Food Trade System Problem Not Being Addressed

The poor food trade system has yet to be fixed and is still full of inefficiencies. The lengthy distribution chain is still evident in the supply of a number of commodities, which has made food become expensive. Despite this, farmers as the producers of food are not profiting from the price increases.

KOMPAS/FERGANATA INDRA RIATMOKOA woman carries a sack of sugar distributed by PT Perusahaan Perdagangan Indonesia to traders during a market operation in Beringharjo market, Yogyakarta, Monday (6/6/2016). The market operation is being carried out to stabilize sugar prices during the fasting month of Ramadhan. The sugar is sold to traders at Rp 12,000 per kilogram and they are allowed to resell it at a maximum Rp 13,000 per kilograms

A number of farmers who met with Kompas last week and on Monday (6/6/2016) said they have never benefitted from increasing prices. This is because the distribution chain of commodities is overly long.

Cattle farmers in Semarang Regency, Central Java, said the increased price of beef in the markets should be a golden opportunity for farmers to reap greater rewards, but they are not able to profit from the price hike.

"As a small cattle farmer, with less than 50 cows being raised, we have never enjoyed higher profits from the high price of beef," said Ardiansyah, a cattle farmer in Kalisidi Village, Ungaran District.

Suparyanto, another cattle farmer in Polosiri Village, Bawen District, said the increased beef price is only enjoyed by traders, both cattle traders at the animal market and beef traders in the market.

"Last week I brought six cows to the Ambarawa animal market, Semarang Regency. The weight of the cows that I brought were 450 to 550 kilograms with a price of Rp 21 million per cow. It turns out that my smallest cow was only bid at Rp 18 million by one trader. In the end I took it back home," Suparyanto said, illustrating the position of traders repressing farmers.

Farmers, according to Business Competition Supervisory Commission (KPPU) chairman Syarkawi Rauf, had not profited from the price hike because of the extremely lengthy distribution chain.

"Between the fattening [process] and the slaughterhouse there is usually two intermediaries. Between the slaughterhouse and the market there is also another intermediary, and then it reaches the consumers. The distribution chain is so long that it causes prices to become too high," he said.

Meanwhile, the high retail price of shallots is not comparable to the price at the farmers' level. At the moment, the price of shallots at the farmers' level in the areas of Brebes Regency, Central Java, is only around Rp 16,000 per kg. However, the retail price of shallots in and around the Brebes area is still Rp 30,000 to 32,000 per kg.

The Indonesian Shallot Producers Association (ABMI) suspects the huge disparity in prices is due to an inefficient shallot trade chain.

ABMI Chairman Juwari said the shallot trade chain goes through at least five stages after produce, namely intermediaries in villages, collector traders in villages and districts (sellers that estimate the price in the fields and buy them wholesale), and then big sellers that are ready to ship the shallots to other regions.

From the big sellers, the shallots are sent to other regions, such as Kramatjati market, and then they are received by shallot dealers. The dealers then pass them on to wholesalers, who then sell them to retailers.

"That is the trade chain of shallots to other regions. For trade within and around Brebes, it [the chain] is shorter, from the big sellers straight to wholesalers or retailers," he said.

He said if at every stage a profit of Rp 1,000 to 2,000 per kg was taken, then there would be a considerable margin between the price at the farmers' level and the retail price.

More sellers

The sharp increase in the price of chicken meat at the consumer level, according to farmers, is because of the longer supply chain from farmers. While the supply chain normally goes through three to five sellers, there are now seven intermediary sellers. This condition is especially true of distribution to big cities such as Semarang, Solo and Yogyakarta.

"There are many impromptu intermediary sellers that enter the distribution chain that takes advantage of the increase in demand. We cannot intervene in the matter," said Agus Hartono, a farmer in Banyumas Regency who has a farm capacity of approximately 50,000 chickens.

Central Java Poultry Husbandry Economic Council Chairman Heru Nugroho said the high cost of chicken meat in the market was caused by the chicken meat supply chain being too long. Usually, the commodity was sold by farmers to big sellers, before being sold on to smaller sellers. And then to the market, retailer and finally to consumers.

Addressing the problem

Looking at the various commodities, it is evident that the inefficient trade system has not been addressed. The presence of intermediary sellers in large numbers can be found in the trade of almost all commodities, which clearly is resulting in the high prices at the consumer level.

According to Syarkawi, the government must simplify and curb the distribution chain of food commodities in order to stabilize food prices.

Meanwhile, National Police Chief General Badrodin Haiti said that the police were continuing to monitor the distribution of food. Regarding President Joko Widodo's instruction of lowering beef prices to Rp 80,000 per kg, Indonesia Agriculture Graduates Association General Secretary Yeka Hendra Fatika questioned the basis of the set price.

"Has the setting of Rp 80,000 for beef already taken into consideration the cost of local beef production? How will this impact farmers, butchers and other farming businesses?" he said.

Meanwhile, the late production of sugar in not only East Java, but also in Lampung has caused sugar prices to rise. "We usually start the harvesting and milling season in mid-April. This is the first time our milling scheduled has been pushed back to May 11," PT Gunung Madu Plantation spokesperson Hapris Jawodo said. Similarly, PT Perkebunan Nusantara VII Head of Plants Department Christian Priyo said the schedule for the milling period has been moved one month back.

Returning to beef, the Jakarta Marine, Agriculture and Food Security Agency has announced that starting from June 11, the stock of frozen beef at PD Dharma Jaya will be increased.

A stock of 250 tons from New Zealand will arrive, adding to current beef stocks that will be supplied to traditional markets in the Jakarta area in order to stabilize prices throughout the fasting month and ahead of Idul Fitri.

from Kompas, Tuesday, June 7, 2016

Indonesian version can be read on previous entry