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Rice imports raised to avert food crisis

Dow Jones Newswires - August 7, 1998

Joyce Teo, Singapore – To stave off severe food shortages in Indonesia during the coming months, the country is importing ever-increasing amounts of rice, mostly with the help of foreign countries, agricultural analysts and industry sources told Dow Jones Newswires.

At the same time, it is planning to increase rice planted areas outside Java and is planting an additional rice crop in Java to make up for the shortfall in its 1998 rice output, said Mahyuddin Syam. Based in Bogor, Java, Syam is a liaison scientist with the Manila-based International Rice Research Institute.

This, coupled with rice imports to date and shipments to come, should ensure Indonesia won't suffer acute food shortages, the industry sources said. They added, however, that this is provided the rice gets to the people.

Many Indonesians now face food shortages because they can't afford to buy essential commodities. Poor distribution channels, rising prices and unemployment mostly get in their way, said an agricultural analyst in Jakarta, who asked not to be named. Otherwise, Indonesia has and will have enough rice to feed its people, Syam said.

"It's not as bad as some people think. Under normal situations in the past, the rice we have is enough to feed the country. But now, I think some people are panicking and are storing rice in their homes or elsewhere," he said. "Some are storing 3-4 months rice supply. Farmers are also storing rice."

He said Indonesia's second crop rice harvest is expected to meet expectations, but added this idea excludes the impact of the La Nina weather pattern. La Nina follows the El Nino weather pattern and occurs when sea temperatures rise in Indonesia and the western Pacific, producing heavier-than-normal rain throughout Southeast Asia and Australia. Should La Nina hit Indonesia severely before the end of the year, some of those rice crops planted during the current unusually wet dry season will be damaged, he said.

But even without the threat of La Nina, other analysts are less optimistic about Indonesia's second rice crop. "The current rice crop is in a very difficult situation now. In West Java, three major pests are attacking the crop, but farmers can't afford to buy pesticides. They also don't apply fertilizers so the crop's yield will be affected," said IRRI's Syam.

The battered rupiah has largely put the price of pesticides and fertilizers out of farmers' reach. Because of pests and diseases, rice output in Indonesia's top three rice-producing areas of West, Central and East Java is expected to fall 10%-15% from the previous year, he said.

Java accounts for 50%-60% of Indonesia's rice output. The UN's World Food Program also said Indonesia's second crop rice will likely be smaller than expected. The WFP will be re-assessing the second rice crop and food situation late August.

However, Indonesia, which typically produces two rice crops a year, has already made plans to plant a third crop in the irrigated lowlands of Java. Farmers have started planting this third crop on an area of some 125,000 hectares, out of some 321,000 hectares targeted for the crop, said IRRI's Syam. He added that an expected yield of 4 tons per hectare should see Indonesia harvesting a 500,000-ton crop in four months' time.

The Indonesian government has estimated its 1998 unhusked rice or paddy output at 46.3 million tons, down 6.25% from a year earlier. As of end-July, its national rice stock held by Bulog, the National Logistics Agency, stood at less than 10% of the 1.9 million tons recorded in the same period the previous year.

The UN's Food and Agriculture Organization, in its latest Rice Market Monitor, released Aug. 4, revised up its forecast of Indonesian 1998 rice imports to 4.5 million tons, from 3.5 million tons.

A rice industry source said Indonesia's Ministry of Agriculture is prepared to bring in 3-4 million tons of rice in the 1998 fiscal year ending March 31, 1999, though the government still says it will import 3.1 million tons in the same fiscal year, compared to about 750,000 tons a year ago.

A July report from the US agricultural attache in Jakarta said Indonesia has imported some 3.3 million tons of rice in the first half of 1998 and is set to receive another 2.4 million tons contracted under commercial contracts or through various assistance programs.

Indonesia recently said it is negotiating to import 500,000 tons of rice from China and 300,000 tons of rice with the help of the Islamic Development Bank, based in Jiddah, Saudi Arabia.

The Islamic Development Bank announced July 20 it will assist Indonesia with an aid loan of $380 million, of which $280 million may be used to import rice, cooking oil, sugar, infant foods and medicine while the remaining $100 million may be used to finance development programs. Indonesia will also get 208,000 tons of rice grants from the WFP, which launched an emergency food operation for the country in April.

According to a WFP emergency report released July 15, Australia, Japan, US and Norway have confirmed donations for 113,000 tons out of the rice requirement of 208,000 tons. Thailand, the world's largest rice exporter, has sent Indonesia a rice grant of 5,000 tons. At a meeting in Bangkok Friday, it is due to finalize the terms of the sale of 500,000 tons of rice to Indonesia. All 500,000 tons will be Thai 25% broken super rice, priced on a free-on-board basis.

The price is expected to be around $285 a ton, Indonesian Food and Horticulture Minister A.M. Saefuddin said Thursday. Saefuddin was speaking to Dow Jones Newswires following his meetings with Surin Pitsuwan, Thailand's Minister of Foreign Affairs, and Supachai Panatchpakdi, the Thai Deputy Prime Minister Commerce Minister, in Bangkok.

Other foreign countries have already pledged substantial amounts of rice for Indonesia. Vietnam, the world's second-largest rice exporter, will send Indonesia 110,000 tons of rice between August and October. The 100,000 tons will be on one-year interest-free deferred payment terms while the remaining 10,000 tons will be given free-of-charge. Taiwan has agreed to loan Indonesia 200,000 tons, which is repayable over ten years.

Japan's Food Agency at the Ministry of Agriculture, Forestry and Fisheries agreed to lend Indonesia 500,000 tons, of which 300,000 tons will come from Japanese rice stocks and 200,000 tons from Japan's minimum access volume rice imports.

Indonesia will receive the 500,000 tons between August and January and is to return the same amount of rice over a 10-year period. Japan's Ministry of Foreign Affairs has also arranged to give 50,000 tons of rice free-of-charge.

The US has pledged a total of 92,500 tons of rice, according to the US agricultural attache in Jakarta. Singapore will provide Indonesia with a $12 million humanitarian aid package that will consist of rice and medicines. Included in its first dispatch is 10,000 tons of rice. A Singapore Ministry of Foreign Affairs spokesman said the ministry won't reveal the total amount of rice to be sent to Indonesia. Late July, Germany pledged about 15,000 tons of rice, most of which will be handled by the World Food Program.