Minister defends recent increase in fertilizer prices

Minister defends recent increase in fertilizer prices

JAKARTA (JP): Minister of Agriculture Sjarifudin Baharsjah
yesterday defended an increase in fertilizer prices, arguing the
rise would not cut farmers' incomes.

Sjarifudin told a hearing of House Commission IV for
agriculture and forestry that fertilizer represented only 8.9
percent of the cost of rice farming.

"Thus, the higher increase in fertilizer prices than the rise
in the rice price will not impact on farmers' incomes as many
people think," he said.

He said the increase in the rice price was not the only factor
which boosted farmers' incomes. Farmers' incomes would increase
if their productivity did too.

"We often overlook these facts and we conclude that farmers'
incomes would drop after an increase in fertilizer prices above
that of the rice price," he said.

Early this week, the government increased the producer price
(floor price) of unhusked rice by 16.6 percent and those of
fertilizers by an average of 21 percent.

The floor price of unhusked rice rose from Rp 450 (19.5 U.S.
cents) to Rp 525 a kilogram.

Urea fertilizer prices rose 21 percent from Rp 330 to Rp 400 a
kilogram. ZA fertilizer rose 27 percent from Rp 355 to Rp 450 a
kilogram and superphospate-36 (SP-36) fertilizer rose 14 percent
from Rp 525 to Rp 600 a kilogram.

"The public may have been surprised to see that fertilizers'
prices increased more than rice's, and then concluded that
farmers' incomes would decrease. This conclusion is untrue," he
said.

Sjarifudin said the government had anticipated that the
increase in fertilizer prices would be followed by rises in the
prices of other agricultural components, including labor, seeds
and pest repellent.

The price of labor is predicted to rise 10 percent this year,
while seed prices would rise 16.67 percent and pest repellent
prices by 9.1 percent.

"Labor represents 54 percent of farmers' costs," he said.

He said the increases would make farmers pay Rp 166,613 more
for every hectare of rice field cultivated this year, but they
could expect Rp 220,912 a hectare more income if they could
increase their production to 4.5 tons of rice a hectare from last
year's average of 4.39 tons.

If farmers' productivity remained at 4.39 tons of rice a
hectare this year, and the labor price rose 20 percent -- higher
than average annual inflation of 9 percent to 10 percent --
farmers' incomes would increase 8 percent to Rp 488,206 a
hectare.

If farmers' productivity rose 2.5 percent to 4.5 tons of rice
a hectare this year, and the labor price rose 10 percent --
similar to inflation and this year's minimum wage rise --
farmers' net incomes would increase 40 percent to Rp 636,554 a
hectare.

"Thus, many people's fear that farmers' incomes will drop
after the fertilizer price rise is not true," he said. (jsk)