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Analysis: Rice stocks deplete, govt ministries split over plan to import rice

Jakarta Post - December 7, 2022

Tenggara Strategics, Jakarta – Rice prices have been increasing lately as traders and the State Logistics Agency (Bulog) reported depleting rice stocks.

The Trade Ministry approved the importation of 500,000 tonnes of rice to replenish Bulog's stocks, however the Agriculture Ministry disagreed and argued there were enough rice stocks in the country, but that these were in the hands of farmers and traders.

Medium-grade rice prices increased to Rp 9,200 (59 US cents) per kilogram in Jakarta's Cipinang Rice Central Market at the end of November, up from a range of Rp 8,300 to Rp 8,500 in August. According to the National Food Agency (NFA), rising rice prices over the past three months contributed 3 to 4 percent to national inflation.

Traders in the Cipinang market reported that rice stocks were depleting fast and the market could be empty by December if supplies of rice to the market remained low. Cipinang Rice Market Traders Cooperative chairman Zulkifli Rasyid revealed that the cooperative recently requested 500,000 tonnes of rice to Bulog, but the agency only supplied 150,000 tonnes. The market sells around 2,500 to 3,000 tonnes of rice per day.

Bulog chairman Budi Waseso told a recent hearing with House of Representatives' Commission IV on agriculture that the agency's stocks had been depleted to only 651,000 tonnes, far below the required 1.2 million tonnes, as a result of market operations to bring down prices. Bulog then requested the government's permission to import rice to replenish its stock. Trade Minister Zulkifli Hasan approved Bulog's request, and said that the government had a standby order to import 500,000 tonnes of rice.

At the same hearing, officials from the Agriculture Ministry disagreed, saying that there were enough rice stocks in the country, but in the hands of farmers, rice milling plants and traders. The ministry said Bulog needed to buy the rice from them at market prices to replenish its stocks, and not resort to imports.

As no agreement was reached at the hearing, House Commission IV's Sudin told Bulog to source rice from the domestic market and asked the Agriculture Ministry to help Bulog locate where the stocks were located. Sudin gave Bulog one week to replenish its stock from the domestic market.

Following the hearing, the Agriculture Ministry's Food Plantation Director General Suwanto sent a letter to Bulog, the House Commission IV, the NFA and other related institutions, detailing the locations of rice stocks across the country where Bulog could buy up to 600,000 tonnes of rice. But after one week, Bulog managed to purchase 30,000 tonnes of rice from the domestic market.

Therefore, it is likely that the Trade Ministry and Bulog will go ahead with importing 500,000 tonnes of rice. For the Agriculture Ministry, however, this could be seen as tarnishing the ministry's efforts in maintaining Indonesia's self-sufficiency in rice. Moreover, President Joko "Jokowi" Widodo last August was awarded by the Philippines-based International Rice Research Institute (IRRI) in recognition of Indonesia's rice self-sufficiency in 2019-2021.

What's more

The Agriculture Ministry has an optimistic picture of Indonesia's rice output. It projected that Indonesia's rice production this year should increase by 2.3 percent to 55.67 million tonnes of unhusked rice, which is equal to 32 million tonnes of rice. Meanwhile, rice consumption is projected to reach 30.2 million tonnes, and therefore the country should book a surplus of 1.8 million tonnes this year. With a national accumulated rice surplus reaching 3.8 million tonnes as of the end of last year, total surplus by end of this year should reach 5.7 million tonnes.

The Agriculture Ministry is now using data from Statistics Indonesia (BPS), not its own data, to make its rice output projections after President Jokowi decided in 2018 to use only BPS data for rice policy making. In the past, data on rice production released by the Agriculture Ministry was normally around 25 to 50 percent higher – or even more – than those of BPS, such as in 2018 when data from BPS showed that unhusked rice production totaled 56.5 tonnes but data from the Agriculture Ministry came at 83.3 tonnes. Such discrepancy in data had impacted import rates to the country.

What we've heard

Several sources said that the National Logistics Agency (Bulog) director Budi Waseso felt that his hand was forced to increase its rice reserves. None of the mills that were presented by the Agriculture Ministry to Bulog were able to supply rice according to the commitments promised by the ministry.

A number of companies even had milling capacity far below the supply commitment as stated in the letter from the Agriculture Ministry. It is also difficult to obtain rice from the field because harvest season has passed. The Agriculture Ministry insisted that rice stocks in several regions were still able to meet Bulog's needs. Meanwhile, rice stocks have been depleting since July.

It is even suspected that the Agriculture Ministry is deliberately increasing the commitment of milling companies in supplying rice. "In truth, there is no stock," said one business actor. Milling companies are reportedly having difficulty supplying rice to Bulog according to the commitment requested by the Agriculture Ministry.

A source in the government said that Syahrul had been playing image politics with the food self-sufficiency program for the last three years. "The Agriculture Ministry does not want its proud claims of self-sufficiency to fail in the eyes of the President," said this source.

That's why Syahrul Yasin Limpo has always rejected import policies, even though the limitations on imports had been decided in a limited coordination meeting chaired by the Coordinating Economic Minister Airlangga Hartarto. The import issuance letter has also been issued by the Trade Ministry.

Even though it received the green light, Bulog cannot import rice. Another source says that this is because the import permit granted to Bulog was actually late. Currently, the supply of rice abroad is already running low. Thai and Vietnamese rice – which Indonesia has previously bought – have been mostly purchased by China.

On the other hand, being late in buying rice from abroad can hit grain prices at the supply level, which affects farmers. This is a concern because next year's harvest season is predicted to start from March 2023.

Another source said that the rice data dispute is also related to the political tug-of-war between Golkar and the National Mandate Party (PAN) against the NasDem Party. Golkar chairman Airlangga Hartarto and Zulkifli Hasan are now members of the United Indonesia Coalition. Meanwhile, Syahrul Yasin Limpo is the NasDem representative in President Joko "Jokowi" Widodo's Cabinet. NasDem has declared itself in a coalition with the Democratic Party and the Prosperous Justice Party (PKS) to face the 2024 presidential election.

Source: https://www.thejakartapost.com/opinion/2022/12/07/analysis-rice-stocks-deplete-govt-ministries-split-over-plan-to-import-rice.htm