Food Price Stabilization

KOMPAS/RADITYA HELABUMI

Workers carry empty jerry cans to be filled with bulk cooking oil during the distribution of bulk cooking oil specifically for traders at Pasar Anyar, Tangerang City, Banten, Tuesday (29/3/2022). A total of 10 tons of bulk cooking oil transported by two tank cars are sold specifically to traders who have been previously registered.

The prices of basic food items continue to surge, even though the government has made assurances as to their supply and distribution ahead of Ramadan and Idul Fitri.

The government is urged to quickly stabilize food prices and prepare social protection mechanisms for vulnerable groups from the impacts of the price surge (Kompas, 29/3/2022).

The increase in the prices of basic commodities ahead of Ramadan has been a recurring annual phenomenon. However, this year's price surge started long before Ramadan, triggered mainly by the global food and energy crisis.

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In addition, we are also facing problems as regards the complex operation and distribution system in the country, including rent-seeking (cartel-like practices) in the supply chain, like what has happened with cooking oil. In some cases, the government has been powerless against the game of the cooking oil “mafia”. The several steps the government has taken as market intervention have not been able to completely curb the price surge.

We also see few anticipatory moves on the part of the Trade Ministry in responding to developments in the market, especially the global market. The domestic shortage is also caused by the continuing decline in production in the midst of increasing demand, thereby resulting in a higher dependence on imported foods.

The import volume of eight key food commodities has increased from 8 million tons in 2008 to 27.7 million tons in 2021. Efforts to boost domestic production, including through the food self-sufficiency program, have yet to show results in the field. In the case of a number of commodities, such as cooking oil, the government’s fluctuating policies have also caused shortages and skyrocketing prices.

KOMPAS/RADITYA HELABUMI

Distribution of bulk cooking oil specifically for traders at Pasar Anyar, Tangerang City, Banten, Tuesday (29/3/2022). A total of 10 tons of bulk cooking oil transported by two tank cars are sold specifically to traders. The traders buy the cooking oil at a price of Rp. 13,000 per liter and must sell it according to the highest retail price of Rp. 14,000 per liter.

The shortage and price fluctuation in the food commodities sector also increases inflationary pressures, triggered mainly by food inflation, after pressures were relatively kept under control during the pandemic.

This situation threatens the buying power and economic resilience of vulnerable groups, especially the poor and very poor who spend 60-70 percent of their income on food. Food commodities also affect 74.05 percent of those on the poverty line, so the increasing prices of basic commodities have the potential to increase the poverty rate yet again.

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Maintaining the buying power of vulnerable groups through efforts to stabilize food supply and prices alone are deemed inadequate. The government needs to provide additional support, including social assistance or direct food assistance, to the groups in need. The National Food Agency, a newly formed institution under direct coordination of the President that manages nine basic food commodities, has been immediately put to the test in how it performs in dealing with this food issue.

To ensure supply and price stability during Ramadan and Idul Fitri, taking steps in the short term to simplify and ease the importation of various food commodities are an unavoidable solution.

However, in the medium to long term, amidst the increasingly fierce competition between global energy and food, the climate crisis and geopolitical factors, Indonesia's food security can be built only by reducing our dependence on imports, boosting domestic production, and improving distribution and business management from the upstream to the downstream.

This article was translated by Hyginus Hardoyo.