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The soybean debacle

Jakarta Post Editorial - March 1, 2022

Jakarta – The government's inattentiveness to the price of soybeans, which are a core staple commodity for the majority of Indonesians, is astounding. President Joko "Jokowi" Widodo, like his predecessors, has talked big about food security for both economic and political stability, but his delivery has left much to be desired.

The government has never implemented consistent policies to increase soybean production, thereby resigning the nation to dependence on the international market for almost 80 percent of its needs of over 3 million tons a year. The beans are vital as they are the chief ingredients of tofu, tempeh and sweet soy sauce, which are – at least normally – affordable protein sources.

Statistics Indonesia data shows that the country imported 2.8 million tons of soybeans in 2020 and 1.7 million tons in the first half of 2021.

This dependence on imports makes the country vulnerable to price fluctuations, which are common with all agricultural commodities, and Indonesia is particularly vulnerable because the price hike is often caused by depreciation of the rupiah. For example, in 2013, when the United States Federal Reserve tightened its monetary policy, soybean prices skyrocketed as the rupiah depreciated, even though the global supply was more than adequate.

The latest 40 percent rise in the local price of soybeans was, however, caused by supply disruptions in major producing countries, including the US, Brazil and Argentina. Unfortunately, tempeh and tofu producers, which are overwhelmingly small or medium enterprises, are the hardest hit by such surges in soybean prices.

Numerous studies point to reasons why domestic soybean production is inadequate, even though it was as high as 1.9 million tons annually in 1992, when the harvested acreage was 1.6 million hectares, and varied between 540,000 and 970,000 tons annually from 2002 to 2017.

The most important reasons are that tempeh and tofu producers prefer imported soybeans for their higher quality and that the profit margin in Indonesian soybean farming is very small because the yield of local crops is only half of other major producing countries. For these reasons, many farmers prefer growing other crops, such as chili or corn.

The latest soybean debacle should jolt the government into designing a set of policies to improve domestic soybean production and consistently implementing them over a long period. Soybean imports should be controlled either by the State Logistics Agency (Bulog) or through private importers with their import quotas linked to local soybean procurement. Soybean prices should be controlled at a periodically reviewed range of floor and ceiling prices to secure reasonable prices for growers. The government should also provide subsidies to soybean farmers and offer training to improve their yields.

Such a multipronged approach, if implemented consistently for many years, would encourage farmers to grow soybeans and big companies to develop mechanized soybean estates, as in the development of sugarcane cultivation outside Java. Big seed developers such as Dow and DuPont, Syngenta, Bayer and Monsanto and East West Indonesia, which have contributed greatly to developing various hybrids seeds for horticulture in the country, should also be incentivized to develop soybean varieties suited to Indonesia.

Source: https://www.thejakartapost.com/opinion/2022/02/28/the-soybean-debacle.htm