Jakarta – Soaring food prices have become more concerning and for rice, it is alarming. The price of rice was Rp 12,530 (81 US cents) per kilogram in early September, up 16 percent year-on-year, according to National Food Agency data.
That figure is far above the government's price ceiling of between Rp 10,900 and Rp 11,800 per kg, which was already revised up last year to accommodate a higher equilibrium price.
Last month, annual rice inflation hit 13.76 percent, the highest in more than a decade, reported Statistics Indonesia (BPS).
Rice prices are soaring as an impact of the current dry season, which saw El Nino intensify over the past few months to result in lower yields in many countries. The Agriculture Ministry estimates that Indonesia's rice yield will decline by around 1.2 million tonnes, while other agencies project a slump of 1.5 million tonnes.
El Nino has sparked concerns over food security in Asia, prompting countries like India to impose an export ban on certain types of rice and Vietnam to significantly cut rice exports to protect domestic supply.
The export ban imposed in some rice-producing countries is believed to have increased the shock to domestic rice prices in countries including Indonesia, where rice is a staple food for the majority of its 270 million population. In fact, the country's rice output is unable to meet the needs of its growing population, despite its claim of self-sufficiency.
It is a tall order for Indonesia to control the price of rice, as the commodity accounts for around 20 percent of poor families' spending, the largest share compared to other items. Failing to keep rice prices in check risks seeing more people in the country fall into poverty.
During a challenging time like "the era of global boiling" today, imports could be the most viable option to calm prices. But it won't be easy given the restrictions in place in some exporting countries, also because Indonesia will have to compete with many other buyers in the global market.
Global rice prices also skyrocketed to a 15-year high in August, according to the Food and Agriculture Organization. Indonesia once considered importing rice from Cambodia, but the plan was put on hold, if not withdrawn, as the price was deemed too high.
The State Logistics Agency (Bulog) has imported 1.6 million tonnes of rice this year to fill the government rice reserve (CBP), which it can use whenever it needs to stabilize domestic prices.
If necessary, Bulog can even realize its remaining import quota of over 400,000 tonnes to bolster the CBP and stabilize prices. But the government should allow the agency to tank higher international prices, as options are growing limited, in addition to ensuring transparency.
The government should do more to convince the domestic market that the domestic rice supply is safe and available, especially after these imports.
Controlling rice prices stands to benefit both consumers and small-scale rice mills, which are reportedly having difficulty sourcing the grain due to rising prices amid a one-sided competition with large industrial mills.
Failing to protect these small-scale rice mills could pose a new challenge in controlling prices in the future because there would be fewer millers to dictate prices.
This would run counter to what's best for both consumers and farmers in some respects, and would require yet another government intervention to prevent the emergence of several dominant players, let alone a single player, which would undermine fair competition.
The situation now bodes ill especially for farmers, as they have limited options to sell their rice. The soaring rice price is not necessarily a boon for farmers, because some dominant players could still dictate prices.