Rice prices and reality<\/p>\n
The confirmation by chief of the National Logistics Agency
\n(Bulog) Beddu Amang early this week that the producer price of
\nrice will be raised by at least 10 percent early next year
\nremoved the confusion caused earlier by statements from the
\nagriculture ministry. Minister of Agriculture Sjarifudin
\nBaharsjah's statement last month that the government would not
\nincrease the rice price until the end of this year was accurate.
\nNonetheless, the remarks gave the impression that rice farmers
\nwould not receive any annual increase since price changes are
\ntraditionally announced between October and November, with the
\nincrease usually taking effect at the beginning of the following
\nharvest season in February or March.<\/p>\n
As Beddu asserted, the producer price of rice should be raised
\nat least by an amount equivalent to the rate of inflation. Such
\nan adjustment will help prevent the farmers' terms of trade from
\nbeing eroded by general price increases (consumer price index).
\nAfter all, the price they receive is the factor that most
\nencourages the farmers to continue cultivating rice crops.<\/p>\n
A significant price incentive is more crucial now than ever.
\nNational rice output has been decreasing for the last two
\nconsecutive years, which forced Bulog to import more than one
\nmillion tons last year. True, weather conditions will affect
\noutput, as will the steady decrease in the acreage harvested due
\nto the conversion of farmland in Java for industrial and housing
\nprojects. However, the amount of acreage harvested could easily
\ndecrease at a faster pace if rice farmers are not given terms of
\ntrade equal to or better than those of other crop growers.<\/p>\n
Determining the price level of rice is indeed a delicate
\nexercise given the special economic, social and political
\nimportance of the national staple. The problem is that quite a
\nnumber of rice buyers also consist of non-rice farmers and farm
\nlaborers.<\/p>\n
There are three major challenges facing the government when
\ndetermining the producer price of rice. The first calls for a
\nprice which is neither too far below international levels nor a
\nmajor source of inflationary pressure. Both are important to
\nstimulating the development of new rice fields, which is now
\npossible only outside of Java.<\/p>\n
The second challenge requires Bulog to manage its market
\noperations in such a way that the rice market provides a
\nreasonable range of price fluctuations to generate fairly
\nattractive margins to traders. Such leeway will encourage the
\ntraders to take on part of the storage operations, thereby
\nalleviating Bulog's burden of stock management.<\/p>\n
The third challenge is for the government to ensure that the
\nincrease in the producer price of rice will not trigger price
\nincreases in other goods. We doubt that a higher rice price will
\ntrigger price increases in other goods because, unlike oil fuel
\nor other commodities used as inputs for the production of goods,
\nrice is a direct consumer item. The increase in prices that
\nfollows any increase in the rice price, similar to the trend
\nevery time the government raises civil servant wages, is more
\npsychological in nature. As long as the supply of general
\nconsumer goods is kept adequate and their distribution smooth,
\nthe rise in the producer price of rice will not likely have a
\nsignificant impact on the consumer price index.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rice-prices-and-reality-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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