Anticipating the Impact of Rising Global Food Prices

Kompas/Iqbal Basyari

A rice seller in Genteng Market, Surabaya, East Java, selling Perum Bulog market operation rice priced at Rp 9,000 per kilogram, down compared to yesterday’s price of Rp 9,350 per kilogram, Wednesday (10/1/2018). The price has been cut because sellers are concerned that the rice from Bulog may not sell well.

JAKARTA, KOMPAS — As the increase in global food prices is beginning to affect the prices of a number of national food commodities, the government needs to take anticipatory measures by strengthening the food stock at least for the next year and by stabilizing prices so that consumer purchasing power is not eroded.

The Food and Agriculture Organization (FAO) and the International Monetary Fund (IMF) have warned of rising global food prices, especially for vegetable oils, meat, sugar and cereals.

The price hikes have been triggered by the ongoing COVID-19 pandemic, La Niña, increasing shipping costs and the surge in food demand from food importing countries in 2020 and 2021.

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On June 3, the FAO released the May 2021 world food price index of 127.1, which showed 4.8 percent growth from April of this year and 39.7 percent from May of last year.

The increase put the food price index at its highest position since September 2011. The value of world food imports, including shipping costs, is projected to reach US$1.715 trillion this year, up 12 percent from US$1.53 trillion last year.

The IMF reported on June 24 that the average global food price had increased by 47.2 percent in May, which was the highest since 2014.

The IMF estimates that average global food prices will increase by 25 percent this year.

For soybeans and corn in particular, from May 2020 to May of this year, prices rose by 86 percent and 111 percent, respectively. The IMF estimates that average global food prices will increase by 25 percent this year.

Rusli Abdullah, a food, energy and sustainable development researcher at the Institute for Development of Economics and Finance (Indef), said on Tuesday that the increase in global food prices would have an impact on the prices of food commodities that Indonesia imported, such as soybeans, wheat, meat and raw sugar.

KOMPAS/RIZA FATHONI

The Jakarta office of state logistics agency Bulog holds the Food Stabilization Movement with box cars at RPTRA area in Gondangdia, Central Jakarta, Friday (19/5/2017). The stabilization movement sells foodstuffs such as rice, sugar, cooking oil, onion and garlic at low prices. The low-cost market is intended to ensure the availability of food and maintain price stability before the fasting month of Ramadhan.

It has also caused an increase in domestic prices of corn, which is the raw material for animal feed. It is necessary to pay close attention to the increases in soybean and corn prices.

Indonesia\'s need for soybeans is largely met by imports, while domestic production of corn is still not sufficient for domestic needs.

“The increase in global soybean prices could lead to an increase in tempeh and tofu prices, as happened earlier this year. As for the increase in the price of corn, it could have an impact on the soaring prices of broiler chickens and broiler eggs," Rusli said in Jakarta.

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The Trade Ministry recorded that the national average retail price of soybeans had reached Rp 12,400 per kilogram as of June 2021.

This is much higher than in January 2021, when it was Rp 11,283 per kg. At the community production level, the average soybean price is Rp 10,848 per kg, up 8.71 percent from May 2021.

Meanwhile, the average price of corn at the farmer level is above Rp 5,000 per kg, which appears to be Rp 500 higher than the benchmark price set by the government. As for the needs for other food commodities, such as rice, sugar and meat, said Rusli, Indonesia can still depend on domestic production.

Limited stock

According to Oke Nurwan, the director general of domestic trade at the Trade Ministry, the government is closely monitoring the fluctuating prices of imported soybeans and corn for animal feed because their stocks are limited.

Kompas/Adi Sucipto

Farmers have their rice harvest in Bakalanpule, Tikung District. Lamongan Regency, East Java Thursday (8/2/2018). The price of unhusked rice at the farmer level reaches Rp 4800 per kilogram, down from Rp 5,200 per kilogram last January.

As of June 29, the stock of imported soybeans was 470,000 tons, sufficient for the needs for the next two months, after which the shortfall will be met through imports.

In addition to maintaining stock, the government is trying to control soybean prices at the importer level. That way, the price of soybeans for tofu and tempeh production at the community level can be maintained in the range of Rp 9,600 to Rp 10,000 per kg. (HEN)

(This article was translated by Musthofid)