8435 for manual grater.In the mechanized grater category, depreciation of grater occupied the highest percentage (57.0%); in the manual grater category, depreciation of sacks had the highest percentage (37.7%).Both categories, however, had the same three components with the highest percentage, namely grater, sacks and presser.The sum of the costs for these three items was 89.5% and 73.9% for mechanized grater and manual grater, respectively.The cost structure indicates that the highest kaopi processing cost item was the cost of the raw material supply, amounting to 66.3% for mechanized grater and 54.2% for manual grater.About 29.3% of the total cost in mechanized grater was attributed to unpaid family labor, which is 44.6% in manual grater.Costs for gasoline and polythene sacks constituted only 3.2% of the total cost in mechanized grater, while costs for polythene sacks were only 0.7% in manual grater.
For kaopi processing, respondents obtained the raw materials (cassava tubers) from their own farming.The average price of cassava roots was Rp838 per kg.Supporting materials consisted of gasoline (for those using mechanized grater) and sack for packaging.Gasoline was obtained with the price of Rp4500 per litre, and sack for packaging with the price of Rp100-Rp160 per sheet.The amount spent for these supporting materials was much affected by the number of kaopi being produced.

Profitability of Cassava Processing
Table 5 presents net profit, family labour earnings, BEP, and R/C ratio of cassava processing in 2012.The total revenue for mechanized grater (Rp2 745 529) was much higher than manual grater (Rp1 890 547).Processors recorded a positive net profit from processing operations, averaging Rp872 499 and Rp346 390 for mechanized grater and manual grater, respectively.The R/C ratio of 1.5 for mechanized grater and 1.2 for manual grater indicates that cassava processing into kaopi is profitable in the study area as every Rp1000 invested in the enterprise yields additional Rp500 and Rp200, respectively, over and above the amount invested.This value of R/C ratio is slightly lower compared to that of 1.55 for making instant gaplek reported by Supriadi (2007) but slightly higher than 1.1 for making cassava chips reported by Asmara R. and A. E. Pradana (2011) and 1.1 for making chips, pellets, and native starch reported by Roonnaphai (2006).The value of R/C ratio will be higher if family labor is not included in the cost component.In this regard, processors obtained family labor earnings of Rp1 422 006 for mechanized grater and Rp1 034 606 for manual grater per month on the average, respectively, indicating that cassava processing provided relatively high net return to family labor engaged in processing operations.Another tool used to assess the economic feasibility of cassava processing enterprise is Break-Even Point (BEP).
As shown in Table 5, BEP in rupiah sales is Rp69 061 and Rp44 943, and in unit sales 13.9 kg and 9.1 kg for mechanized grater and manual grater, respectively.Break-even units indicate the level of sales that are required to cover costs, whereas break-even sales indicate the rupiah of gross sales required to break-even.As the average amount of revenue obtained and average number of units of output produced are above those break-even figures, it can be said that cassava processing in the study area is profitable.
In spite of the fact that cassava processing in the study area has been done for generations mainly as part of regular activity of farmers to secure staple for their own consumption, data in Table 5 confirm that cassava processing into kaopi is profitable for both types of respondents.This result corroborates previous reports that in Nigeria and other African countries processing of cassava into gari (Amao, Adesiyan, & Salako, 2007;Oluwasola, 2010;Lawal, Omotesho, & Oyodemi, 2013;Effiong, Aligbe, Albert, & Ohazuruike, 2014), fufu (Lawal et al., 2013), dried fufu (Ayinde et al, 2004) and lafun (Lawal et al, 2013), is profitable.Similar to cassava processing in African countries, profitable operation of cassava processing in the study area means that in addition to strengthening food security, cassava processing into kaopi has high potential for income generation, especially because cassava can be harvested throughout the year.

