Rice Millers Suddenly Ask Bulog to Stop Buying Unhulled Rice, What's Happening?

The Indonesian Rice Millers and Rice Entrepreneurs Association (Perppadi) is urging the government to temporarily halt the absorption of unhulled rice during the current period of declining production. This step is deemed necessary to prevent grain prices from continuing to soar and to ensure rice mills can still produce rice in accordance with the Highest Retail Price (HET).

Perppadi Chairman Sutarto Alimoeso stated that the current price of unhulled rice in the field has exceeded the Government Purchase Price (HPP) of Rp6,500 per kilogramme. According to him, the increase was triggered by limited grain supply due to the harvest cycle, but was also exacerbated by the government’s continued absorption of grain through the state logistics agency Bulog.

“During these months, the supply of raw materials has decreased. Why? Because that is our harvest pattern. So, in May it drops, then June is still low. Later, entering July, the harvest area will start to increase again,” Sutarto told CNBC Indonesia on Friday.

He explained that when the supply of grain decreases, the price is automatically pushed up, penetrating Rp7,000 per kg. “Because it is reduced, then a price increase occurs. The price of grain has risen to above Rp7,000 per kg, even though the government has set it at Rp6,500 per kg. But the reality in the field is above Rp7,000. If it is above Rp7,000, the impact on rice mills is that they cannot produce premium or medium rice according to the HET,” he said.

Sutarto believes the government should not force grain absorption when entering a period of declining harvest. Instead, the government is advised to optimise the distribution of its existing Government Rice Reserve (CBP) stocks through social assistance and the Food Supply and Price Stabilisation programme.

“So the raw material supply is decreasing because of the harvest pattern. On the other hand, we also convey to the government that when the harvest pattern is declining, the government should not force itself to keep buying. And if you calculate it, the purchase price is already above the HET. There is no government buying at Rp6,500 per kg, that does not exist,” he said.

According to him, it is logically impossible for the government to buy grain at the HPP of Rp6,500 per kg when the market price is already much higher. “The field price is already above Rp7,000. Where can Bulog buy at Rp6,500? It is impossible. In fact, the government, in quotation marks, can be said to be contributing to the increase in grain prices,” he asserted.

Sutarto mentioned that a similar condition actually occurred last year. Therefore, Perppadi is again asking the government to temporarily stop grain absorption when supply is limited, and to rely more on available stocks to maintain market balance.

“If the supply is lacking, Bulog keeps buying. This is why the incident is like last year. In months like these last year, we always suggested that starting in May, the government should stop buying first. Instead, it should distribute, whether through social assistance or the SPHP programme, to supply the market. So that supply and demand tend to be balanced. That is our suggestion,” Sutarto explained.

If Bulog does not temporarily stop absorbing grain and rice from farmers, he said, grain prices will continue to be pushed up, and the HPP provision of Rp6,500 per kg will be difficult to achieve. On the other hand, the surge in grain prices is also starting to pressure the operations of rice mills. Sutarto said many mills are unable to produce rice according to the HET because raw material costs are too high.

“Production is sufficient, we admit production is still sufficient. Moreover, the government has such large stocks. These large stocks should be used to supply the market, not be held back. Now, what is the point of holding them back? The price of grain is rising. If the price of grain rises, demand must be higher than supply. That has to be corrected. You cannot say ‘oh, let it be enjoyed’. Who is enjoying it? It is not necessarily enjoyed by everyone. Many rice mills are not operating. Because if the price is above Rp7,000 per kg, rice mills cannot produce rice according to the HET,” he said.

Sutarto revealed that the price of grain in several regions has even reached levels of Rp7,200 to Rp7,500 per kg. In some areas, the price has touched Rp7,800 per kg. He again reminded the government to return the price of grain to near the agreed HPP of Rp6,500 per kg.

“The price of grain is rising. Yes. That is what the government should pay attention to. We urge the government to return the price to near Rp6,500 per kg at the farmer level, because that is the agreement and farmers are already happy with Rp6,500 per kg,” he concluded.