Warehouse Receipts Unable to Support Salt Farmers

Kompas/Bahana Patria Gupta

Workers carry last year\'s salt from the warehouse onto trucks at the salt production center in Sedati District, Sidoarjo, East Java, Wednesday (24/6/2020).

Banks are still reluctant to accept warehouse receipts from salt farmers as loan collateral because of uncertainty over the price of salt. As a result, the warehouse receipt system, which is expected to help salt farmers, cannot be optimally used.

JAKARTA, KOMPAS — The fall in the prices and demand of locally produced salt has hampered the implementation of a salt warehouse receipt system introduced by the government, when in fact, warehouse receipts should be able to help salt farmers secure decent prices.

The stocks of salt farmers across the country have reached 723,000 tons. Indonesia has 24 warehouses for storing salt produced by the local farmers..

However, only seven have implemented the warehouse receipt system. They are located in Indramayu, Cirebon in West Java, Pati and Rembang in Central Java, Tuban and Pamekasan in East Java and Pangkep in South Sulawesi.

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According to the director of Ocean Services at the Marine Affairs and Fisheries Ministry, Miftahul Huda, the salt warehouse receipt system could not be implemented as expected because banks were still reluctant to receive them as loan collateral because of the uncertainty surrounding salt prices.

"It is difficult for banks to determine the estimated value of salt used as collateral," Huda said on Wednesday (17/3/2021).

A warehouse receipt is a document that provides proof of ownership of commodities that are stored in a warehouse, which operates under the supervision of the Futures Exchange Supervisory Board (Bappebti). The warehouse receipt system is expected to increase the income of farmers because they can sell their crops when the price is high.

Apart from that, national salt warehouses have not optimally absorbed farmers’ salt production because the cost of transporting salt to the warehouses must be borne by farmers, while the selling price of salt is only Rp 400 (2 US cents) per kg.

"Several salt warehouses are fully occupied because there is no demand from the industry," Huda said.

KOMPAS/ABDULLAH FIKRI ASHRI

Farmers harvest salt on plastic-protected land in Bungko Lor Village, Kapetakan District, Cirebon Regency, West Java, Monday (5/8/2019).

The Marine Affairs and Fisheries Ministry will focus on improving the quality and added value of farmers’ salt through research assistance and technology so that the quality of salt can meet industrial needs. In addition, digital channels are also used to sell the farmers’ packaged salt.

Imports increase

When hundreds of thousands of tons of farmers’ salt are not absorbed and are at risk of being damaged in storage areas, salt imports continue to rise. This year, the volume of imported salt is estimated to reach 3.07 million tons, an increase from 2.7 million tons last year, in line with the rise in the demand for industrial salt.

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According to Safri Burhanuddin from the Office of the Coordinating Maritime Affairs and Investment Minister, Indonesia will import more salt this year to meet growing demand and to increase stocks for next year.

Salt-using industries continue to expand their production every year. The imported salt is needed due to the limited production capacity of industrial salt producers in the country. According to Safri, five years ago, the government targeted to achieve self-sufficiency in industrial salt production. At that time, the need for industrial salt was around 2 million tons per year, but now it has increased to 3 million tons per year.

Regarding the absorption of farmers’ salt, the general secretary of the Indonesian Salt User Industries Association, Cucu Sutara, said industry players were still committed to using the salt produced by farmers.

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"Please give us information about the location, the volume of production and the quality of domestic salt that can be absorbed," he said.

One of the indicators of the salt quality needed by industry players is the content of sodium chloride (NaCl). According to Cucu, the NaCl content of farmers’ salt is mostly below 90 percent. As a result, industry players only use farmers’ salt for canning, salting, tanning and direct consumption.

Kompas

A woman in the Pisangan Baru area, East Jakarta, packs imported salt from Australia into small packages for distribution in traditional markets in the Jakarta area, Thursday (8/9/2011).

The majority of industries require salt with a minimum NaCl content of 97.5 percent. Industries that require salt of this quality include chloralkaline, pharmaceuticals and cosmetics, and seasoning producers. (LKT/JUD)

(This article was translated by Hendarsyah Tarmizi)