Mon, 17 Jan 2011

Indonesian farmer Ujang Majudin pointed to rows of rotting chilli peppers, tomatoes and egg plants as clouds gathered again over his fields, already water-logged by incessant rain.

With sharply declining yields and revenue, he faces the toughest season since taking over the family farm 15 years ago. “If the situation doesn’t get better, I have no choice but to lay people off if I am going to survive,” he said.

Next month, he will cut a quarter of his 120-strong workforce if the weather doesn’t improve.

As much as 80 per cent of his chilli crop failed, he explained, powering a battered pickup truck over a washed-out country road an hour outside the capital, Jakarta. “The rain is killing my vegetables.”

Indonesia is in the grip of crop failures brought on by nearly a year of heavy rain, which are threatening millions of jobs and pushing up food prices for tens of millions of impoverished families when global food prices are already on the rise.

Inflation in the country rose to a 20-month high of 7 per cent in December, driven mainly by food prices. The cost of rice Indonesia’s staple foodstuff has risen by 30 per cent in the past year owing to falls in domestic production, prompting the government to spend heavily in recent months on imports.

Indonesians eat more rice per capita than any other country, making it vulnerable to price shocks. To minimise exposure to international markets, the government is aiming to be self-sufficient in rice, soya beans, sugar and meat. But in 2010, it imported 1.2m tonnes of rice and this year will buy more.

At Jakarta’s largest vegetable market, shoppers also complained about the sudden rise in the price of the most important spice in Indonesian cuisine, chilli peppers. The cost has surged fivefold in just weeks to $11 per kilogramme, forcing some people to ease off on hot sambal sauce, to save money.

“If you don’t have sambal, you don’t have a complete meal,” said Sri Kusmiati, who has eaten spicy food since she was a baby and was buying chillies for a meal. “It doesn’t matter if you don’t have vegetables, fish or chicken as long as you have chilli and sambal your meal will be perfect.”

Inflation rose to a 20-month high of 7 per cent in December, half of which was the result of surging food prices.

Susilo Bambang Yudhoyono, Indonesia’s president, and Mari Pangestu, trade minister, have thrown their weight behind a “grow your own vegetables” campaign.

Mr Yudhoyono has encouraged “creativity” at home, while the minister has spoken on national television about her 200 chilli plants.

But without government assistance to keep prices low, social unrest could easily follow in Indonesia a young democracy where more than 100m people live on less than $2 a day. The UN’s Food and Agricultural Organisation has warned the world could be facing price shocks on the scale of the 2008 food crisis, which triggered unrest across the globe and riots in Algiers last week prompted authorities to cut food taxes.

However, officials in Jakarta are still confident their measures will contain the problem at home.

“This is not a food crisis, but a weather crisis,” Bayu Krisnamurthi, deputy agriculture minister, said in an interview. “We are taking it very seriously. We must make sure [food riots] don’t happen here.”

There have also been concerns the central bank may be behind the curve on interest rates. While rates have gone up across Asia Bank Indonesia has left them at record lows of 6.5 per cent in spite of the persistent inflation.

However, Darmin Nasution, the central bank governor, said over the weekend the bank was “ready” for a rate rise, but didn’t say when or how much it could be. The timing would depend on the success of other measures to reduce excess liquidity, such as increased reserve requirements, the bank said.

In a teleconference on Saturday, Mr Yudhoyono said climate change would play an important role in the lives of millions of farmers in Indonesia, a vast tropical archipelago with more than 17,000 islands where rising sea levels are already hitting coastal communities.

H.S. Dillon, an economist and former deputy agriculture minister, advised the president to help struggling farmers and introduce policies aimed at lifting wages in rural communities.

But back in the hills, Mr. Majudin said only the heavens could change the fate of his struggling business.