Unhusked rice price rise 'wont's affect inflation'
Unhusked rice price rise 'wont's affect inflation'
JAKARTA (JP): The government's decision to raise the floor
price of unhusked rice would not boost inflation because of lower
rice prices in the international market, according to Minister of
Agriculture Soleh Solahuddin.
Soleh noted that the recent price increase was to help improve
the welfares of local farmers following the removal of
fertilizers subsidy.
He also said the government would eventually remove price
control on rice to make it less political commodity.
"The rice price increase would not likely boost inflation
because the price in the local market has got much higher than
the international price," Soleh said on Friday.
The international price of rice ranges from US$230 and $270
per ton, compared to the domestic price of a medium quality rice
of around Rp 3.5 million (US$466.6) per ton or Rp 3,500 per
kilogram.
Soleh said the move to increase the floor price of unhusked
rice by about 50 percent was only fair to the farmers, after the
recent removal of subsidies on fertilizers.
"It would specifically benefit farmers who were due to harvest
this month after the planting season in August," he told a press
briefing.
The government raised the price of unhusked rice on Dec. 1 to
between Rp 1,400 (0.18 U.S. cents) and Rp 1,500 per kilogram from
Rp 1,000 per kilogram to compensate the removal of the
fertilizers subsidies and to encourage farmers to plant rice in a
bid to increase the country's rice production.
The State Logistics Agency buys rice from the local farmers in
areas like South Sulawesi, East Java and South Sumatra at Rp
2,400 per kilogram. The buffer stock agency also imports rice to
supplement the short in rice supply.
Soleh said since restriction on the rice trading was lifted,
imported rice had begun to flood the market.
But agriculture analyst H.S. Dillon remains cynical that
raising the price of unhusked rice would help boost local rice
production, if the country still relies on imports of the
commodity.
"When you still import, the prevailing market prices will be
dictated by world prices, the floor price is thus irrelevant," he
said, adding that domestic price had way exceeded the
international price currently.
Soleh reminded that the move to jack up the price of unhusked
rice was only temporary before the government eventually removes
price control on rice.
"In the future, price of rice would be determined by the
market price and the rupiah's exchange rates against the U.S.
dollar," Soleh said.
He did not say when the government would remove the pricing
control on the unhusked rice.
Dillon, however, warned the government against setting free
the price of rice to the market mechanisms, as price control was
a crucial protection for local farmers.
"How are you really going to protect your farmers (without
setting the floor price) then?" he asked.
The floor price measure is designed to protect farmers,
especially in approaching the harvest season, when their
commodities tend to be priced at lower values, he said.
Farmers, who plant seasonal commodities such as rice, often
face great risks and uncertainty without the floor pricing
system, as prices of the commodities often plummet in the market
during the harvesting season, he said.
Setting a floor price is one of the measure to contain
uncertainty for the farmers, he said, adding: "even the Americans
do that."
This helps the farmers calculate their input prices before
they start planting, so they can calculate how much profit they
can expect when they plants rice, compared to other commodities.
"It is an elements which help farmers decide what he should
plant," he said. (gis/das)