Rising Global Food Prices Affect Indonesia

KOMPAS/ADITYA PUTRA PERDANA

Farmers observe corn plants ready to harvest in Banjarsari Village, Kradenan District, Grobogan Regency, Central Java, Wednesday (29/9/2021). The national corn harvest will take place from September to December 2021. According to data from the Ministry of Agriculture, at the end of the year, the corn stock is estimated to be over stocked by 2.85 million tons.

JAKARTA, KOMPAS - The Food and Agriculture Organization of the United Nations (FAO) reported that global food prices rose in September to reach their highest level in the last 10 years. The rising global prices also affected the prices of commodities in the country, especially soybeans and corn. However, Indonesia also benefited from the increase in crude palm oil (CPO) prices.

The FAO food price index in September reached 130, an increase of 32.8 percent on an annual basis. The figure was the highest since September 2011, driven by the rise in prices for cereals, especially wheat, rice and corn, as well as vegetable oils such as CPO.

The International Monetary Fund (IMF) said the global food prices at the producer level had increased 47.2 percent since April. The increase in prices, which hit their highest level in May, continued in August and September.

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In addition to weather anomalies in a number of producing countries, the increase was also triggered by the rise in sea transportation costs, lockdowns, as well as surges in demand to meet needs during the pandemic and increased stockpiling during energy crises in a number of countries.

The director general of Domestic Trade at the Trade Ministry, Oke Nurwan, said on Wednesday (13/10/2021) that the government had assigned the State Logistics Agency (Bulog) to distribute 30,000 tons of corn to farmers. The government also allowed the association of animal feed producers to import wheat as a substitute for corn.

The government can also assign Bulog to stabilize soybean prices. According to the Indonesian Soybean Importers Association, soybean stocks reached a total of 480,000 tons as of September, sufficient to meet two months' needs.

On the other hand, Indonesia has also benefited from the increase in the global demand for CPO. According to the Indonesian Palm Oil Association (Gapki), the value of CPO exports reached US$4.42 billion in August, an increase of $1.6 billion compared to July. Meanwhile, the volume of the CPO exports increased by 1.53 million tons to 4.27 million tons during the same period.

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Gapki’s executive director, Mukti Sardjono, said CPO exports to India jumped from 231,200 tons in July to 958,500 tons in August. Apart from the impact of the energy crisis, the rise in the CPO exports was also due to the reduction in import taxes in India, namely from 15 percent to 10 percent effective June 30- Sept. 30.

“CPO exports to China have increased quite significantly. The volume of CPO exports to China in August reached 819,200 tons, rising by 56.86 percent, from 522,200 tons in July," he said.

This article was translated by Hendarsyah Tarmizi.