Farmers 'gain little' from unhusked rice price hike

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)