Indiscriminate Rice Absorption Not Right during Food Crisis
Efforts to bolster the government's rice reserves by absorbing domestic production on a large scale during a food crisis are inappropriate. This step restricts supply amid a limited supply of rice.
By
MARIA PASCHALIA JUDITH JUSTIARI
·4 minutes read
IVAN DWI KURNIA PUTRA
Workers resting on piles of sacks of rice, at the Cipinang Rice Main Market, East Jakarta, Friday (02/11/2022). The supply of rice at the Cipinang Rice Main Market has decreased.
JAKARTA, KOMPAS — Efforts to bolster the government's rice reserves by absorbing domestic production on a large scale during a food crisis are inappropriate. This step restricts supply amid a limited supply of rice. Inflation is at an even higher risk because the price of rice is also rising.
Previously, the government asked the State Logistics Agency (Bulog) to increase rice stocks to 1.2 million tons by the end of 2022. With such a large stock, Bulog is expected to have sufficient stock to intervene in the market as well as handle emergency situations, such as natural disasters.
One way to increase the stock is by increasing the absorption of domestically produced rice through a commercial scheme. The purchase price for rice is set at a maximum of Rp 10,200 per kilogram at the Bulog warehouse.
According to Bulog director of planning and development for the 2007-2009 period Mohammad Ismet, who is also an agricultural observer at Cokroaminoto University in Yogyakarta, theoretically, the directive for Bulog to procure rice domestically was wrong during a food crisis.
“In a period of shortage, market stock is limited. This is actually the time for traders and millers to release the stock they have bought during the main harvest," he said when contacted on Monday (5/12/2022).
In a period of shortage, market stock is limited.
If Bulog was forced to absorb rice in a period of shortage, Ismet added, the price of rice in the market would increase because the stock available to the general public would be further restricted. Limited absorption of rice would not give Bulog enough stock to intervene in the market. In addition, the quality of the absorbed rice also had the potential to be "sacrificed".
In addition, if Bulog increased absorption during a food shortage, the expectations of other rice actors would change so that market sentiment would likely turn negative. As a result, the price of rice in the market would increase.
IVAN DWI KURNIA PUTRA
A trader shows the quality of the rice he sells at the Cipinang Rice Main Market, East Jakarta, Friday (02/11/2022). The supply of rice at the Cipinang Rice Main Market decreased, causing the price of rice to rise.
Statistics Indonesia (BPS) data shows that the average price of medium-grain rice at the mill-level as of November was Rp 10,122 per kilogram. This price is 0.78 percent higher than the previous month and up 11.58 percent from November of last year.
According to BPS data, rice has been subject to inflation since July 2022. In September, annual rice inflation reached 1.44 percent, then 1.13 percent a month later, and 0.37 percent in November. In addition to the increase in fuel prices, seasonal factors such as reduced harvest areas toward the end of the year are also considered triggers.
Unsuitable
In accordance with the conclusions of a meeting of House of Representatives Commission IV on 23 Nov., Agriculture Ministry director general of food crops Suwandi sent a letter to Bulog president director Budi Waseso at the end of November. The letter contains data on rice stocks at the milling level that can be absorbed by Bulog. The amount is around 610,632 tons spread across 24 provinces at a price of Rp 9,359 to Rp 12,985 per kg.
Bulog president director Budi Waseso said he had received the letter and sent a team to the field to check directly.
"There are indications of violations of the law. We need rice, not just data," he said when met at his office in Jakarta on Friday (2/12).
Since August 2022, according to Bulog data, the distribution of rice for the supply and price stabilization program has increased. The figure reached 214,908 tons in August, then 187,909 tons in September, 160,713 tons in October 2022, and 206,003 tons in November. From January to July 2022, the highest monthly distribution was 66,073 tons.
As of Thursday (1/12), rice stocks managed by Bulog were 514,000 tons. With this stock, the government and Bulog are all but powerless to intervene in the market. Without procurement, rice stocks managed by Bulog are expected to continue to fall to less than 400,000 tons by the end of the year.
Previously, Budi Waseso said he was trying to secure an adequate government rice reserve stock, even if it did not reach the target of 1.2 million tons.
"God willing, this December there will be additional [rice] from imports that secure our stocks. I will open it when [the rice] gets here," he said.
