Traders Face Dilemma Amid Fluctuating Rice Prices
Rice prices in wholesale markets are experiencing fluctuations driven by the dynamics of supply and demand. Consequently, several small-scale retailers are having to devise strategies to maintain stable prices to meet consumer needs.
Handi (3och), a trader at Rawamangun Market, East Jakarta, stated that the price of rice purchased from the Cipinang Rice Wholesale Market (PIBC) has tended to decrease over the last two weeks. Prices have dropped to approximately Rp 700,000 per 50kg sack, down from previous levels of around Rp 725,000 to Rp 730,000 per sack.
Despite the decrease in wholesale costs, Handi has not lowered his retail prices. For instance, Pandan Wangi rice is priced at Rp 15,000 per litre, Rojo Lele Super at Rp 13,000 per litre, and Seigon Bandung at Rp 14,000 per litre. Other varieties include Super Red rice at Rp 16,000 per litre, Super Pera rice at Rp 16,000 per litre, and Wangi Super at Rp 18,000 per litre.
“In the past, getting rice at Rp 600,000 per 50kg was considered good quality. In my opinion, Rp 700,000 per sack is still high, even though it is considered cheap in the current condition,” Handi said at his shop in Rawamangun Market on Tuesday.
Handi explained that he does not take a large profit from the rice he sells, with margins estimated at around Rp 1,000 per litre. He noted that the decrease of approximately Rp 25,000 to Rp 30,000 per sack is insufficient to justify lowering retail prices.
Furthermore, he must consider rising routine operational expenses, such as market management fees (CMS) and significant electricity costs, which are becoming a burden. He noted that simply surviving is enough, as several rice shops in Rawamlamangun Market have already collapsed and closed down.
Handi also has to account for the rising cost of packaging. The price of plastic bags has surged to Rp 160,000 per 100 bags, a significant increase from the normal price of around Rp 90,000 per 100 bags.
He added that he cannot easily raise prices when wholesale costs rise, as he must consider consumer purchasing power and the quality of the rice itself. “It is difficult to raise them. I keep them the same. If the price is Rp 16,000 per litre but the quality is very poor, I cannot raise it. So, if the wholesale price drops, the retail price stays the same. If the wholesale price rises, I absorb the cost (reducing my margin),” he said.
“My principle is just to survive. I am pessimistic about growing the business,” he continued.
Handi noted that his customer base is currently limited. Factors include consumers shifting to online platforms and small business owners, such as food stall operators, choosing to buy directly from wholesale markets where they can purchase 10kg or 20kg quantities at cheaper prices.
Handi revealed that his daily turnover has gradually eroded. Previously, he could earn Rp 7 million per day, but it has now dropped to around Rp 3 million. He hopes for a return to normal rice prices to stabilise his income.
Similarly, another trader at Rawamangun Market, Pardi, expressed his dilemma regarding price fluctuations. As of Tuesday, his retail prices included IR II at Rp 12,500 per litre, IR I at Rp 13,000 per litre, Pandan Wangi at Rp 15,000 per litre, Ramos Bandung at Rp 14,000 per litre, and Petra rice at Rp 16,000 per litre.
“There has been a price drop from the wholesale market to Rp 700,000 per sack. However, the price for consumers remains the same. Instead, I am looking for better quality standards,” he said.
Pardi explained that his decision not to lower retail prices during wholesale price drops is intended to offset the lower margins he experiences when wholesale prices rise while retail prices remain fixed.
“When wholesale prices rise, my profit is reduced because the consumer price stays the same. When wholesale prices drop, the price remains normal, which helps cover the previous losses. I aim for a standard price,” Pardi explained.
He admitted that his income can drop by 20-30 per cent when he does not raise prices despite rising costs, but this is balanced by the margins maintained when wholesale prices fall.
Pardi noted that rice prices currently tend to move upwards, following a recent government regulation setting the purchase price for harvested dried grain (GKP) at Rp 6,500 per kg for farmers. While this policy aims to improve farmers’ welfare, he believes it puts pressure on traders.
“I want to be hopeful, but I am confused. On one hand, raising the grain price is good for farmers’ welfare. But in the end, it is we (the small market traders) who are being pressured and hit hard,” he concluded.