Farmers 'gain little' from unhusked rice price hike

JAKARTA (JP): Agricultural experts believe the government's plan to increase the price of unhusked rice by up to 50 percent will fail to assist farmers because prevailing market prices are almost at the price level.

Bungaran Saragih of the Bogor Institute of Agriculture said on Saturday the government move would be inconsequential in helping the farming community deal with soaring fertilizer prices and other rising farming costs.

"The price of unhusked rice in the market has almost reached the new price level, so the planned increase is somehow meaningless to the farmers," he told The Jakarta Post.

Minister of Industry and Trade Rahardi Ramelan said on Thursday the government planned to raise the floor price of unhusked rice from Rp 1,500 per kilogram to between Rp 2,100 and Rp 2,250, an increase of between 40 percent and 50 percent.

Rahardi, who is also chairman of the State Logistics Agency (Bulog), explained that the increase, the fifth in the 1998/1999 fiscal year, was intended to better farmers' income and encourage increased rice production.

However, the market price is already nearly Rp 2,000 per kilogram at present.

Through the agency, the government buys about a fifth of annual domestic rice production to support its market operation. The latter has often flopped recently due to declines in rice supply.

Consequently, the floor price set by the government has been unable to determine the direction of market prices.

"No matter how many times you increase the floor prices, you will never be able to control the prices because the market prices will continue to rise if the demand is still far higher than supply," Bungaran argued.

The executive director of the Center for Agricultural Policy Studies, H.S Dillon, shared Bungaran's pessimism about the measure. He said it would not prod farmers to expand their rice crop because climbing fertilizer prices and other increased farming costs rendered other crops more lucrative.

Dillon and Bungaran agreed the government should ensure that crucial farming materials should be readily available and affordably priced to make expanded rice farming feasible.

"What matters most to farmers is that high quality seeds and fertilizers are available at the time of planting, when they are needed," Dillon said.

During 1998, Bulog raised the floor price of rice on four occasions. On Jan. 29, it was increased to Rp 600 per kilogram from Rp 525 per kilogram. On April 1, it rose to Rp 700 per kilogram, and on June 1 it was increased to Rp 1,000.

On Dec. 1, the price was raised by 50 percent to Rp 1,500 per kilogram to compensate for the removal of fertilizer subsidies.

Rice bought and distributed by Bulog makes up only part of the domestic supply. The buffer stock agency also imports rice to supplement the shortage in the rice supply.

Rahardi acknowledged Bulog's domestic rice procurement nose-dived by 683 percent to 249,000 tons last year, the lowest level in 25 years, due to a decline in rice production.

In 1997, the agency procured 1.95 million tons of rice from local farmers.

The drop in domestic production, Rahardi said, forced Bulog to import 4.6 million tons of rice in the 1998/1999 fiscal year, an 780 percent in crease over its import of 523,776 tons in the 1997/1998 fiscal year. The agency initially planned to import 4.1 million tons.

Rahardi said 25 percent of the import was derived from aid commitments with other countries. The rest was purchased through commercial purchases, including 893,000 tons from international open tenders. (gis/das)