Rice prices may rise by 1.2-1.8% each month

JAKARTA (JP): Head of the National Logistics Agency (Bulog), Beddu Amang, said yesterday that rice prices are likely to climb by between 1.2 and 1.8 percent each month from now until February in anticipation of the end of the harvest months and the beginning of the planting season.

Beddu assured consumers, however, that the cumulative increase in rice prices would not exceed this year's inflation rate, which is projected to be nine percent.

"Rice, therefore, will not become an inflation-generating factor," Beddu said after a meeting with President Soeharto.

He said Soeharto has ordered Bulog to manage its market operations in such a way that price rises will be kept within acceptable limits.

Bulog is charged with maintaining stability in the prices of several basic food commodities through its marketing monopoly over foods such as rice, sugar and wheat flour.

Beddu said a cumulative rice price increase of up to nine percent per annum should be tolerated in order to cover storage costs, including rice losses in storage, as well as to compensate farmers for the general increase in the consumer price index.

He said that rice stocks held by Bulog currently totaled 1.1 million tons, which were sufficient for seven months of allocations to civil servants and armed forcers members as well as employees of state plantation companies.

Beddu said this year's favorable weather helped to increase the rice stock, thereby bringing down the price by a slight 0.2 percent during the April-August period.

Indonesia, formerly the biggest rice importer in the world, became self-sufficient in rice in 1984. However, a substantial decline in domestic production as a result of the prolonged dry season forced the country to import rice again last year.

Although rice productivity increased at a rate of three percent between 1988 and 1993, it dropped by 3.2 percent to 46.6 million tons (unhusked) last year -- the lowest level in 15 years -- from 48.2 million tons in 1993.

Stock

Rice stocks from domestic procurement so far reached 830,000 tons, or slightly less than the target of 900,000 tons, while those from imports amounted to 600,000 tons, Beddu added.

Beddu also reported developments in Bulog's plan to build up 75,000 tons of a palm oil buffer stock for price stabilization.

Last June, Bulog required crude palm oil (CPO) producers to contribute part of their production to the buffer stock at a government-set price in order to support its market operations to bring down cooking oil prices to Rp 1,400 (62 U.S. cents) per kilogram by December.

Beddu said that, so far, the private sector has only delivered 6,000 tons of their 37,500-ton quota. The buffer stock has therefore reached only 16,000 tons, including the contributions made by state plantation companies.

Bulog initially agreed to pay Rp 1,235 (54 U.S. cents) per kilogram of CPO for the buffer stock but Beddu said yesterday that Bulog intends to renegotiate the prices because CPO prices on the world market had dropped.

He said that the initial agreement was made when cooking oil prices were Rp 1,525 per kg. Since prices have now dropped to Rp 1,350, he said, Bulog intends to purchase the CPO from producers at approximately Rp 1,100 per kg.

"We will renegotiate the prices, although the producers are still insisting that Bulog pay them the original price," he said. (pwn)