OPPORTUNITIES AND CHALLENGES IN EAST OF JAVA DAIRY INDUSTRY : A VALUE CHAIN APPROACH

Abstract

The Indonesia dairy industry has been through an evolution right from the Dutch era until today. Indonesia still imports fresh raw milk for processing. Therefore, the supply of local raw materials reached 798 thousand tons from 3.8 million tons needs. Most of the total national milk production still came from Java with the highest production came from East Java region that is equal to 57.3%. The paper is an attempt to identify various prospects and challenges for East of Java Dairy industry value chain and identifying various opportunities for governmental organizations to provide critical standard infrastructure that will be improve value chain that supporting by efficiency of dairy supply chain. This paper also tries to finds out , what should be objective for East of Java dairy industry to overcome global crisis faced by the Indonesia especially East of Java Province and what should be the evolving strategies adopted by East of Java Dairy Industry to have competitive edge overcome on Indonesia and or in South East Asia Dairy Market. Dairy value chain development comprises extension, input supply (feed, bull services, and veterinary services) milk production, dairy processing and milk and milk products marketing. Through the development of large territorial producers’ organizations capable of managing milk supply in volume and quality, they would be able to take part in the management of the supply chains. To do so, the present paper suggests that farmers’ organizations need material and immaterial investments and assistance from regional public players to build new local collective capacities. The competition regime framework is an asset for the design of such public supports in accordance with the principle of subsidiarity, taking the regional specificity of the markets’ institutions and collective capacities into account. The authors would offer some solutions to increase the value added in the dairy value chain and improvement in the income distribution in this value chain.