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Indonesia grappling with record-high rice prices: BPS

Jakarta Globe - March 1, 2024

Arnoldus Kristianus, Jakarta – As Indonesians prepare to welcome the fasting month of Ramadan in March, rice prices reached an all-time high in February 2024, according to the Central Statistics Agency (BPS). Throughout the month, a survey on rice producer prices was conducted across 932 milling companies in 33 provinces.

"The national rice prices in February 2024 are the highest compared to previous periods," said Deputy of Statistics Production at BPS, M Habibullah, during a press conference at the BPS office on Friday.

BPS reported a 0.37 percent monthly inflation in February, with year-on-year inflation at 2.75 percent and calendar-year inflation at 0.41 percent, driven primarily by a significant increase in food prices, particularly rice and red chili.

Industry players attribute the staple food price hike to weather conditions such as the El Nino climate phenomenon and reduced rice production due to fertilizer shortages. However, the Business Competition Supervisory Commission (KPPU) suspects collusion or cartel practices among industry players in the distribution chain may be behind the surge in prices.

The average price of premium quality rice in mills rose by 6.31 percent to Rp 14,525 (92 cents) per kilogram compared to the previous month. Similarly, the average price of medium-quality rice in mills increased by 7.39 percent to Rp 14,162 per kilogram, and the average price of lower-quality rice in mills rose by 4.65 percent to Rp 13,664 per kilogram.

Compared to February 2023, the average rice prices in mills for premium, medium, and lower quality rice each increased by 22.91 percent, 25.32 percent, and 30.53 percent in February 2024.

During the period from February 2023 to February 2024, the highest average rice prices in mills for premium, medium, and lower quality occurred in February 2024, reaching Rp 14,525 per kilogram, Rp 14,162 per kilogram, and Rp 13,664 per kilogram, respectively.

Conversely, the lowest average rice prices in mills for premium, medium, and lower quality were Rp 11,525 per kilogram in June 2023, Rp 11,006 per kilogram in May 2023, and Rp 10,303 per kilogram in July 2023.

Habibullah said rice prices would stabilize as long as the stocks are sufficient, meaning there are reserves stored by farmers, State Logistics Agency (Bulog) warehouses, private entities, and government rice reserves that can meet market demands.

"However, in the market price formation mechanism by traders, there is usually a psychological effect, such as doubts about the smoothness of supply due to declining rice production, and this is responded to by traders with a price increase to compensate for the reduced supply in the following period," he explained.

In a cabinet meeting held on Monday, President Joko "Jokowi" Widodo called upon his ministers to address the rising food prices ahead of the Ramadan (fasting month) in March. Jokowi has given the green light to Bulog to import 2 million tons of rice from Thailand.

Data from the National Food Agency (Bapanas) indicates that the rice supply deficit has persisted for the last eight months. In January and February, domestic rice output was 2.8 million tons less than the national demand.

The Bapanas anticipate that the prolonged increase in rice prices will subside in the coming weeks, just in time with the upcoming Ramadan when food demand typically picks up growth. According to Bapanas Head Arief Prasetyo Adi, the price of dried grains from farmers' harvests has sharply declined to Rp 7,100 per kilogram from Rp 8,600, indicating that rice prices will decrease significantly in the next two or three weeks. The retail price of rice is expected to return to its usual level of around Rp 14,000 per kilogram during Ramadan.

Source: https://jakartaglobe.id/business/indonesia-grappling-with-recordhigh-rice-prices-bp