Indonesian Food Agency Sees Opportunity in Rising Grain Prices

Arief Prasetyo Adi, the Head of Indonesia’s National Food Agency (Bapanas/NFA), has pointed out that the ongoing increase in grain prices could potentially stimulate greater agricultural production. The assertion comes amidst concerns over diminishing grain yield due to El Nino and national deficits.

In a statement issued on September 26, 2023, Arief underscored that production factors like land availability, processing procedures, fertilizer, and seeds, as well as technology and mechanization play a critical role in sustaining production levels. These elements are particularly crucial given the impact of climatic phenomena like El Nino, which threaten to lower production.

According to Arief, rising consumer prices for rice are a direct consequence of increased grain prices at the production level. He emphasized that any policy measures to address the fluctuation in rice prices must be comprehensive, spanning from production to distribution.

“For on-farm policies, it’s essential to continue efforts to maintain and increase production,” Arief said. “In the post-harvest or off-farm segment, we are committed to absorbing farmers’ yields through the optimization of state-owned enterprises as off-takers.” He added that Bapanas is entrusted by the President to prepare government food reserves (CPP) in anticipation of shortages.

Data from the Central Statistics Agency (BPS) indicates that national rice production from September to November 2023 is estimated to fall short of the total consumption requirement of 2.55 million tons per month. Specifically, production is predicted to decline to 4.07 million tons of milled dry grain (GKG) in September, 3.82 million tons of GKG in October, and 2.88 million tons of GKG in November.

“In the latter half of the year, domestic rice production typically wanes compared to the first half. The monthly rice balance is projected to remain in deficit until year’s end,” Arief noted. He highlighted the need for contingency plans, especially with additional demand spikes expected during the Christmas and New Year period, as well as elections slated for April 2024.

In response, the government’s rice reserve stock (CBP) is prepared for any required stabilization interventions. Arief confirmed that 640,000 tons of rice food aid will be distributed to 21.35 million beneficiary families over the next three months from these reserves, held at Perum Bulog.