FINANCIAL FEASIBILITY OF INVESTING IN SMALLHOLDER COW-CALF COOPERATIVES IN BALURAN NATIONAL

Livestock grazing is a major driver of human-wildlife confl ict in conservation areas. Currently, it is estimated that 3000 heads of cattle illegally grazing within Baluran National Park (BNP) in East Java. The recent research has suggested the potential of livestock system intensifi cation to reduce land-use and confl ict through conservation priorities. The research goal was to investigate the fi nancial feasibility of starting intensive cow-calf cooperatives by smallholders in the BNP area. Data were collected using Farm surveys in a Criterion sampling design. Optimal herd management plans were generated using whole farm Linear Programming and fi nancial feasibility was assessed using Discounted cash-fl ow analysis and debt-servicing capabilities. Investment lifetime was set at 15 years and four alternative varieties of cattle were taken from Bali, Peranakan Ongole, Limousin and Simmental. Results show that investing in all varieties represents a positive investment opportunity. Bali cattle obtaining the highest NPV ($53.769), IRR (14,25%) and B/C ratio (1,13). Farmer income can be increased by 163% by combining additional Off-farm labor. However, debt-servicing capabilities of cow-calf cooperative activities showed that the loan principal can only be repaid in the 10th year instead of the maximum eight years set by the government cow-calf credit scheme. We urge the government to reconsider either the grace period or the repayment time of the credit scheme to better fi t the cash-fl ow characteristics of cow-calf enterprises.

Kata kunci: analisis arus kas, konflik manusia-satwa liar, linear programming, penggembalaan ternak known whether the employees were aware these constructions are illegal under permit regulations, or that they were duped into it by the permit holder (Wianti, 2014).
The enclave has grown since and currently numbers over 320 families, who are still reliant on government funded Direct Cash-Assistance (BLT) and free rice distributions (Raskin) to meet their needs (Wianti, 2014).Considering that former old-order political and industry collusion are largely at the root of the problem, the current government takes a humanistic approach towards the settlers in Merak.Why the Karang Teko villagers on the border of the protected area are not prohibited from grazing their cattle in the national park is unknown.
Direct competition between the grazing cattle from both communities and wildlife has contributed to population declines in several highly threathened and protected species.The most notable example of this is the Banteng (Bos javanicus), whose population numbers have dwindled from 150-200 pre-settlement down to less than 25 individuals in 2014 (Hakim et al., 2015).Next to this, settlers have been involved in the illegal hunting of Banteng and other protected species such as Javan Rusa (Rusa timorensis), as well as birdtrapping, feeding into the rampant illegal bird trade on Java (Eaton et al., 2015).
Recent research has indicated the potential of intensification of livestock systems to spare lands and thereby reduce conflict with conservation priorities (Lapola et al., 2014;Cohn et al., 2014).In  As part of the smallholders in the BNP area rear cattle for external investors on a split-profi t basis, only those farmers that had full ownership of all or part of their cattle were included.
The value of cattle owned was estimated based on weight in kilograms, determined by measuring the heart girth and body length (Pater, 2007;Heinrichs et al., 1992) (Equation 1).The average value of the cattle owned per farmer was used as a proxy for available investment capital.(Paune et al., 2014;Astuti, 2004;Martojo, 2003;Cundiff et al., 1993) (Anggraeni, 2015).

RESULTS AND DISCUSSION
Estimated investment costs for buildings and land was Rp. 541.000.000 and annual depreciation equal to Rp.
Of the alternative types of cattle considered, keeping the Simmental variety resulted in the largest farm surplus over the 15 year investment period (Fig. 2).
For all cattle varieties, the optimal herd development plan included only bought replacement heifers and no replacement heifers reared from own calves.Next to this, all calves are sold at age 1.5 years and none at 7 months or 1 year of age (Table 3).
Combining the potential income accrued from On-farm and Off-farm activities over the 15 year period resulted in the Bali cattle providing farmers the highest value, with relatively little differrence compared to P.O.cattle (Table 8).Averaging the annual On-and Off-farm income gained between cattle varieties, gave a value of Rp. 39.528.390.This represents a net increase of Rp. 24.517.890,or 163% compared to the Rp.15.010.500annual income of Baluran villagers reported by Anggreani (2015).
The higher amounts of calves produced and sold by the Simmental and Limousin variety in the optimal Whole Farm Linear Program (Table 3) compared to Bali and P.O.cattle, can be explained by their much higher reproductive success.
The coeffi cients for these parameters in the whole farm Linear Programming model were based on availlable literature.
National Park authorities are currently looking into starting an integrated agricultural system within the former concession area Merak, where the manure from intensively held cattle colonies might be used as organic fertilizer for fi elds of chili and dragon fruit, who seem exceptionally well suited to grow in the area due to the extended dry season.The fresh feed for the cattle is grown around these fields and the products marketed as ecologically friendly and conservation supportive agriculture (Rademaker, 2017).
However, the economic benefi ts of such a system have not been investigated yet and it is unknown how the cooperatives as described in this research might fi t into such a system.

CONCLUSIONS AND SUGGESTION
Our results show that starting cow- boundaries.The cattle belong to two villages.The first is the village of Karang Teko located on the park's border and the second village, Merak, is an enclave of settlers who entered the park in 1975 as employees for a plantation company that, in a conterversial case, had obtained a 25-year plantation exploitation permit from the Ministry of Internal Affairs (SK.16/HGU/DA/1975), even though the right to grant exploitation rights and reborder protected areas did not lie with the Ministry of Internal Affairs, but with the Ministry of Agriculture.Despite continous protests from the Ministry of Agriculture, the permit was never revoked and exploitation continued untill its expiration in the year 2000.

