Boosting farmers' income<\/p>\n
Maintaining a stable supply of basic food and ensuring food
\nsecurity is the ultimate objective of the government following
\nlast week's decision to raise the producer (floor) price of rice
\nby 16.67 percent. Farmers will continue to grow rice if their
\nearnings remain higher than that from other crops. However, the
\nfood crop sector cannot be separated from other sectors of the
\neconomy. Hence, fertilizer prices were increased by 21 percent in
\na bid to further reduce government subsidies on that
\nagrochemical.<\/p>\n
Most farmers expect the measure to have little impact on their
\nreal incomes as the rice price increase was introduced
\nsimultaneously with a rise in the price of fertilizer.
\nAgronomists have estimated that fertilizer alone usually accounts
\nfor up to 30 percent of rice production costs. This means farmers
\nwill have to increase their working capital as well.<\/p>\n
The government has been facing a dilemma with regard to the
\nprice of rice, the national staple. Its price cannot be increased
\ntoo steeply because it would cause strong inflationary pressures
\nand the number of landless farmers and farm laborers who depend
\non the open market for their staple remains quite large. This
\nmeans a high rice price would hit hard not only the fixed low-
\nincome people in urban areas but also millions of others in rural
\nareas.<\/p>\n
It is nonetheless essential to prevent rice farmers' terms of
\ntrade from being eroded by the general price increase (consumer
\nprice index). If it is not, there is the risk farmers will shift
\nto other crops, thereby threatening food security.<\/p>\n
There are at least two other problems besetting the rice
\neconomy. One of them is the declining size of farm land held by
\nfarmers in Java. The latest agricultural census in 1993 concluded
\nthat farmers in Java only held an average 0.47 hectare and the
\nnumber of farming households with less than 0.50 hectare of land
\ntotaled 11 million.<\/p>\n
The small landholding has been exacerbated by what agronomists
\nsee as the diminishing returns of rice crops. Even though
\nnational rice output has been increasing, larger production has
\nbeen generated mostly by rice-crop expansion. In fact, according
\nto the latest data available from the Central Bureau of
\nStatistics, the rice yield per hectare declined from 4.38 tons in
\n1993 to 4.35 tons in 1994. One can easily see how rice growers
\nsurvived without an annual increase in the price of the staple.<\/p>\n
Many may ask why the government has to increase the price of
\nfertilizer. It is true the agrochemical is made from natural gas
\nwhich is abundant in the country, but the rice economy will never
\nbe more efficient and competitive unless it is gradually freed
\nfrom government subsidies. Sound macroeconomic management demands
\na gradual, if not abrupt, abolition of such market distortions.
\nThis has become even more imperative in light of Indonesia's
\nparticipation in the ASEAN Free Trade Area in 2003 and the larger
\nAsia-Pacific free trade region in 2020.<\/p>\n
The latest increase in the rice price is not insignificant
\ndespite the 21 percent increase in the fertilizer price, and an
\ninflation rate of only 6.7 percent last year. What is more
\nimportant though, is that the producer price should be the
\nminimum gained by rice farmers during the peak harvest season
\nwhen the market demand tends to be depressed.<\/p>\n
We have learned from experience that what is mandated by the
\ngovernment will not automatically materialize in the marketplace.
\nFarmers may still receive much less than the floor price because
\nof collusion between cooperative officials and traders or due to
\nfarmers' failure to meet the minimum quality standards. It is the
\nresponsibility of the government to prevent such collusions and
\nto help farmers fulfill quality standards, otherwise the floor
\nprice policy will not be effective.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/boosting-farmers-income-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}