Government Slow to Anticipate Issues - Food Supply Chain Too Long

The government's anticipation of price hikes for several staple foods has been terribly slow. Severe weather conditions disrupting crop production and problematic trade systems are the main issues that should have been handled better to avoid price hikes.

Tutik (39), a customer at Palmerah Market in Jakarta, was confused, and complained about the price of several staple foods, including sugar, beef, chicken and shallots on Sunday (5/6/2016), one day before this year's fasting month began. 

"The price of staple foods has been high for more than a week. We hope the government conducts impromptu inspections in traditional markets to stabilize the prices," Tutik said.

The market price for sugar is currently between Rp 16,000 (US$1.19) to Rp 18,000 per kilogram, far above the usual price of Rp 12,000 per kilogram, triggered by depleted stocks ahead of the fasting month of Ramadhan. At the same time, demand for sugar has doubled.

Sugar stocks both in producers' and traders' warehouses have been depleted as this year's milling season has yet to start. It has been pushed back this year as extreme weather has delayed the harvesting of sugar canes. 

"The stock at warehouses has been generally depleted. The only stock left is the leftover from last year's milling season at traders' warehouses," Indonesian Sugarcane Farmers' Association (APTRI) chief patron Arum Sabil said. The majority of sugar factories will start the milling season for this year in June. Usually it starts in early May.

Severe weather has also resulted in price hikes for shallots. Since March, reports from several regions said the price of shallots had increased from around Rp 20,000 per kilogram to Rp 40,000 per kilogram due to continuous rain that resulted in decreased production.

Long supply chain

Apart from that, Indonesian Shallot Association (ABMI) chairman Juwari said the shallot supply chain was very long, resulting in a sharp price difference between the commodity's selling price at farmers' level and the final selling price for customers in markets.

The shallot trade chain comprises several levels, including wholesale middlemen, wholesale traders, traders who distribute shallots to wholesale markets, traders who own the warehouses at wholesale markets, wholesale traders and retailers.

The Agriculture Ministry's horticulture director general, Spudnik Sujono Kamino, said the high prices for commodities like chilies and shallots were largely due to distribution issues.

Meanwhile, beef price hikes in several regions have been caused by higher beef prices in Jakarta and surrounding areas.

East Java Deputy Governor Saifullah Yusuf said beef prices in East Java markets had increased to Rp 130,000 per kilogram from the usual price of Rp 90,000 per kilogram, due to price hikes in Banten and Jakarta reaching Rp 140,000 per kilogram.

The price of chicken in markets in Bandung, West Java, ahead of the fasting month also continued to climb. In Cihapit Market in Bandung, for example, the average price of chicken was Rp 37,000 per kilogram. In the past week, the price of chicken has gone up twice, from Rp 33,000 per kilogram originally, to Rp 35,000 per kilogram and again to Rp 37,000 per kilogram in two days.

Indonesian Poultry Farmers Association secretary-general Aswhin Pulungan said he predicted the price of chicken could reach Rp 40,000 per kilogram approaching the fasting month.

"There is a price hike at the farmers' level. However, the hike occurs from production costs [BPP], as the BPP component for purchasing chicken feed and day-old chicks is already high," he said.

Business conditions remain highly unconducive for independent farmers despite the implementation of Agriculture Ministry Regulation No. 26/Permentan/PK.230.5.2016 on the production and distribution of broilers. In Tasikmalaya, 120 kilometers east of Bandung, the average price of live chickens at the farmers' level is Rp 21,000 per kilogram.

At a chicken farming center in Banyumas regency, prices have not significantly increased. Chicken farmer Agus Hartono (58), from Sumbang District in Banyumas, said prices at the farmer level had increased from Rp 17,000 per kilogram to Rp 18,500 per kilogram. The significant price hike at consumers' level was because the trade chain from farmers was getting longer.

Predicted earlier

The price hike of staple foods was poorly anticipated by the government. Severe weather and problematic supply chains should have been thought about earlier. Bogor Agricultural Institute (IPB) School of Agriculture professor Dwi Andreas Santosa said the food price hike would not have happened if the government had better plans in food procurement. 

"Everything can be predicted so that the needs can be planned and calculated," Dwi Andreas said.

The Meteorology, Climatology and Geophysics Agency (BMKG) has predicted that the 2016 dry season will be see wet conditions. BMKG head Andi Eka Sakya said rainfall had been relatively high. Heavy rains are good for rice and corn but bad for shallots and chilies.

Last week, Business Competition Supervisory Commission (KPPU) head M. Syarkawi Rauf said commercial beef and chicken problems were linked to regulations that had created opportunities for producers and traders to control prices.

As a result, the President's goal to decrease the prices of several commodities would be 

difficult to achieve as additional supplies, including from imports, had not been provided quickly.

Diponegoro University agriculture lecturer Arifin said the government could not blame the beef price hike on small-time farmers. The price hike was caused by a handful of people in the beef trade.

ABMI chairman Juwari said the government should immediately resolve the shallot trade issues. Problematic commercial systems cause the emergence of big-time traders who manipulate prices.

Source Kompas, Monday, June 6, 2016