Rice Procurement for Government Reserves Hampered

The efforts of the State Logistics Agency to procure unhulled rice from farmers are still hampered by high prices. The price of unhulled rice in a number of areas has begun to fall with the expansion of harvest areas.

KOMPAS/TOTOK WIJAYANTO (TOK)

Workers unload rice imported from Thailand which is used as food reserves for market operations at the warehouse of the Bulog Perum Cirebon Branch Office, West Java, Tuesday (28/2/2023).

CIREBON, KOMPAS – The procurement of 1.4 million tonnes of rice for government reserves during the March-April 2023 harvest season has encountered a problem in a number of regions. Bulog is still unable to procure unhulled rice or rice from farmers because the price is still above the government's reference price (HPP).

Based on Kompas’ observations in a number of rice production centers in West Java and Central Java that harvested rice on 27-27 Feb., the farm-level price of fresh unhulled rice (GKP) was still above Rp 5,000 per kilogram. Meanwhile, the price of mill-ready dried unhulled rice (GKG) in several regions of West Java, such as Karawang, Subang and Indramayu, reached Rp 6,000 per kg. The price of rice is Rp 9,500 per kg.

The prices of GKP, GKG and milled rice is still higher than the upper limit of the HPP. The maximum HPP for GKP at the farm level is Rp 4,550 per kg, while the mill-level price of GKG is Rp 5,700 per kg, and the HPP for rice with medium quality at Bulog’s warehouses is Rp 9,000 per kg.

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Jumair (48), who runs a small rice mill and is a Bulog partner in Cirebon, West Java, acknowledged on Tuesday (28/3) that he was still waiting for the GKP price to decrease before procuring unhulled rice from farmers. Currently, the price of GKP in Cirebon and surrounding areas is Rp 5,000 per kg, while it is Rp 4,800 per kg in Brebes, Central Java.

"In many places in this area, the rice harvest has not yet begun," he said in Cirebon.

According to Jumair, the high price of GKP was not only caused by an increase in production costs, but also because of purchases by traders and millers with large capital. They boldly bought GKP at prices of between Rp 6,500 and Rp 6,800 per kg directly from farmers in a number of areas that had begun the harvest earlier.

This happened before the government had set the lower and upper price caps for unhulled rice and rice. With the increase number of large traders in the procurement of rice from farmers, small mills were unable to compete. “We cannot immediately buy farmers’ rice at the start of the harvest, like last year. This year, we have to wait for the harvest to widen and the prices to go down," he said.

In many places in this area, the rice harvest has not yet begun,

This year, the National Food Agency has asked Bulog to realize 2.4 million tonnes for the government's rice reserves. Around 1.4 million tonnes of this amount is to be procured during the March-April 2023 harvest.

The head of Bulog’s Cirebon office, Budi Sultika, said that during the March-April 2023 harvest, the agency planned to procure 70,000 tonnes of rice, or around 70 percent of its warehouse’s capacity of 110,000 tonnes.

"We will only carry out the rice procurement in the second week of March 2023 because we are waiting for the price of rice in our working area to drop to Rp 9,000 per kg. Currently, the price of rice in Cirebon and surrounding areas is still Rp 10,000 to Rp 10,500 per kg," he said.

KOMPAS/TOTOK WIJAYANTO (TOK)

Rice fields in the Bugel area, Patrol District, Indramayu, West Java, were flooded, Monday (27/2/2023) due to high rainfall for the last three days.

As of 27 Feb. 2023, as stipulated in National Food Agency Circular No. 47/TS.03.03/K/02/2023, the maximum HPP for fresh unhulled rice GKP at the farm level is Rp 4,550 per kg, while the minimum HPP is Rp 4,200 per kg. The reference price is lower than the market price in most rice-producing regions.

Suryadinata Wira Lodra, the chairman of the Karawang branch of the Barokah Farmers Association (Gapoktan), said the government’s price procurement range did not motivate farmers to sell their unhulled rice to Bulog. "Last year, the price was Rp 4,500 to Rp 5,200 per kg," he said.

Falling prices

On the other hand, the farm-level prices of unhulled rice have begun to fall in several other areas as the harvest expands. However, in a number of areas that have begun the rice harvest, the lower and upper HPP caps are still not effective in controlling farm-level prices of rice.

Indonesian Farmers Union (SPI) chairman Henry Saragih said the farm-level price of GKP in Bojonegoro, Tuban, Lamongan, Gresik and Mojokerto in East Java had dropped to 3,500 per kg, far lower than Rp 5,600 per kg during the previous harvest season. Currently, rice had been harvested in at least 50 percent of rice-producing areas in East Java.

Mujahid Widian, head of strategic studies on the SPI Central Executive Board, said the fall in prices was normal, especially during the peak harvest. “The price of unhulled rice at the farm level will continue to fall because of the increase in production and [because] farmers need funds. This condition is exacerbated by the low level of the reference price set the National Food Agency, which has prompted a number of parties to ensure that the price of unhulled rice does not exceed the upper limit. As a result, prices could fall below the lower limit," he said when contacted on Tuesday.

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Mujahid therefore hoped that Bulog would still purchase unhulled rice at prices farmers deemed reasonable. According to SPI's study, a reasonable price would be around Rp 5,600 per kg.

The downward price trend has also occurred in Central Java. Hardiono, deputy head of the Central Java Farmers and Fishers Association, said that the farm-level price of GKP in Purwodadi, Grobogan, had dropped from Rp 6,000 per kg in early February to Rp 4,500 per kg now.

“The price set by the food agency is still low [relative to the high production costs], partly due to an increase in labor costs in the agricultural sector. Not to mention the risk of crop failure. The ideal GKP price is Rp 5,700 per kg” so farmers don't suffer losses, he said.

In procuring GKP with prices that had fallen below the government’s reference price, Bulog executive secretary Awaludin Iqbal said the agency must first check the moisture content. He suspected that prices had fallen because the GKP was still damp. A number of Bulog's partners applied the “rafaksi” system of adjusting prices based on moisture content when buying rice from farmers.

This article was translated by Hendarsyah Tarmizi.