Improving Supply Chains

KOMPAS/TOTOK WIJAYANTO (TOK)

A trader sorts and cleans shallots that have just arrived at Pasar Senen, Jakarta, Monday (11/7/2022). The price of shallots in the market is still in the range of Rp 60,000-Rp 70,000 per kilogram..

The public has been complaining about rising food commodity prices, especially the prices of chili and shallots, which are actually not categorized as staple foods.

Data from Statistics Indonesia (BPS) shows that inflation reached 0.61 percent in June 2022. The high prices of goods in the food, beverage and tobacco categories contributed the most to inflation at 1.77 percent. Among these categories, chilies, shallots, and cayenne peppers were the biggest contributors.

Annual inflation has risen to 3.19 percent to date (January-June 2022). Bank Indonesia predicts that the inflation rate in 2022 will exceed the maximum target of 4 percent. Inflation is projected to exceed the initial target, partly due to surging food prices in both the global and domestic markets.

Also read:

> Traders and Buyers Complain about Rising Prices

> Diversification of Raw Materials Needed Amid Soaring Prices

The government has been trying to bring inflation under control. For example, the government has maintained the prices of subsidized diesel fuel, 3-kilogram canisters of liquefied petroleum gas (LPG) and Pertalite gasoline, despite the increase in the price of nonsubsidized fuel. The electricity rate has also been raised for only around 2 million household customers in the 3,500-volt ampere (vA) category and above, as well as for government facilities.

Chilies and shallots are not categorized as staple foods. However, due to the high consumption of the two horticultural products, any increase in their prices push up the inflation rate and become the source of customer complaints (Kompas, 11/7/2022). The two commodities have always contributed to the inflation rate.

KOMPAS/KRISTIAN OKA PRASETYADI

A trader sells cayenne pepper and tomatoes, Sunday (10/7/2022), at Bersehati Market, Manado, North Sulawesi. The price of shallots and cayenne pepper soared to Rp. 100,000 per kg.

In order to keep the inflation rate in check this year, food prices must be controlled. The production of chilies and shallots should be increased. Their production output and prices can be regulated so they do not fluctuate too much through the year by developing the chili and shallot processing sector. The Agriculture Ministry must improve the genetic makeup and cultivation of horticultural crops, especially chilies and shallots, in the face of climate change. Over the last four years, we have experienced a wet dry season, which is not friendly for horticultural crops, although it is good for rice production.

We need to be aware of a delay in increasing commodity prices from producers to consumers. One of the affected commodities is wheat flour, the key raw material for producing noodles and bread. The price of wheat is expected to continue to increase until the fourth quarter of this year. The current prices in the domestic market do not reflect the increase in the international market. Some flourmills still have older supplies of wheat that are stored in producing countries.

Also read:

> Overcoming Price Shocks

> Global Situation Affects National Economy

On the other hand, the average provincial minimum wage has risen by only 1.09 percent. The government continues to provide various forms of social assistance to maintain consumer buying power. These social assistance programs help support the livelihood of poor and vulnerable families, but the social benefits will be eroded by rising inflation. More decent jobs must be created and government spending used more effectively.

To maintain domestic prices, the government needs to ensure smooth interregional trade, especially in food, and ensure that there are no levies that can increase costs. Its effort to turn micro, small and medium enterprises (MSMEs) into reliable exporters must be realized by removing the barriers to cross-country trade.

This article was translated by Hendarsyah Tarmizi.