Value Addition
Production structures of the processing of cassava are summarized in Table 6.Labor coefficient for respondents with mechanized grater is 0.009, and that with manual grater is 0.017, which means that 9 man-days and 17 man-days are needed to process 1 ton of cassava, respectively.The labor coefficient indicates that the amount of cassava that can be processed by respondents in mechanized grater category is almost double compared to that in manual grater category.This finding is in line with that reported by Okorji (2003) that in gari processing the use of modern and traditional techniques resulted in 37% reduction in time of operation in gari production.In the study area, such reduction is clearly attributed to the more efficient operation of mechanized grater, which can reduce the time needed to grate 100 kg of cassava from 6 hours to 0.5 hour.Nevertheless, conversion factor and product value are almost the same for both categories of respondents.Conversion factor for mechanized grater is 0.378, and that for manual grater is 0.374 which means that 378 g and 374 g of kaopi is produced from 1 kg of cassava root, respectively.With this conversion factor, the value of kaopi produced from 1 kg of cassava root is estimated as Rp1875 and Rp1852, respectively.
Gross value added from the processing of cassava is obtained by substracting the costs of raw material and other current inputs from the product value (Hayami et al., 1987).This gross value amounts to Rp996/kg for mechanized grater and Rp1004/kg for manual grater, respectively.The value added ratio is 53.1% and 54.2%, respectively, implying that 53.1% and 54.2% of the market value of kaopi is processors' income from processing.
Income share for labors is 37.6% and 67.2%, reflecting the more labor-intensive nature of cassava processing with manual grater.On the other hand, the processor profit is Rp622 with the profit rate of 33.2% for mechanized grater, and Rp329 with the profit rate of 17.8% for manual grater.As can be seen from the amount of value added and value added ratio, kaopi processing is a significant value adding process for both types of respondents.However, while labor income and labor share are significantly higher for manual grater than mechanized grater, processor profit and profit rate are significantly higher for mechanized grater than manual grater.This means that the use of manual grater is more time consuming and laborious, but still provides positive net profit and fairly high family labor earning.The use of mechanized grater clearly reduces the drudgery of processing, and as expected, it can produce more output, process more raw materials, and have higher labor coefficient than traditional grater.This explains the result of the cost and return analysis that the net profit is higher for mechanized grater than for manual grater.Therefore, the use of manual grater is more suitable in a small-scale operation, so more commercialized or larger scale operations of cassava processing should attempt to use mechanized grater.At the same time, the use of mechanized grater will yield maximum benefits if combined with the use of other labor-saving tools and equipment, such as hydraulic press in dewatering and fermentation stage.Overall, processors are recommended to use mechanized grater as it would release more time to them for investment in other economic ventures that could enhance family living condition.
The value added ratio and profit rate of kaopi processing are higher than that for making gaplek and even opak reported by Hayami et al. (1987) who had found that processor profit and profit rate was low for opak making and even zero for gaplek making.It was argued that characteristics of the gaplek production process, which is simple and requires little capital or special skill are the reason for low value added ratio and a labor share of 100%.The high value added ratio and profit rate in kaopi processing despite its similar characteristics of the production process may be related to other factors, such as the wide consumption of kasoami, high demand of kaopi, and positive image of kasoami in the diet of villagers.In other word, the findings in rural Java that cassava is inferior goods may not be true for the case of kasoami in the study area, although this needs further study.
It can be said from the study results that, being profitable and as a significant value adding process, cassava processing into kaopi using mechanized grater is more feasible to be made into more commercialized or larger scale operation.At the same time, advancement in cassava processing will in turn support promotion of cassava production and utilization (Mutuku, Wanda, Olubandwa, Maling'a, & Nyakeyo, 2013).In this regard, mechanized grater based cassava processing has high potential for employment creation and income generation, and for promotion of food diversification, enhancement of food security, and poverty alleviation, which will lead to increased attainment of sustainable development.

Conclusion
The study results revealed that cassava processing into kaopi is profitable and a significant value adding process, and hence has high potential for the attainment of food security and income and employment generation.However, the level of profitability and value added is higher for processors using mechanized grater than those using manual one because the former can reduce processing costs, process higher volume of raw materials, and produce more output with greater efficiency.As cassava forms a major part of the household diet and livelihood strategy of most households in the selected villages, interventions targeted at improving the cassava processing sector are likely to have a large impact on the villagers.Processors are recommended to use mechanized grater since the time and money saved can be put into other economic use and family welfare.Future researches need to focus on marketing and value chain of cassava processed products to help processors seize the opportunities for commercialization and income diversification from cassava processing.
a. Revenue: TR = P x Q, where TR = Total Revenue, P = Price of output and Q = Quantity of output b.Cost: TC = FC + VC, where TC = Total cost, FC = Fixed cost; and VC = Variable cost c.Profit: NP = TR -TC, where NP = net profit Family labor earnings = Net profit + Family labor cost b Including an imputed cost of family labor (US$1 = Rp9399) Source: Field survey, 2012

Table 1 .
Production structure of cassava processing operation

Table 2
are in the level of illiteracy.A greater proportion of respondents (47.2%) had more than 10 years experience in cassava processing.Those with 5-10 years experience were 35.8%, while those with experience of less than 5 years were only 17.0%.Generally, it implies that respondents in the study area had sufficient experience in cassava processing.As many as 64.2% of cassava processors used mechanized grater for grating operation, and 35.8% carried out grating operation manually.
also indicates that cassava value addition was carried out by the processors with various educational backgrounds.Majority of the processors (41.5%) had junior high school education, 34.0% had primary education, and 22.6% had senior high school education, while only 1.9% acquired university education.These figures show that none

Table 3 .
Average monthly depreciation costs for each processor

Table 5 .
Net Profit, BEP and R/C ratio of cassava processing according to type of grater used