Dispute over Grain Harvest

A fierce dispute over grain occurred at the beginning of this year’s harvest. The government will issue a new regulation concerning purchase prices to maintain a balance.

KOMPAS/TOTOK WIJAYANTO (TOK)

Laborers from Ngawi harvest rice in Pelem Gadung Village, Karangmalang, Sragen, Central Java, Wednesday (1/3/2023).

JAKARTA, KOMPAS – There was heavy competition for the purchase of grain and rice in several rice-production areas during the first harvest season this year. Large corporations came out on top and set the prices, leaving small-scale millers and the State Logistics Agency (Bulog) bereft.

During the early 2023 rice harvest, small millers, whether partnering with Bulog or not, were unable to immediately get access to grain as large corporations had picked up the grain from farmers at very high prices. This is just one example of what has been happening in a number of rice centers in West Java and Central Java over the last two weeks.

In Demak and Sragen regencies, Central Java, where the harvests were completed at the end of January and February 2023, the price of harvested dry unhusked rice (GKP) at the farm gate exceeded Rp 6,500-6,800 per kilogram. This is far above the government’s current purchase price (HPP) of Rp 4,200 per kg, or the sum proposed by several farmer associations and organizations to the National Food Agency (BPN) on 2 March 2023, which was between Rp 5,400 and Rp 5,800 per kg.

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The proposed government purchase price already took into account an increase in the cost of production, including increases in fuel prices, fertilizers and labor costs for planting and harvesting.

Indonesian Farmers Association (HKTI) Demak regency chairman Hery Sugihartono said Demak farmers harvest earlier than farmers in other rice-production areas. As soon as the harvest is completed, their grain is immediately purchased at high prices by large corporations.

Farmers receive cash payments on the spot. The highest GKP price at the time was Rp 6,800 per kg. This made it impossible for small millers in Demak to purchase the farmers’ grain. The high initial price eventually hiked up the GKP prices for farmers in other areas.

At the time, the factory purchased the GKP for Rp 6,500 per kg.

Jumangin (48), a GKP farmer in Pelem Gadung village, Karangmalang district, Sragen regency, said that he once supplied GKP to a large rice factory in Nganjuk, East Java. At the time, the factory purchased the GKP for Rp 6,500 per kg.

Jumair (48), a small milling business and a partner of Bulog Cirebon, said that until the last week of February 2023, he was unable to supply rice to Bulog because GKP farmgate prices were still around Rp 4,700-4,800 kg. Previously, the price was set at Rp 6,500-6,800 per kg.

West Java Seed Bank and Farm Technology Association (AB2TI) spokesman Masroni said there was a dispute over the GKP among small, medium and large millers and Bulog. Large corporations need GKP to produce premium rice, while small and medium mills and Bulog need to produce medium rice. Both are sourced from GKP harvested by farmers.

KOMPAS/TOTOK WIJAYANTO (TOK)

Farm workers look for the remains of rice grains that are still carried by straw after being knocked down during the harvest in Wonorejo, Kedawung, Sragen, Central Java, Wednesday (1/3/2023).

Flip-flopping policies

These conditions make it difficult for the government to curb the increase in rice prices and realize the government’s rice reserves (CBP). The 500,000 tons of rice imported by the government throughout January-February 2023 has failed to reduce the spike in rice prices.

This year, the BPN is aiming for Bulog to absorb 2.4 million tons of domestic grain/rice. Some 70 percent will be absorbed during the main harvest season in March-April 2023.

However, Bulog noted that until the end of February 2023, domestic rice procurement for the government’s rice reserves amounted to only 15,451 tons. The rice reserve stock in warehouses amounts to 50,086 tons, while commercial rice stock amounts to 3,565 tons.

To keep large corporations from purchasing grain at high prices, the BPN issued Circular Letter (SE) No. 47/TS.03.03/K/02/2023 concerning purchase price limits for grain or rice on 20 February this year. The upper price limit for GKP at the farm gate was set at Rp 4,550 per kg, while medium rice at Bulog warehouses was Rp 9,000 per kg. The BPN also provided leeway for Bulog to purchase grain or rice above the government purchase price.

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This circular should deter large corporations from purchasing grain from farmers at high prices. However, without revising the lower purchase limit, the circular also backfired on farmers. GKP prices at the farm gate had fallen to Rp 4,200-4,500 kg, with some even reaching Rp 3,800 kg.

Based on Kompas monitoring between 27 February and 4 March 2023, in several areas in West Java and Central Java, the decline in the purchase price of farmers’ GKP was not only caused by the circular, but also due to wider harvests and high rainfall.

On 7 March, the BPN revoked the circular, which led GKP prices in several areas in East Java to rise to Rp 5,700 per kg from the previous Rp 4,650 per kg.

BPN head Arief Prasetyo said on Tuesday (7/3/2023) that the circular was initially issued to discourage large corporations from purchasing grain/rice at high prices, which could shut down small millers and cause rice prices for consumers to skyrocket. “The day after the circular was revoked, large corporations continued to purchase GKP at high prices, namely in Mojokerto and Ngawi, East Java, which was previously set at Rp 4,650 per kg,” he said.

Arief added that the government would set a reasonable price benchmark for farmers, millers and consumers. The government is drafting a new HPP.

During the main harvest in Kebumen, Central Java, President Joko “Jokowi” Widodo acknowledged that the GKP price at Rp 4,200 per kg was too low for farmers. The President has asked the BPN to ensure that the government purchase price for grain and rice is beneficial to all parties, whether farmers, traders, millers or consumers (Kompas, 9/3/2023).

In relation to this, the BPN stated that it would soon issue a new HPP for grain and rice. According to Arief, the latest HPP proposal has taken into account the feedback from all rice stakeholders concerning all related aspects. (HEN/JUD/IKI/IDO/FRN/Z04/HLN)

This article was translated by Kesya Adhalia.