Grain HPP of Rp. 6,000 per kilogram is not considered profitable for farmers

The increase in GKP HPP is good news for farmers. On the other hand, an increase in the HET for rice could hinder the decline in rice prices.

KOMPAS/P RADITYA MAHENDRA YASA

Farmers who are facing agricultural land damage and failed harvests due to flooding in Wonosalam District, Demak Regency, Central Java, on Friday (22/3/2024).

JAKARTA, KOMPAS — National Food Agency has adjusted the government purchasing price or HPP of dry harvested grain at the farmer level from IDR 5,000 per kilogram to IDR 6,000 per kg. The HPP is considered not to be profitable for farmers.

The Chairman of the Indonesian Seed Bank and Agricultural Technology Association (AB2TI), Dwi Andreas Santosa, stated on Thursday (25/4/2024) that the dry-harvested rice price of Rp 6,000 per kg is far below the proposed price of several agricultural organizations. The proposed price range is around Rp 6,500 to Rp 7,000 per kg.

AB2TI proposes a GKP selling price of IDR 6,900 per kg at the farmer level. This amount comes from the production cost of GKP on 1,500 square meters of land, which is IDR 5,966 per kg, and the farmer's profit of 15 percent.

"From GKP production costs alone, farmers only profit very little. Especially if we refer to the threshold value of the exchange rate for food crop farmers (NTP TP)," he said when contacted from Jakarta.

From the production cost of GKP alone, farmers only make very little profit. Especially when referring to the threshold of exchange value for farmers of food crops.

Dwi explains that the threshold of NTP TP is 100. This figure indicates whether a farmer's income and expenditure are the same, resulting in neither profit nor loss. From this NTP TP, the fair price of GKP is Rp 6,035 per kg. If the National Food Agency (Bapanas) sets the HPP GKP at Rp 6,000 per kg, it means that farmers will not make a profit.

"Therefore, we hope that Bapanas will revise the HPP. The compromise figure between Bapanas' GKP HPP and the proposed figures from various farmer organizations is IDR 6,450 per kg," he said.

In addition to the GKP HPP, Bapanas also relaxed the temporary ceiling price for medium rice from Rp 10,900-Rp 11,900 per kg to Rp 12,500-Rp 13,500 per kg based on zoning. The temporary ceiling price is valid from April 24 to May 31, 2024. Bapanas also extended the temporary validity period of the premium rice HPP, which was previously Rp 14,900-Rp 15,800 per kg, until May 30, 2024.

Also read: HET for Medium Rice and Increased HAP for Corn

Chicken meat and eggs

Bapanas is also working on the reference price for the sale of chicken meat and eggs. On April 25, 2024, Bapanas invited stakeholders in the chicken farming sector and the Central Statistics Agency (BPS) to discuss the reference price.

During the meeting, the benchmark price for purchasing dry corn with a 15 percent water content at the farmer level has been agreed upon at Rp 5,000 per kg. The benchmark purchasing price has increased from the previous price of Rp 4,200 per kg.

KOMPAS/AGUS SUSANTO

Residents buy chicken eggs at Kranji Baru Market in Bekasi, West Java, on Tuesday (9/4/2024). Chicken eggs are sold at Rp 28,000 per kilogram.

Director of Statistics for Food Crops, Horticulture, and Plantation at Statistics Indonesia, Kadarmanto, stated that in the past five years, the production cost of corn has increased. The production cost of corn in 2017 was Rp 2,440 per kg, while in 2023 it has reached Rp 4,600 per kg.

"So there is indeed a fairly large increase in corn production costs, namely almost double," he said in a press release.

The Director of Food Supply and Price Stabilization at Bapanas, Maino Dwi Hartono, stated that the increase in the reference price of purchasing corn will affect the increase in production costs in chicken farms. Therefore, the HAP for chicken meat and eggs also need to be adjusted.

Although the results may not be able to represent or satisfy all adjustments, the adaptation to HAP still needs to be done. Amid the rise in production costs, farmers, livestock breeders, and business actors also want to gain profits.

"However, we need to remember that consumers also need to pay attention to getting prices that are still affordable and reasonable," he said.

Also read: Food Prices After Eid

Since 2022 until now, Bapanas has not changed the reference price for corn as well as chicken meat and eggs. The current HAP for chicken eggs at the breeder level is IDR 22,000-IDR 24,000 per kg and at the consumer level is IDR 27,000 per kg.

Regarding the HAP for chicken meat at the farmer level, it is priced at Rp 21,000-Rp 23,000 per kg. For that commodity's HAP at the consumer level, it is priced at Rp 36,750 per kg.

Purchasing power

The Executive Director of the Institute for Development of Economics and Finance (Indef), Tauhid Ahmad, believes that the increase in GKP's reference selling price will have a positive impact on farmers. The increase in the reference selling price can raise the price of farmers' rice which has dropped during the harvest season, while also compensating for the increase in GKP's production costs.

On the other hand, an increase in HET for rice will actually halt the current rate of decline in rice prices. Without an increase in the HET for rice, rice prices will be slow to fall even though the rice harvest is underway.

"This will make food inflation tend to remain quite high or even increase. "Apart from that, people's purchasing power could be further eroded after spending a lot of money during Ramadan-Lebaran," said Tauhid.

The increase in the reference price of rice (HET) will actually slow down the current decline in rice prices. Without an increase in the HET of rice, the price of rice would slowly decrease, even though the harvest season is currently underway.

Referring to Bank Indonesia data, Tauhid shows that in March 2024, volatile food inflation will reach 2.16 percent on a monthly basis. The inflation rate is higher than inflation in the volatile food group in February 2024, which was 1.53 percent.

The increase in inflation in that group is mainly contributed by the rise in prices of beef, chicken eggs, and rice. If the increase in the government's fixed price for rice prevents a decrease in its retail price, that commodity will contribute to inflation again.

Therefore, according to Tauhid, in order to prevent the purchasing power of the community, especially the lower class, from being eroded, the Food Supply and Price Stabilization Program (SPHP) as well as rice assistance must be rolled out again. However, the target must be more measurable, prioritizing areas where the prices of food, including rice, are high.

Also read: Even though the economy has the opportunity to grow 5 percent, people's purchasing power is vulnerable

KOMPAS/AGUS SUSANTO

Residents check the quality of rice at the Cipinang Rice Market in East Jakarta on Thursday (25/4/2024). The government has extended the highest retail price for premium rice to IDR 14,900 per kilogram, which has been in effect since March 2024. The reference prices for medium rice, paddy, and corn have also been raised.

Dwi, who is also a Professor at the Agriculture Faculty of IPB University, believes that the increase in HPP GKP will automatically trigger an increase in retail prices of medium and premium rice at the consumer level. However, the increase in retail prices will not have a significant impact on consumers.

The reason is that the government will once again roll out rice aid for 22 million underprivileged families until June 2024. With this, disadvantaged families can receive social protection after their wallets and savings have been depleted during Ramadan and Eid-al-Fitr.

"Furthermore, with the current increase in the standard price of medium grain rice, household expenses for a plate of homemade rice is still not too high, which is Rp 1,200," said Dwi.

Also read: Proposed Increase in HPP for Grain and Sugar is Quite High