Figure 1 .
Figure 1.Location of Baluran National Park (BNP) on the North-Eastern tip of Java Island, Indonesia.Basemap from National Geographic, ESRI (2017).

( 1 )
Cattle weight estimation Where W kg is weight in kg, equal to heart girth square (H 2 ) in inches multiplied by body length (L) inches, divided by 300 and multiplied by the ratio of pound to kilogram.Secondary data relating to the operational and investment costs, were obtained from the East-Java Livestock Extension Offi ce or DINAS Peternakan JATIM in Surabaya.The maximum limit for the number of members per planned cooperative was set at 10 members and 50 heads of breeding cows in an intensive colony system.Firstly, optimal herd management and resulting cooperative farm returns were analyzed for four differrent types of cattle in a multi-year whole farm Linear Programming model.The objective function of the LP model was set at maximizing farm surplus (income minus variable costs and depreciation) (Gomes,

Finally, the potential
amount of off-farm income cooperative members can generate through unschooled labor outside of the cooperative was estimated, based on required labor in the optimal farm plans.Pay rate was set at Rp. 6.250 per hour, which is the average income per hour for villagers in Baluran National Park if calculated back from average annual income (Rp.15.010.500) to a working month consisting of 25 days of eight hours

Figure 3 .
Figure 3. Cash fl ow developments of cow-calf cooperatives for the different cattle varieties (a) Bali cattle (b) Simmental cattle (c) P.O.cattle (d) Limousin cattle.Solid black line indicates Net cash fl ow, dotted black line Cash infl ow and grey broken line Cash outfl ow for the duration of the investment.
3.a-b).Investing in the Simmental variety produced the most stable cash fl ow and the Bali variety the most unstable cash fl ow.Debt-servicing capabilities of the capital loans showed that net accumulated cash-fl ows after tax and interest remained positive for all varieties considered in both Merak and Karang Teko.However the principal could only be repaid in year 9 and 10 for the Bali and Simmental variety, year 10 and 11 for the P.O.variety and year 12 and 13 Limousin variety (Tables 5-6).The planned ten cooperative members represent 24.000 hours of availlable anual labor.Total annual labor required for running the cooperative was an average of 2280 hours per year for all four cattle varieties, or 228 hours per member.The amount of hours availlable to work Off-farm by cooperative farmers was 21.720 hours, resulting in a potential average annual Offfarm income of Rp. 135.750.000, or Rp.
calf cooperatives by small-holders in the Baluran area represents a positive investment opportunity.Firstly, the whole-farm Linear Program showed the Simmental cattle as the variety with the highest production and returns.However, detailed cash-fl ow analysis showed that the Bali variety generates the highest NPV, IRR and B/C ratio of all four cattle varieties considered.Investing in cowcalf cooperatives provides farmers with the potential to increase their income by 163% through additional Off-farm labor.However, debt-servicing capabilities of cow-calf activities showed the loan principal can only be repaid in the 10th year of operations instead of the maximum 8 year period set by the government.We urge the government to reconsider either the interest rate or the grace period of the credit scheme to better fi t the cash-fl ow characteristics of cow-calf enterprises.Future research should investigate the social support for starting cow-calf cooperatives among the local communities currently grazing their cattle in BNP.Next Agro Ekonomi Vol.28/No.1, 2017 to this, the economic benefi ts of integrated conservation supportive agricultural systems that National Park authorities would like to develop should be assessed.

Table 1 .
Activities and Constraints Included in The Base Model For The Whole Farm Linear Programmming Model.
(R) Female Calves, Feed and Capital, (P) Manure YSTR Revenue from selling a Steer Calf at 1 year of age (R) Female Calves, Feed and Capital, (P) Manure MHFR Revenue from selling a Heifer Calf at 1.5 years of age (R) Male Calves, Feed and Capital, (P) Manure MSTR Revenue from selling a Steer Calf at 1.5 years of age (R) Male Calves, Feed and Capital, (P) (PO), Simmental and Bali variety, with the differrent feed requirements, weight and reproductive characteristics accounted for

Table 2 .
Respondent and Cattle Characteristics Used to Determine Available Investment Capital Per Farmer.
respectively.The number of cows culled for the P.O. and Bali variety was similar to that for the Simmental and Limousin varieties with 175 and 173 individuals, however their revenue values were lower (P.O.: Rp. 2.646.000.000;Bali:Rp. 1.888.814.000).Figure 2. Cumulative Farm Surplus Generated Over the 15 Year Investment Period Through Optimal Herd Management of The Four Cattle Types.Agro Ekonomi Vol.

Table 3 .
Optimal Herd Development of Simmental Cow-Calf Cooperative Based on Whole Farm Linear Program.

Table 4 .
NPV , IRR and B/C ratio for investing in cow-calf cooperatives for the four cattle varieties, the percentage of cash infl ows allocated to the differrent cost items and % of cash fl ows that become net positive cash fl ow.Discount factor r in calculating NPV was equal to 10%, the prime lending rate in Indonesia.

Table 5 .
Debt servicing capabilities for investing in Bali, P.O.Simmental and Limousin cow-calf cooperatives in Karang Teko and net value accrued per member.Year in which net accumulated cash-fl ows after tax exceed loan principal is highlighted in bold.

Table 6 .
Debt servicing capabilities for investing in Bali, P.O.Simmental and Limousin cow-calf cooperatives in Merak and net value accrued per member.Year in which net accumulated cash-fl ows after tax exceed loan principal is highlighted in bold.

Table 8 .
Potential Off-farm and On-farm income gained per member by investing in cowcalf cooperatives in Karang Teko (K) and Merak (M).